XPO, Inc.

XPO, Inc. is a leading provider of freight transportation services, operating in the highly competitive North American and European freight transportation markets. The company uses its proprietary technology to move goods efficiently through supply chains for approximately 55,000 customers ¹ in North America and Europe. As of December 31, 2025, the company had approximately 37,000 employees ² and 592 locations ³ in 17 countries ⁴. The company has two reportable segments: North American Less-Than-Truckload (LTL), the largest component of its business, and European Transportation. The LTL industry in North America is described as a bedrock industry providing a critical service to the economy, with secular growth drivers, a favorable pricing environment and an established competitive landscape.

XPO has one of the largest LTL networks in North America, with approximately 9% ⁵ share of the U.S. market, estimated to be $53 billion ⁶ in 2024. The company's network serves approximately 37,000 shippers ⁷ with critical geographic density and day-definite domestic services to approximately 99% ⁸ of U.S. zip codes, as well as cross-border services to Mexico, Canada and the Caribbean. In Europe, XPO is the #1 full truckload broker and the #1 pallet network (LTL) provider in France; the #1 full truckload broker and the #1 LTL provider in Iberia (Spain and Portugal); and, in the U.K., a market leader in warehousing, a top-tier dedicated truckload provider and has the largest single-owner LTL network. Competitors named in the filing include Old Dominion Freight Line and Saia in North America. The company's competitive advantages include its proprietary technology, its trailer manufacturing facility and commercial truck driver schools, which are described as self-reliant competitive advantages.

XPO generates revenue by providing less-than-truckload and other transportation services for its customers. The company's revenue model includes fuel surcharge revenue, which is a significant component. In 2025, the North American LTL segment generated revenue of $4,832 million ⁹ and the European Transportation segment generated revenue of $3,324 million ¹⁰. The company's customer base is diversified, with its top five customers combined accounting for approximately 8% ¹¹ of revenue globally in 2025, and the largest customer accounting for less than 3% ¹² of revenue. In the North American LTL segment, the top five customers combined accounted for less than 11% ¹³ of revenue in 2025, with the largest customer accounting for approximately 4% ¹⁴ of revenue.

In the North American LTL segment, XPO provides shippers with geographic density and day-definite domestic and cross-border services to the U.S., as well as Mexico, Canada and the Caribbean. This segment also includes the results of the company's trailer manufacturing operation. For the full year 2025, the segment moved approximately 16 billion pounds ¹⁵ of freight through its network. The segment's revenue was $4,832 million ¹⁶ in 2025, compared to $4,899 million ¹⁷ in 2024. Key revenue metrics for the segment include a yield (gross revenue per hundredweight, excluding fuel surcharges) of $25.39 ¹⁸ in 2025, representing growth of 6.0% ¹⁹ compared to 2024. The segment's adjusted EBITDA was $1,142 million ²⁰ in 2025, compared to $1,115 million ²¹ in 2024. The segment's depreciation and amortization expense was $381 million ²² in 2025, compared to $346 million ²³ in 2024.

In the European Transportation segment, XPO serves an extensive base of customers within the consumer, trade and industrial markets. The segment offers dedicated truckload, LTL, full truckload brokerage, warehousing, managed transportation, last mile, freight forwarding, and multimodal solutions. The segment's revenue was $3,324 million ²⁴ in 2025, compared to $3,173 million ²⁵ in 2024, an increase of 4.8% ²⁶. The segment's adjusted EBITDA was $147 million ²⁷ in 2025, compared to $158 million ²⁸ in 2024. The segment's depreciation and amortization expense was $136 million ²⁹ in 2025, compared to $140 million ³⁰ in 2024.

In 2025, XPO developed new linehaul models that use artificial intelligence (AI) to improve the efficiency of freight flows, piloted routing innovations for pickup-and-delivery operations and continued to improve productivity with real-time labor analytics at the service center level. Since implementing its growth plan in the fourth quarter of 2021, the company has added more than 2,000 net new doors ³¹ to its network. The company has created a strategic growth opportunity by building more than 30% ³² excess door capacity into its network. In 2025, the company purchased over 1,200 tractors ³³ in North America, reducing its average tractor age to approximately 3.7 years ³⁴. Since the launch of its growth plan in late 2021, the company has added more than 19,100 trailers ³⁵ and 6,000 tractors ³⁶ to its fleet. In March 2025, the Board of Directors authorized repurchases of up to $750 million ³⁷ of common stock. During 2025, the company repurchased 954 thousand ³⁸ shares of common stock with an aggregate value of $125 million ³⁹ at an average price of $130.96 ⁴⁰ per share. In February 2025, the company refinanced its term loan facility, recording a debt extinguishment loss of $5 million ⁴¹ in the first quarter of 2025. In the second half of 2025, the company used cash on hand to repay $115 million ⁴² of outstanding principal under the Refinancing Term Loan B-2 Facility. The company also recorded a charge of $35 million ⁴³ related to a pre-Con-way acquisition environmental matter and a gain of $13 million ⁴⁴ from the settlement of claims against certain truck manufacturers.

For the fiscal year ended December 31, 2025, XPO reported consolidated revenue of $8,157 million ⁴⁵, an increase of 1.1% ⁴⁶ compared to $8,072 million ⁴⁷ in 2024. Net income was $316 million ⁴⁸ in 2025, compared to $387 million ⁴⁹ in 2024. Diluted earnings per share from continuing operations was $2.64 ⁵⁰ in 2025, compared to $3.23 ⁵¹ in 2024. Operating income was $656 million ⁵² in 2025, compared to $660 million ⁵³ in 2024. Adjusted EBITDA was $1,272 million ⁵⁴ in 2025, compared to $1,266 million ⁵⁵ in 2024. Net cash provided by operating activities from continuing operations was $986 million ⁵⁶ in 2025, compared to $808 million ⁵⁷ in 2024.

Management provided specific guidance for 2026, stating that they anticipate interest expense to be between $205 million and $215 million ⁵⁸. They also anticipate gross capital expenditures to be between $500 million and $600 million ⁵⁹ in 2026, funded by cash on hand and available liquidity. Additionally, management estimates that the defined benefit pension plans will contribute annual pre-tax income in 2026 of approximately $14 million ⁶⁰.

A key growth vector for XPO is its company-specific action plan to enhance network efficiencies and drive growth in its North American LTL business. This plan focuses on four levers: providing best-in-class service, investing in network capacity and enhancements for the long-term, accelerating yield growth, and driving cost efficiencies. The company has made considerable progress in each of these areas since launching the growth plan in the fourth quarter of 2021, and management believes they are still in the early stage of realizing the plan's full potential. The company has created a strategic growth opportunity by building more than 30% ⁶¹ excess door capacity into its network, positioning it to capture profitable market share gains when market conditions improve. The company also sees significant growth potential ahead in its major markets and intends to continue expanding its business by investing in capacity for the long-term, gaining profitable market share and aligning price with the value it provides.

Another growth vector is the company's investment in proprietary AI technology. In 2025, the company developed new linehaul models that use AI to improve the efficiency of freight flows, piloted routing innovations for pickup-and-delivery operations, and continued to improve productivity with real-time labor analytics at the service center level. Management sees AI playing a major role in how the company operates, prices its services, competes, and creates value over the long term. The company expects its proprietary, AI-driven capabilities to become increasingly essential to how it operates, competes and creates value. The company's proprietary optimization models analyze massive amounts of data including volume, capacity, and dimensions to generate instructions to maximize trailer utilization, reduce cost, and enhance service.

The company's margin and cost outlook is focused on driving cost efficiencies through optimizing variable costs, overhead, and use of purchased transportation. In 2025, the company lowered its cost of third-party purchased transportation by over 50% ⁶² compared with 2024 and reduced outsourced linehaul miles as a percentage of total linehaul miles to 5.1% ⁶³ in the fourth quarter. Management aims to achieve continuous improvements in cost efficiency. The company's progress with labor productivity and linehaul insourcing highlights the important role of artificial intelligence in sustaining a strong cost performance. With more linehaul miles managed internally, the company can gain greater control over service quality and protect its cost structure against rising truckload rates when the current freight recession ends.

The company's operational outlook includes continued investment in network capacity and enhancements for the long-term. In 2025, approximately 60% ⁶⁴ of the company's capital expenditures were deployed to acquire more than 3,600 trailers ⁶⁵ and 1,200 tractors ⁶⁶, increasing the capacity of its fleet. The company's average tractor age at year-end 2025 was 3.7 years ⁶⁷, compared with 5.9 years ⁶⁸ at year-end 2022. The company continues to invest in tractors with 15-liter engines and automatic transmissions that improve reliability and fuel economy. In Europe, the company has more than 150 all-electric trucks ⁶⁹ currently deployed supported by the existing and ongoing installation of more than 350 electric charging stations ⁷⁰ at its facilities. The company also has a natural gas-powered fleet of 280 trucks ⁷¹ serving customers in France, the U.K., Spain and Portugal.

The company's capital allocation strategy includes share repurchases and capital expenditures. In March 2025, the Board of Directors authorized repurchases of up to $750 million ⁷² of common stock. As of December 31, 2025, the remaining share repurchase authorization was $625 million ⁷³. The company anticipates gross capital expenditures to be between $500 million and $600 million ⁷⁴ in 2026. The company has never paid, and has no immediate plans to pay, cash dividends on its common stock. The company's R&D spending is not explicitly quantified in the filing, but the company notes it has been investing in proprietary AI technology and that the process of continuous enhancement of information technology systems may lead to significant ongoing software development costs.

A significant headwind flagged by management is the overall freight environment, which continues to be recessionary due to a mix of macroeconomic pressures on supply and demand. Factors that may affect results include elevated interest rates; economic inflation, which may have a negative effect on certain operating costs such as salaries, wages and employee benefits, fuel and insurance; uncertainty regarding the impacts of tariffs imposed, revoked or reciprocated between the U.S. and its trading partners; and the ongoing reluctance of some shippers to route goods through areas unsettled by conflict. The company notes that U.S. demand for LTL services may increase when interest rates decrease or tariff uncertainties subside, as both dynamics historically correlate to a rebound in industrial activity.

A structural constraint identified by management is the current state of LTL industry capacity, which is constrained below pre-pandemic levels in North America. The company believes that its combination of capacity and technology puts it in a unique position to respond quickly to rebounds in demand when the freight recession eases. Additionally, the company faces risks related to the potential divestiture of its European business. The previously announced authorization by the Board of Directors to divest the European business remains in effect, but there can be no assurance that the divestiture will occur, or of the terms or timing of a transaction. A sale or other divestiture of the European business will result in the company being a smaller, less diversified company with a more concentrated area of focus and less geographical diversification.

XPO faces material risks from the cyclical nature of the transportation industry, as economic recessions and other factors that reduce freight volumes, both in North America and Europe, could have a material adverse impact on its business. The company's business levels are directly tied to the purchase and production of goods and the rate of growth of global trade, which are influenced by inflation, interest rates, and trade policies. The company's company-specific action plan to enhance network efficiencies and drive growth in its North American LTL business may not be effective or timely, and may not improve results of operations or cash flow from operations as planned. The company has approximately $1.5 billion ⁷⁵ of goodwill on its consolidated balance sheet as of December 31, 2025, and if it determines that this goodwill has become impaired, it may incur impairment charges which would negatively impact operating results. The company is exposed to currency exchange rate fluctuations because a significant proportion of its assets, liabilities and earnings are denominated in foreign currencies, primarily the euro and British pound sterling. As of December 31, 2025, a uniform 10% strengthening in the value of the USD relative to the GBP would have resulted in a decrease in net assets of $36 million ⁷⁶. The company's indebtedness could adversely affect its financial condition, with total outstanding principal amount of debt (excluding finance leases) of $3.2 billion ⁷⁷ as of December 31, 2025. The company's European business heavily relies on subcontracting and a large number of temporary employees, exposing it to risks related to managing these third parties.

Management's message to shareholders emphasizes the company's strategy to help customers move goods efficiently through their supply chains by using transportation capacity, organizational strengths and proprietary technology to deliver superior outcomes at scale. The tone is forward-looking and confident, highlighting significant growth potential ahead in major markets and the intention to continue expanding the business by investing in capacity for the long-term, gaining profitable market share and aligning price with the value provided. Key strategic priorities emphasized for the period ahead include providing best-in-class service, investing in network capacity and enhancements for the long-term, accelerating yield growth, and driving cost efficiencies. Management provided specific forward-looking guidance, stating that they anticipate interest expense to be between $205 million and $215 million ⁷⁸ in 2026 and anticipate gross capital expenditures to be between $500 million and $600 million ⁷⁹ in 2026. Management also estimates that the defined benefit pension plans will contribute annual pre-tax income in 2026 of approximately $14 million ⁸⁰.