Welcome to the XPO Logistics Q1 2018 Earnings Conference Call and Webcast. My name is Melissa and I will be your operator for today's call. At this timing 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 security 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. The forward-looking statements in the company's earnings release were 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 in the Investor's section on the company's website at www.xpo.com. 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 Investor's section on the company's website. I will now turn the call over to Brad Jacobs, Mr. Jacobs, you may begin.

Thank you, operator. Good morning, everybody. Thanks for joining our earnings call. With me in Greenwich are John Hardig, our CFO; Scott Malat, our Chief Strategy Officer; and Tavio Headley our Head of IR. First of all, I'm happy to welcome Kenny Wagers to the team as our new Chief Operating Officer and to congratulate Troy Cooper on his promotion to President. These appointments will support the high levels, organic, and acquisition related growth we're anticipating. As you saw from the press release, we had a strong start to 2018. We posted record first quarter revenue, net income, EPS and adjusted EBITDA. We generated robust organic revenue growth of 11% and we increased our adjusted EBITDA 14% year-over-year to a first quarter record of $330 million. The growth was broad-based across our operations. We grew contract logistics organic revenue 14% and last mile 15%, driven by demand from our e-commerce customers. And in the tight market, we grew freight brokerage revenues 30%. Our logistics business keeps picking up steam. We brought 20 new sites online in the first quarter. We're now opening on average two facilities a week. Companywide our sales pipeline stands at a record $3.66 billion, which is 23% higher than a year ago. In the first quarter, we signed up new business of $972 million, that's up 36% and a new quarterly record for us. Since the beginning of the year, we've been launching one innovation after another for our customers. Scott will describe our new share distribution network, our next generation warehouse management system, our digital freight marketplace and mobile driver tools and our voice-enabled tracking that integrates with Amazon Alexa and Google Home. These investments and others should propel our earnings growth in 2019, 2020 and beyond. We remain on track on deliver on our target of at least $1.6 billion of adjusted EBITDA this year and approximately $1 billion of cumulative free cash flow for 2017 and 2018. And on that note, I'll ask John to review the first quarter numbers in more detail. John?

Thanks Brad. Our results in the quarter reflect a healthy diversification of customer verticals and service lines. I'll start with our transportation segment. We increased revenue 16% to $2.8 billion. Operating income increased 32% to $139 million, and adjusted EBITDA grew by 14% to $266 million. We had a good quarter in less-than-truckload. Our adjusted OR improved 120 basis points to 87.8%. This was the best first quarter operating ratio in 18 years. And it's an acceleration from the 60-basis point improvement in the fourth quarter. Our full year 2018 adjusted OR is on track to improve 100 basis points to 200 basis points over 2017. Yield in the quarter accelerated and was up 3.9%. This compares to 2.6% in the fourth quarter and 1.8% in the third quarter last year. Pricing on contract renewals was up 5.9%, also an acceleration from the fourth quarter when it was 5.3%. We recently made a substantial investment in our LTL sales organization. We added 190 people since November, including 140 in the first quarter. We launched our new sales effectiveness program. We're capitalizing on the strong LTL market to make changes to our freight mix. We're focusing on profitable freight that matches our network for the long-term. As a result, we expect to see meaningful acceleration in operating income growth in the second half of the year. Weight per shipment increased 4.3%, tonnage per day was down 1.1% as we continued to cull less profitable freight mainly in our largest national accounts, and replace it with freight from local accounts. As a result, we've grown our local revenue by 22% over the last two years. Despite a tight truck market, we reduced purchase transportation costs 8.5% by increasing utilization and moving more of the freight to our own fleet. In last mile,…

Thanks, John. From a macro standpoint, we're continuing to see broad based strength in both North America and Europe. In North America, the truckload market continues to be favorable, although not quite as tight as earlier this year. Produce season started late. We're expecting volumes to pick up alongside the start of beverage season this month. In Western Europe, all of our major transportation markets improved in March, and again in April, reflecting steady economic growth. These are all positive signs of the up cycle, but what we're most excited about are the long-term growth opportunities that are being fueled by our investments in the business. Our most significant investments are in the areas of innovation and sales. XPO Direct is a great example of how we use innovation to serve our customers and gain new business. XPO Direct is a brand new, shared space distribution network that positions goods in close proximity to 95% of the U.S. population. Customers share our technology, warehouses, last mile hubs, cross docks, trucks and brokered capacity at a fraction of the cost of setting up their own distribution centers, and with a lot more flexibility. We've already signed up a number of Tier 1 e-commerce and retail customers. On the technology front, we've launched a number of major innovations since the start of the year. WMX is our next generation warehouse management system. It's proprietary to XPO. It gives us the ability to implement new logistics sites more rapidly, integrate the latest automation in robotics, and create more data analytics for our customers. WMX also pairs well with our new security robot program called C3 XPO, which has improved security at our logistics sites. Another recent innovation is Drive XPO. It's a mobile app for brokerage carriers that launched in North America and…

Thank you. Our first question comes from the line of Chris Wetherbee with Citi. Please proceed with your question.

Hey, thanks. Good morning, guys.

Good morning, Chris.

Brad, maybe we can start on the M&A front. Just wanted to get a sense if you could give us sort of your most updated thinking in terms of I guess either timing, sort of what the target environment looks like, sort of how that process is all progressing at this point?

It's progressing. It's progressing well, and it's progressing as expected and as originally outlined last year when we returned to the M&A market. You'll recall when we first announced that last year, we said, we want to do that in a very methodical, disciplined way. The same way we did it from 2011 till 2015. We wanted to cast a wide net, speak to lots of potential acquisition targets, and then funnel it down to a smaller and smaller amount, and then end up selecting the one that's the most accretive and most valuable for our shareholders and our customers. And we said the base case scenario is, we would have a big acquisition or two medium sized acquisitions announced by the end of this year, and we're very much on track for that. That could be three weeks from now. That could be three months from now. That could be December. But the base case scenario is this year.

Okay. That's helpful. Any thoughts in terms of where you're looking, has that changed in terms of the end markets that you're most interested?

It hasn't. We're still looking from a geographic point of view at companies, because of their size, are in more than one country, usually more than one continent. So global companies and the headquarters are generally in North America or Western Europe and the types of companies are ones that are identical or similar or very adjacent to the service lines that we're actually offering right now.

Okay. That's helpful. And then just a follow-up thinking about the organic revenue growth, so you've announced a lot of initiatives over the course of the last quarter or so, and very recently as well. Wanted to get a sense, you posted a nice organic revenue growth number in the first quarter. How do you see that playing out with new salespeople on board, some of these new initiatives, heading in towards the peak season? Do you see a nice acceleration in revenue growth. Just want to get a sense of kind of how that looks relative to your pipeline and everything else.

I don't know if I'm really good at predicting that because the last two quarters, we were thinking it was going to come in between 5% to 8%, and it came in at 10% and 11%. So, we've been underestimating the amount of organic growth that's out there to be gotten, and our ability to go and get it. Brokerage obviously had 30% organic growth; logistics had 14% organic revenue growth, last mile had 15% organic revenue growth. So, everything is performing very, very, very well. I would say the likelihood of us only doing 5% to 8% organic revenue growth for the full year is very low. And the chances of us doing the high end of that range or a bit higher than that range is highly likely.

Okay. That's helpful. Thanks for the time this morning, guys. Appreciate it.

Thank you.

Thank you. Our next question comes from the line of Brian Ossenbeck with JPMorgan. Please proceed with your question.

Hey, good morning. Thanks for taking my question.

Good morning.

Just wanted to talk about the last mile for a little bit. It's clearly growing pretty fast at 15% this quarter, it should accelerate throughout the year. Big and growing market, but we have seen some more headlines of, and some more transactions for other competitors to get into the space, especially in North America. So, I wonder if you could talk about what you're seeing on the competitive dynamic, specifically from customers. Any retention? And then just provide a little bit more color on the European rollout, a couple months into it.

Okay, great. Thank you for those questions. So, last mile is going very well. We grew 15% in the first quarter. We have read the same headlines about competitors coming into the market, and some very professional, experienced, high quality companies coming in, which is great, always good to have sophisticated competition rather than unsophisticated competition. We have competition in all of our lines of business. We don't have a monopoly or dominant market share in anything that we do. So every day, we have to earn our customers' business. In last mile, customers demand extremely high level of service. More than in most other lines of business, and there's a lot of ingredients that go into being able to deliver that excellent level of customer service. You need scale, you need density, you need a national network of last mile hubs. You need proprietary technology to do the dynamic route planning, the customer satisfaction scoring at the point of delivery. You saw recently we did an industry first and integrated with Alexa and Google Home. So there's a lot of pieces to the puzzle in last mile. We have all those pieces to the puzzle. I think some of the people who are trying to get into the business might get all those pieces and some of them won't. In any case, we don't take our leading position in last mile for granted and we continue to deliver great customer service for our customers every day. We won more last mile business in the first quarter than in any other first quarter in XPO's history. And with respect to your question about Europe, Europe is a place we entered last mile just within the last year, and we're now up and running in five countries, UK, Ireland, France, Spain and the Netherlands. And there's strong demand for Last mile business, particularly well-executed last mile business with really high-levels of operational excellence.

Okay. Thanks for the detail on that. Just a quick follow-up on the contract logistics pipeline and reverse logistics, in particular, you mentioned you're doing about $0.5 billion in revenue there, clearly another big growth area. Just wonder if you could give us a sense of how much of those opportunities are in the current pipeline, if that's what's fueling some of that growth, and if it's as big of an opportunity in Europe as it is in North America?

It is. Reverse logistics, which is largely related to e-commerce, is very big for us in Europe because we have the largest e-fulfillment platform in Europe. So this is a large business. It's fast growing. As Scott mentioned, we're now managing over 170 million returns annually, and our revenue in reverse logistics is approaching $0.5 billion. So this is a business that we gravitate to because it's a complex business. It's a business that has a lot of moving parts that many things have to be done. If you notice the theme, the types of businesses that we're doubling down in and that we're investing more and we're building, are ones that are complex. Ones that have high value add. Ones that can differentiate ourselves from competition, ones that are non-commoditized. And ones that are technology enabled. So, in reverse logistics, technology is a big differentiator. You will know that of our substantial tech spend, a big part of that is for predictive analytics. So in reverse logistics, we use machine learning to forecast the likely rate of returns by SKU, and this is highly valuable data and information for our customers because it helps them manage their inventory more, and it helps them place their goods closer to the customer. Oh, and you asked one other thing. You said do we have reverse logistics business in the pipeline? The answer is yes.

In the pipeline, right.

Yeah. That's one of the faster growing parts of our business.

Okay. Great, thanks for the time.

Thank you.

Thank you. Our next question comes from the line of Scott Schneeberger with Oppenheimer & Company. Please proceed with your question.

Morning, Scott. Scott Schneeberger - Oppenheimer & Co., Inc.: Hey, good morning, everybody. The yield accelerated in LTL in the quarter. Could you please discuss the drivers there, and elaborate on how you anticipate yield trending over the coming quarters? Thanks.

Scott, are you referring to LTL? Scott Schneeberger - Oppenheimer & Co., Inc.: Yes.

Yeah. So, in LTL, yield was up 3.7%. No, 3.9%. Which you are right, accelerated from the fourth quarter, where it was 2.6% up. And accelerated from the third quarter, where it was up 1.8%. So it was up 1.8%, third quarter; 2.6% at fourth quarter; and now at 3.9% in the first quarter. So it is accelerating, and that's for two reasons. Number one, we have to recover our cost. There is cost inflation, so that's covering that. And number two, it's a good market. It's a very, very healthy market. The industrial end markets are strong, and competition is rational. And that's one of the reasons why our contract renewals in LTL are up 5.9%. Also in acceleration from the fourth quarter where it was 5.3%, I expect yield to remain strong for the balance of the year. And we made a substantial investment in our LTL sales organization. We added 190 new salespeople in our sales organization and sales support as well since November, including 140 in the first quarter. So lots going on in sales in LTL. Scott Schneeberger - Oppenheimer & Co., Inc.: Great. Thanks for that. And then shifting gears a little bit, could you please elaborate on the investments that you made in the first quarter, and what you expect as far as a cadence of investment OpEx spend over the coming quarters? And then, kind of rounding this out, based on business trends and demand influence. How will that influence your investment spending over the balance of the year, and could you provide a perspective on what type of elevated investment you might expect in 2019 and beyond from obviously this very high level of activity starting this year? Thanks.

So I can't really speak to 2019 and 2020 because we haven't done the budget for that yet. But I can tell you precisely what our strategy is for making investments in the now, that are drags on earnings, that are big improvements in earnings going forward in future years, for this year. In this year, we made a commitment to the Street to deliver $1.6 billion of EBITDA and free cash flow of $625 million. To the extent that we have extra EBITDA, that we have a – what is it called? Something of riches? Embarrassment of riches. We have an embarrassment of riches and have more, or even significantly more than $1.6 billion of EBITDA. We will continue to invest that into the business. So, for example, the 190 LTL sales and support that we've hired in the last few months, the growing the sales organization in Europe more than was originally planned. Opening 30 last mile hubs by the end of the summer. Staffing up our organization so that we can continue to do two contract logistics implementations a week, which is the run rate we're on. Investing in technology, and we've been rolling out one innovation after another after another, the most recent one, XPO Direct. We did grow EBITDA 14% year-over-year in the first quarter and we do expect to grow EBITDA 17% for the full year. So I like where we are in terms of delivering the numbers. The higher the numbers come in, don't expect the $1.6 billion to go up, but do expect us to invest more in the business in things that will reap rewards and significant rewards in the outer years. Scott Schneeberger - Oppenheimer & Co., Inc.: Great. Thanks very much.

Thank you.

Thank you. Our next question comes from the line of Ravi Shanker with Morgan Stanley. Please proceed with your question. Ravi Shanker - Morgan Stanley & Co. LLC: Thanks very much, Brad, if I can follow up on your last response here. So essentially you're telling us that you're drawing a line in the sand at $1.6 billion of EBITDA. And kind of – just given that your organic growth rate in the first quarter was well above our expectations and seemed like above your expectations as well, you're going to plow in kind of – if that organic growth accelerates through the year and you make more money, that gets plowed back into the business, when do we see that upside? Does that mean that your EBITDA in 2019 is going to be kind of exponentially higher than 2018 levels? I mean what's the payback going to be like on the incremental investments you're making over that $1.6 billion that you made on this year?

Well, good morning, Ravi. Well, first of all, exponential is a pretty strong word. I don't know that I can say it's going to be exponential, but we are building the business for the long-term. We are building the business so that we're well positioned to serve customers with high levels of customer satisfaction for many years. And that we build up on the scale that we've got to make each one of our service lines better. We're able to delight our customers more in each one of our lines of business. So, we will continue to invest industry-leading levels into things like technology and innovation. So, in terms of what the profit growth will be in 2019, 2020. We haven't worked through that, we haven't released that, we haven't even begun the budgeting for that. But our goal is to make it very, very healthy, very strong. Ravi Shanker - Morgan Stanley & Co. LLC: Okay. And also, your pipeline growth this quarter was really impressive. Can you give us a little more detail on where that new business is coming from? Which segment, which region, and also how much incremental cost or investment will you have to make to take on that new business?

So, you're right. The new business pipeline was a record. There were a lot of records in this quarter. That was one of them. It was at $3.66 billion, up 23% from a year ago. It's – where the biggest year-over-year pipeline increases were, logistics, European transformation and last mile. The customer wins; we won $972 million new business, up 36% from a year ago. In terms of how it breaks out between the segments, a little more than half, 52% in logistics, 48% in transportation. And in terms of the – that's where the pipeline is. And in terms of geography, it's about a little more than two-thirds here in North America, and a little under a third in Europe. Ravi Shanker - Morgan Stanley & Co. LLC: Great. Thanks for that (32:17). And just one last follow-up for maybe John or Scott. Can you quantify any unusual cost headwinds you may have had this quarter? Whether it was weather or incentive comp or something, and I'm sorry if I missed that in your prepared remarks.

Sure, Ravi. Hey, it's Scott. There's always headwinds and tailwinds in any quarter. We had a good quarter within those. In terms of things within the quarter, there were the investments in the LTL and the European sales and XPO Direct. That added up to about $17 million. From a weather perspective, it was a tough winter, especially in France and other parts of – in North America. That was a $16 million headwind, but you always have things going for you and against you. Ravi Shanker - Morgan Stanley & Co. LLC: Great, thank you.

Thank you.

Thank you. Our next question comes from the line of Ari Rosa with Bank of America. Please proceed with your question.

Hey, good morning, guys. So, first question, I wanted to touch on the acceleration in European transportation on the truckload and less-than-truckload side. It looked like there was a real step up there, and it's kind of continued from fourth quarter. So just wanted to talk about, what's kind of driving that? Is that kind of the organic growth opportunity, or is that you guys kind of expanding your service offering and drawing in more business that way?

Good morning, Ari. It's the latter, not the – it's tight capacity mainly. So, capacity is even tighter in Europe than it is over here in North America. And unlike North America, where it's still tight, but it's a little less tight than it was at the beginning of the year. In Europe, capacity actually tightened more in March, and then tightened more in April, and we're starting May with even tighter levels. I don't want to sound like a broken record, but record is actually the right word for this quarter. We had the best first quarter ever in European transport. That was due to dedicated truckload in the UK and France, because as a result of the tightness in the market there, we're seeing more customers want to shift to dedicated versus one way truckload, and also growth in last mile is starting to put some numbers up.

Okay. That's really helpful. And then on some of these initiatives that you have underway, XPO Direct and the digital freight marketplace, et cetera, is there a good way to quantify what the opportunity looks like there in terms of whether it's incremental revenue growth or thinking about EBITDA contribution from those opportunities? Should we view that as incremental growth above and beyond the $1.6 billion? And even if it's not for 2018 that it really materializes, how do we think about what the opportunity set looks like going forward from those initiatives?

The answer is yes, Ari. All of those five major technology and other innovations that Scott went over earlier in the call, they're all designed for two things: to delight our customers and to generate more profit for our shareholders. So XPO Direct, which is that shared space distribution network, that's designed to give flexible capacity to our customers so they can position their goods closer to the end consumer without putting in additional capital cost. It's a shortened delivery time, so effectively we're renting out our scale to the customer and allowing them to reach 95% of the U.S. population within one or two days. So right now we have about 75 facilities in the network and we're going to expand that to 100 by the third quarter. XPO Connect is something a little bit different. That's a cloud-based digital freight marketplace. It's fully automated, self-learning. It's dynamic, automatically finds loads and it gives customers full 100% visibility across our modes in real-time. So that's more on the transportation side. The voice-enabled tracking in the last mile, that was an industry first, integrating with Amazon Alexa and Google Home. That is a really cool function. We've been demonstrating that a lot here internally throughout the company, and you go right on to Alexa or to Google Home and you talk with back and forth with the smart speakers, and you can place your order. You can track your order. You can change your order. You can confirm your order. And in last mile, nailing down the exact delivery window to as precise amount of time as possible, and if anything changes from our side or from the consumer side, being able to make that known and visible and transparent to the other side and work around that, that's a…

That's a great run down. Thanks for that, Brad. And then just last question for me. Returning to this question about last mile, obviously, there were kind of some news headlines around that yesterday and it sounds like it's very early stage, but just thinking about XPO strategically within that business, obviously, there's this speculation that UPS is looking to partner with a last mile provider. Would it make sense for XPO to partner with someone like UPS who could funnel a large amount of heavy goods freight into your network? Or do you prefer to kind of continue to do the one-off relationships that you have with customers? What makes sense kind of from a strategic standpoint for you guys?

Oh, yeah, it would make absolute sense for us to cooperate with other logistics providers who don't want to actually do the last mile, but have inquiries from their customers in other lines of business who also have last mile business. It would make absolute sense for us to work together with other firms doing that.

There's not a concern around like loss of control or anything of that sort?

Well, you're really not losing control because in the scenario that I think you're describing, basically another logistics provider in parcel or in LTL or in another part of the business other than last mile has a customer who also has last mile needs, so instead of delivering something just to a distribution center, they also want it to go from the DC right to the last mile and be installed and assembled. And maybe they don't have that expertise. Sure, it would make absolute sense for us for them to hand that over to us and to do the last mile. This happens all day long in the world of transportation and logistics globally, where a freight forwarder, for example, is managing something coming in from Asia into Long Beach, and then they hand it off to an intermodal provider who puts it on a box and gets it up to Chicago, and then they may hand it off to a broker or to a trucking company to go by truck, and then eventually it goes to a warehouse, and then from a warehouse to a last mile provider like ourselves, and then ends up in somebody's apartment in Manhattan.

Okay, terrific. Thanks for the time, guys.

Thank you.

Thank you. Our next question comes from the line of Jason Seidl with Cowen & Company. Please proceed with your question. Jason Seidl - Cowen & Co. LLC: Thank you, operator. Good morning, Brad. Good morning, team. Wanted to focus again on the XPO Direct; you mentioned, Brad, I believe that some of the customers that you've signed up were Tier 1 e-commerce and retail type people. Are these people who don't already have established supply chains for their e-commerce business? And if they do, what percent of their business are they moving over to sort of the XPO Direct product?

Hey, Jason, how are you? It's Scott. Jason Seidl - Cowen & Co. LLC: Hey Scott.

These are customers that do have established legacy networks. What we're getting for them with XPO Direct is additional capacity. It's modern distribution centers with automation. It's capacity both in the transportation, the last mile hubs, the LTL capacity that we can provide for them, and we can do not only e-commerce deliveries – we also do store-based distribution out of that network. Jason Seidl - Cowen & Co. LLC: And when you look at some of the established players versus maybe some of the people that are smaller and up and coming, this sounds like a network that could be used by both, if I'm not mistaken.

It is. We've started with large customers that have large distribution networks, very complex requirements and the things that we can provide for them. Certainly, over time, some smaller players could use our network to scale up, but we have large Tier 1 players filling that network today.

The problem that it solves is, there's generally a tradeoff between speed and cost, and with XPO Direct, by renting out our network, we're able to offer air speed at ground rates. Jason Seidl - Cowen & Co. LLC: That makes sense, Brad. I wanted to have a follow-up question about some of the e-commerce in Europe. Brad, you said you were in five countries and you listed them. I was wondering, what plans do you guys have to expand that, and would that expansion be organic, or would that be maybe one of the targets for your acquisition hunt?

Well, last mile in Europe is up and running in a handful of countries right now, and we're going to keep growing that because there's a lot of demand for it. So that's a big organic push. We haven't brought anybody in last mile in Europe. There aren't a whole lot of last mile companies to buy in Europe. By the way, there were not a whole lot of last mile companies to buy in North America. We bought the biggest one is 3PD, and then we bought ACL, and UX, and Optima, and we fully integrated them into one platform. And once we got scale, once we got density, we were able to crack the nut of last mile. It's a tricky, tricky business. And in Europe, that's our main dilemma, is how do we quickly get up to the scale that we need in order to get the density, in order to get the cost structure that allows us to give extremely high levels of customer satisfaction and make a decent profit on it as well? Does that answer your question? Jason Seidl - Cowen & Co. LLC: No, it does. So it seems like you were going to try to build the densities in these existing five countries before you go out and start expanding organically beyond. Is that a good way to read that?

Yes, we have, but we do have a couple other countries that we have on our radar, but these are the main countries. When you look in Europe, where we have our main population centers of our XPO people are UK, France, Spain. Those are the three biggest ones. So that's where we have the technology. That's where we have the setup, the network and the customers. So that's where we started. Jason Seidl - Cowen & Co. LLC: Okay, fantastic. I appreciate the time, as always, everyone.

Thank you, sir.

Thank you. Our next question comes from the line of Amit Mehrotra with Deutsche Bank. Please proceed with your question.

Thanks, operator. Hi everybody, how are you? Thanks for taking the question.

Good morning.

Just a follow-up quick one on XPO Direct. It doesn't seem – and correct me if I'm wrong, but it doesn't seem like you're just renting out the scale, but also fulfilling the order. I'm just trying to understand if that's the accurate way to think about, and just the economics and how the economics work. Do you just kind of take commission kind of like what Amazon does with Fulfillment by Amazon for the footprint part, and then maybe direct the fulfillment maybe through your broker channel or LTL network? Is that how we should think about in terms of the potential opportunities strategically?

Hey, Amit. It's Scott. From a distribution standpoint, we do the last mile – what's unique to the XPO network is that we provide the last mile for heavy goods right into the home, so we have the heavy goods in distribution facilities that have every day transport going back and forth between our last mile hubs and it does the full distribution all the way to the final home. And you do small package, which is also part of the network. We do use third party providers for that last piece, and use those. In terms of the contracts, they vary, and they are customized based on what customers need. It is generally a fixed variable-type contract where there are some fixed costs covered, and then there's a variable component to it by piece.

And I guess this would be in North American – the revenues of this business would be in North America logistics, and then just if that's correct, just let me know. And then when should we start to see some inflection as a result of maybe more ramping of the business?

It's mostly in logistics, but as Scott was explaining as well, there's a brokerage part of it. There's a last mile part of it. Sometimes there's an LTL part of it, too. But the bulk of the revenues and profits you'll see in the logistics part, you're correct.

Okay, and then on the second question, I appreciate, Brad, like the budget is not done for 2019, but we're also kind of in an environment the last couple of weeks where there are concerns around peak cycle, especially, I guess, within the shorter cycle businesses that your transportation segment has, which is close to 50% or so of revenue. So in that context, is there any kind of reason to think the revenue and EBITDA growth of the business is actually very strong? Not even just the 11% or the 10.4% you did last quarter, but really kind of even within that high single digit framework that you provided. Is there any reason to think kind of that type of revenue growth and EBITDA growth that you're achieving even this year slows? If you can just help us think about that as you look at the pipeline of new business, because that is kind of top of mind right now, especially in the transportation segment.

Sure. There's no reason to think it's going to slow. And I don't know that we're in any better position than everyone else to predict what the economy's going to do over the next few years. I do remember very well in 2015, everybody, when I say everybody, I mean close to like 100%, agreed that we're going into a recession and the big argument was how deep is the recession going to be? How long is it going to be? But everyone had all kinds of very well thought out analysis of how long the cycle had been since the last recession and so forth, and the number of recessions over the decades and, everyone thought that. So I – it didn't happen, obviously. So I don't know that we can just look into what everybody's thinking. Everybody's thinking, oh, maybe it's peaking now. Maybe they're right, maybe they're wrong. All I know is where we are right now is very strong. No doubt about that. We're in 32 countries; none of them are in recession. They're mostly in a 1% to 3.5% GDP range, with most of them in the upper end of that. And in every single one of our lines of business, we have significantly more demand than we have capacity, which is why you're seeing pricing going up.

Right.

So for the time being and for the foreseeable future, absent some geopolitical event, life looks good.

Okay.

At least from our point of view, just looking at our customers and seeing what our customers are doing and saying.

I think you're maybe disappointed that you didn't get more M&A questions on this call, so I think if it's okay, I can just ask you a quick one, less about potential targets but more around how your philosophy around applying – the philosophy that you're applying, I guess, to potential deals. And I'm really talking about kind of the parameters that at least for me are important in terms of the company not paying a premium to its own multiple, the CapEx, capital intensity of the business not really changing materially, and then the potential acquisition as you leverage your technology investments is effectively under-earning. And so when you think about those kind of parameters and, clearly, those are my parameters not yours. But just help us think about how maybe the philosophical aspects of your M&A strategy has evolved in the context of those parameters?

I got the first three. The multiple CapEx, different industry, what was the fourth one?

There were just three. So, the multiple relative to your own CapEx intensity, and then also the acquisition would be under-earning when kind of you leverage your own technology investments?

Okay. So, with respect to the multiple, we have the same philosophy. The philosophy is, there's no reason to do an acquisition unless it's extremely accretive. There's just no reason to. It's a bad use of time, resources and capital. So, any acquisition that we do will be both strategically compelling to our customers. So if they read it, they get a smile on their face. And something that's highly accretive to our earnings, to our EBITDA per share. That is sacrosanct in our philosophy. There's no conflict on that. In terms of CapEx intensity, the vast majority of the ones that we're looking at are asset light, and have similar or less CapEx as a percentage of revenue as we do. There's a small number of the ones we're looking at, that have higher CapEx as a percentage of revenue than we do. We would keep an open mind to that. It's not our first choice. We keep an open mind to that at the right price. So, for anything there's a right price. So something that would be more asset-intensive would have to be a very, very compelling price. But I don't want to signal you that we're likely to do something asset heavy because we're not. But if we were, it would have to be something that was extremely, extremely accretive. And then the third topic, as I heard it, was something that has to be under-earning. I would say it slightly differently, which is, we would always want to buy something that, after we bought it with a fresh set of eyes, and with a new set of enthusiasm, and with synergies, and putting one-to-one together and coming up with more than two, we would be able to grow the earnings quite a bit. But that doesn't mean that it's an under-earning asset on its own. It could be. Conway was under-earning. It could be a company like Norbert Dentressangle, which was not under-earning, but once we bought it and applied our management techniques and the synergies with the rest of the company, and our enthusiasm, then it's making records in terms of the amount of earnings power it has.

Okay. Yeah, that's fair, and that's very helpful. Thank you very much for answering my questions.

Thank you.

Thank you. Our next question comes from the line of Brandon Oglenski with Barclays. Please proceed with your question.

Hey, good morning, everyone. Thanks for taking the question.

Good morning.

So, Brad, it did sound like you had some confidence on the EBITDA outlook, saying even if we come in above organic growth rates, probably not going to be much above $1.6 billion this year. So I just want to reconcile that because normally when I see top-line upside at most transports, we see earnings upside as well. So what are those incremental investments and why not just put them in the budget right now?

So the incremental – it's a good question. The incremental investments are in sales and sales support. And that, we've already had 190 people that we've added in the last few months. Depending on how business evolves over the rest of the year, we may add more. That's in the United States. In Europe, we did not have in the budget an expansion of the sales force. And because business is good over there, we have been investing in the sales force. The last mile hubs, right now we're budgeting 30 of them by the end of the summer. We will then have a truly national footprint where we're close to the vast majority of the population. There could be a few more that would get us even closer, and we'll have to just see whether we want to invest in that or not. We have staffed up for the robust level of contract logistics activity that we have. If we see that that contract logistics activity goes even more, we will want to staff up, because we always staff up in advance of the expansion so that we're not overloaded. And particularly for peak, we always want to be in our customers' different peaks around the world, very amply staffed up so we don't let them down. Technology is a lever that we can always push. We always have many, many more technology requests in our pipeline than we have time to do. But we can always add more people and put more money into technology, which is essentially our most secret, secret sauce. I mean, I can keep going down the list, but the key point you have to understand is, we balance it. We want to balance short-term performance and long-term growth and earnings. And we want to have both of those. So we feel that the $1.6 billion is a nice 17% growth from last year. Not a whole lot of our competitors growing EBITDA 17% year-over-year. And we would like to plow back into the company any excess of earnings into the kinds of things I just mentioned.

Well, I guess in that context then, can you talk about the CapEx budget this year, and maybe why that's not creeping higher given this environment?

Well, the CapEx budget is two things. It's technology and it's assets. Those are the main things. Technology, we can control that, and we have expanded it a little bit. And on assets, there's two ways you can grow the business. You can either add more assets, or you can so called sweat the assets. You can utilize the assets at a higher level, and that's what we've been doing. We've not been growing the container fleet in intermodal, yet we had 7% volume increases in intermodal. We've not been growing the LTL fleet, but we've been growing to our best OR quarter in 18 years there. We've been not growing the truckload fleet in Europe, but we've been improving our performance there. So, the emphasis is more on utilization and operational excellence than on just – on an undisciplined way, just add a lot of CapEx.

All right, thank you, Brad.

Thank you.

Thank you. Our next question comes from the line of Matt Reustle with Goldman Sachs. Please proceed with your question. Matthew Reustle - Goldman Sachs & Co. LLC: Thanks for taking my question. Not to beat a dead horse here on the reinvestment of the business. But is it fair to say, it's essentially accelerating future investments that you would have planned to have made just given the opportunity to do so, if given the opportunity to do so?

For the most part, Matt, yes. But in our technology, we come up with new ideas seemingly every month. And some ideas of things that we're rolling out, we did not have the past. But for the most part, yes, it's accelerating things we would have done anyways in the future. Matthew Reustle - Goldman Sachs & Co. LLC: Okay, thanks. And then one other point, and you referenced this in the release, in the comments, about growing your share of wallet with your existing customers. Where do you think you are, on average, with your biggest customers, in terms of share wallet? And do you have any context for where that's trended over time and where you think that can get to over time, as you rollout this broader product suite?

Yes. So, if you look at just the lines of businesses that we are in and where we're in them, that adds up to about $500 billion here in North America and a similar amount in Europe. So about $1 trillion of total addressable market, and even though we have a substantial amount of business, we're less than 2% of the total addressable market. So we have a very small percentage of the total market. Now, if you look at our specific customers, we have different levels of penetration with those customers. Some of them, we have as much as all of their business in a specific line of business. For instance, in logistics we have a few customers like that. And others, we have a fraction of a 1%. But on average, we have less than 2%. Our goal in our sales organization has been, over the last two years, to identify who are the customers who we have the best match with? What are they spending in each one of our lines of business? How much business do we have with them in each line of business? Not in totality, but in each line of business. And what's our goal? What's our count plan? How can we get closer to that customer and serve that customer better and more? And that's how our salespeople are compensated, by meeting that account plan. Now, with respect to cross-selling, cross-selling has gone well. We had about 26% of our sales coming from secondary service lines, which is up from about 23% a year ago. It's up from about 15% two years ago. So there's very, very strong growth in that, and if you look at our top 100 customers, 93 of them are using multiple service lines now. You go back two years that was 75. So big increase in that. Matthew Reustle - Goldman Sachs & Co. LLC: Great, thank you very much.

Thank you. I see I've been very long winded on this call, and its 9:30 already. So we'll take one or two more questions and then let people get back to the market.

Thank you. Our next question will come from the line of Allison Landry with Credit Suisse. Please proceed with your question. Allison M. Landry - Credit Suisse Securities (USA) LLC: Thanks for getting my question in, and I'll just ask one. In terms of free cash flow, how should we think about the cadence for the balance of the year? And specifically within that, working capital needs? And I think in the past maybe you've given out the proxy for how much working capital requirements increase for maybe every point of revenue growth, if I'm remembering correctly. So any comments there with respect to how we should think about modeling the changes in working capital and free cash flow going forward?

So free cash flow is very important for us. In 2016 it was $211 million, in 2017 it was up 77% to $374 million, and this year we're projecting another 67% increase in free cash flow to $624 million, which will deliver $1 billion of free cash flow between last year and this year. With respect to the quarterly breakout of the free cash flow, the first quarter is always our big cash usage. It's our lowest EBITDA quarter. We pay out our bonuses, and this year we paid out $138 million in bonuses to 20,000 employees. And we've frontend loaded some of the CapEx this year because there was demand for it. So working capital, by the nature of the business, the business model, shows that when business is growing and sales are growing, obviously, your working capital needs will grow. But for the course of the year, we're confident that we will deliver $625 million of free cash flow. Allison M. Landry - Credit Suisse Securities (USA) LLC: Okay. Great, thank you.

Thanks, Allison. Thank you, everyone, for participating in the call, and we look forward to talking to you in three months. Have a good day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.