Welcome to the XPO First Quarter 2025 Earnings Conference Call and Webcast. My name is Paul and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the company regarding forward-looking statements and the use of non-GAAP financial measures. During this call, the company will be making certain forward-looking statements within the meaning of applicable securities laws, which by their nature involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those projected in 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 also may refer to certain non-GAAP financial measures as defined under applicable SEC rules. Reconciliation of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earnings release and the related financial tables or on its website. You can find a copy of the company's earnings release which contains additional information 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.

Good morning, everyone. Thanks for joining our call. I'm here with Kyle Wismans, our Chief Financial Officer; and Ali Faghri, our Chief Strategy Officer. This morning, we reported financial results that delivered on our outlook in a challenging freight market. Company-wide, we reported first quarter revenue of $2 billion and adjusted EBITDA of $278 million and our adjusted diluted EPS was $0.73, exceeding expectations. Importantly, our LTL segment maintained the momentum we carried through year end and outperformed the industry. The highlight of the quarter was a sequential LTL margin improvement that was better than normal seasonality. We've now improved our adjusted operating ratio by a cumulative 370 basis points over two years, keeping us on the industry's best trajectory for operating efficiency and profitability. In addition to strong margin performance, we accelerated yield growth, operated more cost efficiently with linehaul and labor and enhanced service quality. At the same time, we continue to invest in our network to strengthen our competitive position and sustain high returns over time. I'll walk you through the levers driving our momentum in LTL starting with customer service. In the first quarter, we delivered a damage claims ratio of 0.3%. Notably, we brought damages down to a record low in the quarter, which is a testament to the discipline built into our service culture. We also continue to raise the bar with on-time performance marking our 12th straight quarter of year-over-year improvement. The service centers we've opened over the past year are playing a critical role in improving service by reducing rehandles and transit miles. This helps ensure consistent outcomes for our customers. And for our company, it supports both margin expansion and the scalability of our network. Our larger footprint is also driving tangible gains in efficiency across dock operations, linehaul and pickup and delivery. We've now opened almost all of the service centers we acquired and we're seeing the benefit across our network. We've also met our goal of 30% excess door capacity in the current environment. This excess capacity positions us to capture market share in a freight upturn and unlock more operating leverage. In addition to real estate, we're committed to investing in our fleet with both tractors and trailers. Since launching our LTL growth plan in 2021, we've added more than 5,000 tractors and 16,000 trailers to our network. This of course continues the insourcing of linehaul and is helping us operate with greater flexibility for customers. The average age of our tractors is now down to four years at the low end of our targeted range. This benefits both reliability and safety and it also reduces the cost of operating our fleet. Turning to pricing, this remains a cornerstone of our plan and we're seeing the impact of our pricing initiatives on yield growth. In the first quarter, we grew yield excluding fuel by 6.9% year-over-year marking an acceleration from the prior quarter. This reflects the strength of our commercial strategy and the value we bring to customers. Our high-quality service is earning pricing gains that outpace the market through contract renewals and new business. In addition, local customers and our premium services are becoming more meaningful parts of our revenue mix and both channels carry higher margins. We have a growing pipeline of customer demand for our premium offerings including retail store rollouts and trade show transport. We expect these initiatives to continue driving above-market yield growth well into the future. Cost efficiency is another core part of our plan and an area where we made major progress this quarter, particularly with linehaul and labor productivity. We lowered our purchase transportation cost by 53% year-over-year and reduced our outsourced linehaul miles to just 8.8% of total miles, the best level in the company's history. This is a reduction of more than 900 basis points, demonstrating that we're executing well ahead of plan. By year-end, we expect to reduce outsourced miles even further into the mid-single digits, enhancing efficiency and customer service. And when demand returns, the insourcing we're doing now will protect our cost structure as truckload rates rise, enabling us to generate stronger incremental margins versus prior up cycles. We also continue to improve labor productivity in the quarter with our proprietary technology. Our software anticipates volume shifts before they happen, allowing our managers to flex labor hours in real-time and making our network more resilient. This technology is unique to XPO and it's helping us outperform on margins and profitability in the current freight downturn. It will become an even greater advantage for us in the future. Before I close, I want to spend a minute on artificial intelligence. We've been investing in proprietary AI technology to realize its full potential across our business. We've already identified a number of high-impact applications, initially with linehaul optimization, labor planning, and pickup and delivery. These are areas where intelligent automation and better decision-making can directly enhance profitability. Recently, we deployed new AI-driven linehaul models designed to improve freight flows across our network. These pilots are already delivering higher load averages and transit efficiencies. In our pickup and delivery operations, we're beta testing AI to optimize trailer and route assignments at the shipment level. These tools factor in appointment windows and other logistics to enhance on-time performance. We see AI playing a major role in how we operate, compete, and create value over the long term. In summary, our first quarter results reflected strong execution across the business. We delivered above-market yield growth, improved cost efficiency, and raised the bar on service quality, all of which strengthened our competitive position. And our investments in capacity and technology are making our networks smarter and more agile, while leveraging our scale. We built XPO to drive results in any environment and we intend to keep outperforming the industry with sustained long-term margin expansion. Now I'm going to hand the call over to Kyle to discuss the financial results.

Thank you, Mario, and good morning, everyone. I'll take you through our key financial results, balance sheet, and liquidity. Revenue for the total company was $2 billion, down 3% year-over-year, but up 2% sequentially from the fourth quarter. In our LTL segment, revenue was down 4% year-over-year and up 1% sequentially. The majority of the decline was related to lower fuel surcharge revenue tied to the price of diesel. Excluding fuel, LTL revenue is down 2% year-over-year and up 1% sequentially. On the cost side in LTL, we drove another significant reduction in purchase transportation expense. Our expense for third-party carriers decreased by 53% compared with the prior year as we insourced more of our linehaul runs. This equated to a reduction of $41 million in the quarter. We also utilized our labor more productively, resulting in a 1% improvement in hours per shipment in a quarter. Notably, we're able to hold our total cost, salary, wages, and benefits at a similar level to last year's first quarter, despite inflation. To do this, we've been utilizing the productivity tools in our proprietary technology. These capabilities are unique to XPO and will be increasingly valuable as our network grows. On the equipment side, we achieved a 5% reduction in maintenance costs per mile, primarily due to our purchase of new tractors for our fleet. We expect this cost to track lower in the future as older units are retired. LTL depreciation expense increased by 10%, or $7 million, reflecting the priority we place on making ongoing investments in our network. Next, I'll cover adjusted EBITDA, starting with the company as a whole. We generated adjusted EBITDA of $278 million in the quarter, down 3% year-over-year. Within that number, adjusted EBITDA for the LTL segment was $250 million, down 2%. Our strong yield growth and cost efficiencies in the quarter were mitigated by the operating environment in the form of lower fuel surcharge revenue, tonnage, and pension income. But even with these constraints, the underlying trends in the business continue to gain momentum. In our European transportation segment, adjusted EBITDA was $32 million for the quarter, and adjusted EBITDA for the corporate segment was a loss of $4 million. Returning to the company as a whole, we reported first quarter operating income of $151 million, income, up 9% year-over-year. And we grew net income by 3% to $69 million, representing diluted EPS of $0.58. On an adjusted basis, our EPS for the quarter was $0.73, compared with $0.81 a year ago. And lastly, we generated $142 million of cash flow from operating activities in the quarter and deployed $191 million of net CapEx. Moving to the balance sheet, we ended the quarter with $212 million of cash on hand. Combined with available capacity under our committed borrowing facility, this gave us $811 million of liquidity. And our net debt leverage ratio at quarter end was 2.5 times trailing 12 months adjusted EBITDA. This was an improvement from 2.9 times in the first quarter of 2024. In February, we successfully repriced our $1.1 billion term loans and refinanced our ABL revolver into a new secured cash flow facility. This extended the maturity of our revolver to 2030 and stabilized our liquidity with a constant $600 million of availability while providing long-term capital structure flexibility. While we remain committed to investing in initiatives that support earnings growth, we expect our lower CapEx profile to generate a higher level of free cash flow this year. This dynamic, over time, should provide us with greater flexibility to return capital to shareholders. Recently we announced an authorization by our board of directors for the repurchase of up to $750 million of our common stock. We expect to begin opportunistically repurchasing shares this year with our excess cash. Now I'll turn over to Ali who will cover our operating results.

Thank you, Kyle. I'll start with the review of the first quarter operating results for our LTL segment, where we executed well in a soft freight market. Our total shipments per day were down 5.8% in the quarter compared with a year ago, but with an important underlying trend. We generated volume growth in the mid to high single digits in our local channel, which is a key area of focus for us. We're accelerating our market share gains with these high-margin customers through targeted sales initiatives and the strong value proposition. With weight per shipment down 1.8% in the quarter, our tonnage per day was down 7.5%, which largely tracked the seasonality. This outperformed the industry as a whole. On a monthly basis, year-over-year, our January tonnage per day was down 8.5%, February was down 8.1%, and March was down 6%. Looking just at shipments per day, January was down 6%, February was down 6.1%, and March was down 5.4%. For April, we estimate that tonnage will be down 5.7% from the prior year. Our pricing was robust in the quarter, and again, we delivered above-market yield growth. On a year-over-year basis, we grew yield ex-fuel by 6.9% and revenue per shipment by 5.2%. Importantly, we accelerated our year-over-year yield growth from the fourth quarter as well as on a two-year stack basis. Our revenue per shipment has improved sequentially for nine consecutive quarters, and we expect both revenue per shipment and yield to improve sequentially through the rest of this year with ongoing pricing momentum driven by our service quality and premium offerings. These are all key drivers of our margin expansion opportunity, and we're steadily enhancing them as part of our LTL growth plan. In the first quarter, we sequentially improved our adjusted operating ratio by 30 basis points to 85.9%, which outperformed normal seasonal trends. We outperformed on margin through a mix of yield growth, cost efficiencies, and productivity gains, and by leveraging our proprietary technology to enhance the contribution for each of these levers. Turning to our European business, we delivered solid progress despite a challenging macro environment. We increased revenue by 2% year-over-year on a constant currency basis for the 5th consecutive quarter of growth. We also grew adjusted EBITDA by 19% sequentially from the fourth quarter, outpacing seasonality. And in some key geographies, like the UK, we increased adjusted EBITDA by double digits versus the prior year, showing continued strength. Another positive indicator is our sales pipeline in Europe, which grew by high single digits in the quarter. Customers are increasingly responding to our offerings, putting us in a strong position to continue outperforming the market in any macro environment. Before we go to Q&A, I'd like to summarize the major initiatives that powered our first quarter performance and the ongoing momentum in our LTL business. First, we're continuing to deliver above-market pricing growth underpinned by strong service quality. Our premium service offerings and our success with the local channel are also key to our results, and these initiatives are in the early stages of their potential. At the same time, we're optimizing our cost structure by reducing third-party linehaul costs and enhancing productivity. We see a long runway for further efficiency gains across our network. Together, these drivers have created a large margin expansion opportunity, and our execution gives us the ability to capture that opportunity regardless of market conditions. Now we'll take your questions. Operator, please open the line for Q&A.

Thank you. We'll now be conducting a question-and-answer session. Thank you. Our first question is from Jon Chappell with Evercore ISI.

Thank you. Good morning, everyone. Ali, just kind of the obvious first question. In January or early February, you gave a full year guide of flat tonnage and 150 basis points of margin improvement. Things have changed quite a bit since then, so if you can just provide an update there if you're willing? And as part of that, second quarter, I think typical seasonality, somewhere around 250 to 300 basis points of OR improvement. With the April tonnage down 5.7%, what are you kind of anticipating for that sequential move this year?

Hey, Jon. This is Mario. So, when you look first at full year, this is the fluid environment and it's tough to predict what the macro is going to do and what the demand environment will do in the back half of the year. But based on our performance here today, we do expect to deliver 150 basis points of full year margin improvement. And this is even with full-year tonnage being negative on a year-on-year basis, relative to our initial assumption that volumes would be flattish this year. And there's a few reasons for that. One is, yield performance has been excellent. Our pricing initiatives are gaining momentum. They're trying to get ahead of expectations. We talk about the Q2 yield outlook here. We're also managing costs very effectively. I mean, when you look at the linehaul insourcing, we have accelerated that. We were down to 8.8% in the first quarter, 53% reduction in PT costs. And we expect that to further be reduced in the back half of the year as we continue to drive that initiative. And we're managing our labor very effectively. I'm very proud of how the operating team executed in the first quarter against a soft backdrop where tonnage was down, we were able to improve productivity on a year-on-year basis by 1%. Now, let's say the macro gets more negative from here and things do soften, and let's say the year is down, mid-single digits on tonnage for the full year, we'd still expect to improve OR by about 100 basis points for the full year. And overall, that would be a really strong year for margin improvement, because keep in mind that we have the toughest comp in the industry. We were the only carrier improving operating margins in 2024 as well. Now when you look at the second quarter, we also expected another strong quarter for margin performance in Q2. Typical seasonality for us is a sequential improvement of 250 to 300 basis points of OR improvements, sequentially Q1 to Q2. And again, it's a dynamic environment, so based on what we have seen so far in April and our execution, we do expect to be at or above the high end of that range, outperforming seasonality, and that's also driven by our continued strength in yield and effective cost management as well.

Great. That's super helpful, Mario. Just super quick follow-up. You mentioned the 30% excess door capacity giving you the leverage to gain share in an upturn. In that scenario that you laid out where maybe tonnage is down mid-single digits, obviously things get worse. Are there other variable or semi-variable cost levers you can pull to manage that and what capacity remains at that type of access level?

Yes, when we assess real estate capacity in our network, it is typically associated with low costs. Real estate usually falls within the low to mid-single digits as a percentage of revenue in LTL. Our objective is not merely to fill terminals with freight if they don't operate efficiently. Instead, we aim to onboard profitable freight based on high service quality, new offerings for customers, and a disciplined approach to what we include in our network. Even if the general market weakens and demand declines, it's important to note that two-thirds of our costs are variable. We will manage that as we have over the past year by adjusting labor and utilizing our proprietary technology to align field hours with current volume levels. Additionally, as we bring more linehaul operations in-house, we're achieving greater efficiency at lower costs. Despite depressed truckload rates, our road flex operation allows us to transport freight at a lower cost per mile than using third-party carriers. We're also able to utilize about 5% to 6% more physical space by using 228-foot containers instead of 53-foot ones. This will further enhance our capabilities as we move into the latter part of the year. We are effectively controlling what we can and plan to continue doing so no matter what challenges arise in the environment.

Good morning. I have a clarification question. Is the 100 basis point improvement in operating ratio this year based on a 5% decline in volume? I think I have the exact number if you could repeat it. My question is about the volume aspect for less-than-truckload services. It seems we're down around the mid-teens in volume compared to the peak of the cycle. Is this primarily due to weaker demand from your customers, or have you experienced significant losses to other shipping modes, particularly truckload?

Good morning, Fadi. This is Ali. I'll take the first part about the full year margin outlook, and then I'll pass it to Mario to talk about some of the industry volume dynamics. As it relates to the full year margin outlook, we would expect to deliver 150 basis points of OR improvement this year with volumes down on a year-over-year basis to the extent that the macro worsens and volumes are sub-seasonal to a greater degree as we move through the year and are down somewhere in that mid-single-digit range for the full year. As Mario noted, we would still expect to improve OR in that scenario by about 100 basis points for the full year.

Fadi, when examining the overall industry volume, which includes both public and private carriers, we see a decline in volumes from pre-COVID levels, estimating a drop of about 15% to 16%. Post-COVID, 2021 marked the peak, slightly lower than 2018 and 2019, just before the pandemic. From 2021 to 2024, numerous supply chain changes and disruptions occurred. Shortly after the height of COVID, there was a chip shortage causing industrial companies to ship fewer goods. This was followed by retailers dealing with excess inventory and a subsequent decrease in industrial demand. The ISM manufacturing index has remained in contraction territory, below 50, for nearly 2.5 to 3 years, which aligns with the current freight recession. This decline is primarily driven by weaker underlying demand in the U.S. industrial sector. Looking ahead, there isn't much direct conversion from LTL to truckload. For instance, truckload rates are about $2 per mile on average, with our typical haul around 850 miles, making the cost around $1,700 for a shipment. In comparison, our average revenue for bills last quarter was $385, indicating that truckload rates are significantly higher. Some have asked about the conversion point for heavy LTL; within our network, shipments averaging 15,700 pounds account for less than 0.5% of total shipments. While some conversion exists, it is minimal. When truckload rates recover, we expect to see some shift back as well. There are questions about truckload consolidation, which has been a practice for decades through transportation management systems (TMS). TMS identifies opportunities to combine freight into truckloads when service requirements allow, and with lower truckload rates, more combinations may occur. However, any shifts will reverse when truckload rates increase, indicating no significant structural changes in how LTL freight is managed nationwide.

Okay, this is great. And so basically, because that 15%, 16% seem to have underperformed like industrial production quite a bit over that time frame, but you don't think this is a significant share loss to other modes. This is an opportunity potentially for the industry to see that volume come back when things turn the corner from an industrial production perspective.

Yes, and I tell you Fadi, we're excited about this outlook because if you think about it, this industry has been capacity constrained for a long time, and you haven't had any meaningful amount of capacity being added. Even when you look at us and other carriers adding capacity, we are just recycling the capacity from yellow that used to be in operation a short two years ago. So whenever the cycle starts turning and you start seeing more freight going into LTL and truckload in every mode, you'll see truckload rates going higher, you're going to be the cycle of all cycles in terms of increases in volume, and you won't have enough industry capacity to handle that. So that's a piece that getting us excited in the future. Now keep in mind, we're delivering the kind of numbers we are in a very soft freight market. Now imagine what's going to happen in the context of an upcycle where you have 30% excess door capacity, you have an excellent service product, we have a team that is executing really well out there, and you couple that with customers who are happier and happier with the work that we are doing, we get really excited about the next upcycle. Although it's tough to see now with all this tariff noise that we're seeing.

Hey, great. Good morning. Mario, I want to hit on the pricing side, right? Just the market doesn't occur in a vacuum and you've done well, but we're hearing from others that have reported some pretty aggressive kind of pricing story in the market. Can you talk a little bit about what's going on, particularly in the local SMB side? And then, Ali, just to clarify, I'm getting a lot of questions, just if you're down 7.5% in tonnage in first quarter, trending down, call it, mid-single digits in 2Q. I think just it would be helpful to clarify that comment. Because does that mean you need just flat performance for the back half of the year to be better than mid-single digits? Does it have to be up to get to? I just want to understand your comment on getting to the 100 basis points of improvement versus the 150 you were reiterating. Thanks.

First, regarding the overall industry pricing, I will hand it over to Ali to discuss volume expectations and our observations from April onward. On the pricing front, we are seeing a favorable environment for LTL pricing. Comparing our pricing structure to the best in the industry, we started off about 15 points lower a few years ago. This difference was mainly due to their superior service over a longer period, and about 5% of that was accounted for by accessorial revenue from premium services, with around 2.5 points arising from a mix of small to medium-sized businesses offering better margins. Over the past few years, we have managed to outperform the market by about 2 to 3 points on price. One part of that is addressing the 7 to 8 point service differential that contributes to better pricing, and we have an eight-year timeline to achieve this. This past year, we have been pricing about a point higher than our usual rates due to service improvements. The second area of focus is accessorial revenue, which was 9% to 10% of our revenue when we began our strategy. Our aim is to increase that to 15%, and as of the last quarter, we reached 11%. We achieved an additional point in revenue through the introduction of higher-value services our customers have requested, such as trade shows and timely deliveries. The third focus is on expanding within the small to medium-sized business segment. Although it’s challenging, providing excellent service is essential for these customers, who typically ship 5 to 10 times a week. On-time, damage-free deliveries are critical for their brands. We've seen great success in this channel thanks to our service enhancements. Additionally, we've increased our local sales team size by 25% over recent years. It takes about a year for new local sellers to reach full productivity. Our local sales force has been doing an excellent job, and in the first quarter, we saw mid to high single-digit growth in tonnage from this channel, which accelerated to double digits in April. We expect continued strong performance from this segment in the coming years, aiming for local accounts to represent 30% of our total business.

And then Ken, when you think about the volume outlook for the year. If you just look at the first quarter specifically, tonnage was down 7.5 points on a year-over-year basis. However, we did see the trend improve as we move through the quarter. January was down 8.5 points year-over-year and then March and April were down closer to that 5% to 6% range. Now if you look to the second half of the year, Ken, we do have easier comps versus the first half of the year. So volume should gradually improve as we move through the year given that comp dynamics and also following normal seasonality. Now to the extent that we see the macro soften in the back half of the year and volumes remain down mid-single digits in the back half, even against those easier comps, that would be more reflective of a sub-seasonal demand environment in the back half of the year. We would still expect to deliver 100 basis points of OR improvement in that scenario. So regardless of how we look at it, we're going to deliver a very strong year of margin improvement this year on top of being the only LTL carrier to improve margins in 2024 as well.

Thank you for the clarification. I have a quick follow-up regarding service, Mario. Claims have increased slightly, from 0.2 to 0.3. Is there any insight on this, particularly since you emphasized the importance of service? Also, Ali, does the volume outlook account for the impact of tariffs in the return to normalcy, or do you anticipate any challenges arising from that? Thank you, everyone.

So again, on the damage claims ratio, so it's been relatively consistent with where we've been. We were in the 0.2% range for the quarter, but we just caught the round up to the 0.3%. Now when you look at the underlying damages in the quarter, so that's the KPI, when we deliver a pallet to a customer, they can take an exception of the damage. So it's a real-time KPI of how our damages are doing. And they have been the best of any other quarter in the company's history in the first quarter. And as you know, we've made tremendous progress in improving our quality of service. And it's not going to be linear. It took best in class 10 years to go from a 0.7% to 0.1% claims ratio. And it took us a few years to go from a higher number to where we are now. And our goal is to get to having no claims in our network. That's the ultimate goal. And we're making tremendous progress on that front.

And Ken, on the volume outlook for the second half, obviously, there's a lot of uncertainty and so it's difficult to predict the impact of the tariffs, but generally the way you should think about it is the 150 reflects what we've been seeing through the first four months of the year to the extent, again, the macro gets softer, tariffs start to have an impact on the broader economy, trends turn more sub-seasonal for us from a volume perspective. Again, that would be more supportive of the volumes being down in that single-digit range for the year and closer to about 100 basis points from a margin improvement perspective.

Hey, thanks, good morning. Mario, I believe you mentioned wanting to increase local to 30% of the revenue. What is the current percentage, and can you provide insight into the margin difference between local and national? Is that gap increasing or decreasing at this time?

Yes, so we when we started our plan, Scott, we were at about 20% of total was the revenue of locals. We're now up to the low to mid 20% range. And our goal, obviously, to keep on making meaningful progress. As I mentioned earlier, we've added about 2,500 new local customers in the first quarter, just to kind of give you an idea on the cadence. And again, we accelerated tonnage growth in April in that channel to double digits compared to mid to high single digits in the first quarter. Now, if you look at pricing differential, the margin differential between that channel and the larger accounts have been fairly consistent through the years. Typically, we price that channel based on an annual price that goes through a normal GRI process once a year typically and the margins trend has been relatively consistent.

Sure, Scott. So again, April was down 5.7% on a year-over-year basis, and that was largely in line with normal seasonality relative to the month of margin. As I noted, we did see volume trends improve throughout Q1 on a year-over-year basis, and that momentum carried into the month of April. Now, when you think about Q2 as a whole, obviously tough environment to predict. But if you look at how tonnage has historically played out throughout the second quarter and apply those trends through the rest of Q2, that would imply full quarter tonnage being down a similar range to the month of April on a year-over-year basis.

Hey, thanks. Good morning, guys. So maybe just to follow up on that, I know this is difficult, but as you sort of look and talk to the customers in the portfolio to get a sense of maybe what the tariff impact could be. I guess, relative to what that normal seasonality is for 2Q. Have you picked up anything meaningful that sort of tells you that you can perform close to that level, or maybe there's going to be sort of expected underperformance in the month of May, potentially with a bounce back in June? If there's any kind of color or clarity you've gotten from customers, it'd be great to hear.

Yes, Chris, it's challenging to assess the situation because we are in unprecedented times, making it difficult to predict the impact of tariffs on domestic trade movements. As an LTL carrier, we are primarily affected by domestic movements rather than external imports. We conduct quarterly surveys with our customers to gather their insights, and we just completed our Q1 survey at the end of April. The feedback indicates that the majority of customers expect flat demand in the latter half of the year, which is a shift from a quarter ago when most were anticipating an increase in demand. This shift reflects a more cautious attitude from our customers. In both Q1 and April, we observed industrial freight slightly outperforming the retail segment, which is significant as industrial freight accounts for over two-thirds of our total freight. Looking ahead, it's challenging to forecast future trends. We haven't noticed a significant pull forward from customers, who generally fall into three categories: those who are adopting a wait-and-see approach, those who continue to import goods as usual, and those who are redesigning their supply chains to source or produce more locally. For example, I recently met with a large industrial client who is shifting more of their manufacturing to Texas, leading us to manage both inbound and outbound freight for them, covering raw materials and finished products. We're seeing a range of behaviors from our customers, making it hard to anticipate the next few months. In April, as Ali mentioned, we performed in line with seasonal expectations. Our figures showed a decline of 8.4% in January, 8% in February, 6% in March, and a 5.7% drop in April. However, as we move into the latter part of the year, our comparisons will become easier. We'll see what the market has in store, and we are committed to closely collaborating with our customers to provide them with solutions as needed.

Okay, that's helpful. I appreciate the color there. And quick follow up, you mentioned in the prepared remarks to buy back. Obviously, you guys have been focused, I think, also on de-leveraging over time, but maybe with where the stock is, this has become a bit more attractive. Can you talk a bit about what the opportunity you might see kind of capital available for buybacks as we go through 2025?

Yes, Chris, when you think about the buyback, so we had the authorization come out at the end of the first quarter. We had a $750 million authorization. And when you think about capital allocation for us, we're looking in three ways, right? Our focus is going to be continuing to invest organically and that's CapEx for the business. Then we're going to look to continue to de-lever and get to our long-term goal at 1 to 2 times. And then when you think about excess cash, that authorization gives us the flexibility to seek the highest return of capital for our shareholders. And that's really what we're looking at. So there's no specific timeframe on that repurchase or no specific amount, but we'll be opportunistic with what the market affords us.

Nope. I am here. Good morning, guys. I wanted to ask two quick questions. One, going back to the pricing side, if we removed the push into local and premium services, how would the contractual nuance look on a sequential basis? And the second question, we've heard a bunch about Amazon maybe pushing back a little bit into the LTL space, going back into their fulfillment centers. UPS has announced they're getting back in the ground with freight. How much of a threat to the industry going forward is that, or is this just around the edges? Thanks.

Yeah, it's Kyle. I'll start then I'll hand it back to Mario. So I think to directly address your question, when you think about renewals for us, renewals were up mid to high single digit range for the quarter. And that was an acceleration, and it reflects the confidence we have in delivering above market yield performance through the year. And when you think about renewals, you really have to look at the flow through from those renewals. And in the first quarter, yield was up 6.9%, again, reflecting the strong renewals, and rev per ship was up 5.2% with the delta being weight per ship. So a very strong showing for us there. And when you think about how those renewals will impact us here in the quarter, we think for Q2 yield ex fuel is going to improve sequentially from the first quarter. And we expect to see it through the rest of the year. So on a year-over-year basis, we expect Q2 yield ex fuel to be up in a similar range year-over-year basis to Q1, and that assumes a similar weight per shipment dynamic on a year-over-year basis in Q2 versus Q1.

We don't view UPS and Amazon as significant threats for several reasons. Starting with UPS, they focus on lightweight shipments, typically a few hundred pounds, whereas our average shipment weight is about 13.50. Their service is more parcel-like, aimed at residential deliveries, which is not our main area in traditional LTL. Additionally, this isn't a new initiative for them; they've provided this service for a long time. Historically, heavy parcel shipping doesn't work well in a parcel sortation facility, making it challenging for them to execute effectively. Furthermore, they exited the LTL business a few years ago, so we don't foresee a meaningful impact on our industry from them. Regarding the large retailer you mentioned, they have limited exposure to LTL compared to other transportation modes, as they primarily move parcel and truckload freight. If they were to insource more of that freight, it could pose a threat to those industries, but in LTL, it represents only about 2% of the overall industry spend. For us, it's less than half a point of our total volume and shipments, indicating we don't conduct much business with them. Similar to large retailers, when they have excess capacity between distribution facilities, they will prefer partial truckload shipping. Based on our observations, we currently do not expect either to pose a threat, but we will continue to monitor the situation closely.

That makes sense. I appreciate the time and color as always.

You got it. Thanks Jason. Operator, can we please take the next question?

Our next question is from Jordan Alliger with Goldman Sachs.

Hi, good morning. More of a curiosity question. I'm sort of following on. It seems like pricing has been the main or one of the main topics of conversation these past few weeks and months. I guess my question is, in light of what you said about contractual renewals, mid-to-high single digits, why would a shipper agree to price increases like that in the environment we're in? Thanks.

A lot of it goes back to the quality of service that we provide. Currently, we are about 12 points lower on overall yield when adjusted for shipment weight and haul length compared to the best in class. There is still a significant gap, but it's influenced by several factors. First, delivering better service allows us to achieve higher prices; customers recognize our investments in the network, which operates in an inflationary environment characterized by increased wages, higher equipment costs, and investments in service centers. These factors necessitate pricing adjustments in a capacity-constrained industry to maintain our service levels. Second, there is a mix component; every customer needs freight delivered on time and without damage, and they are willing to pay a premium for that assurance. We are successfully onboarding more of this type of freight. Additionally, the local businesses we are acquiring prioritize service, with customers wanting timely pickups and damage-free deliveries. We have seen substantial success in this area, and the service improvements we've implemented, combined with our local seller strategy, have helped us forge strong relationships with these customers.

Okay, thank you.

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