Welcome to the XPO Logistics Third Quarter 2019 Earnings Conference Call and Webcast. My name is Melissa, 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. [Operator Instructions] 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. 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 as to the extent required by law. During this call, the company may also refer to certain non-GAAP financial measures as defined under the 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 related financial tables. You can find a copy of the Company’s earnings release, which contains additional important information regarding forward-looking statements and non-GAAP financial measures, in the investors section on the Company’s website. I’ll now turn the call over to Brad Jacobs. Mr. Jacobs, please go ahead.

Thank you, operator. Good morning, everybody. Thanks for joining our third quarter earnings call. I’m here in Greenwich today with Matt Fassler, our Chief Strategy Officer; and Tavio Headley, our Senior Director of Investor Relations. We delivered beats this quarter on both adjusted EBITDA and adjusted EPS. We also generated strong free cash flow. We achieved these results despite a soft macro, which is reflected in our updated revenue guidance. Our main lines of business produced important gains in the quarter. In logistics, we increased adjusted EBITDA by 11%. We continued to buy truckload capacity at better-than-market rates. We grew revenue in managed transportation by 22%, with a tailwind from XPO Connect. We outperformed the market in Europe. And our LTL adjusted operating ratio was our best third quarter OR ever. We remain firmly on track for our LTL business to generate at least $1 billion of EBITDA in 2021. Our proprietary technology is continuing to drive benefits for our customers and our shareholders. Our entire management team is highly focused on executing on 10 major levers to significantly improve our profit over the next several years. The majority of these 10 initiatives relate directly to our technology. Companywide, we’re using our tech to optimize the $5 billion variable-cost opportunity in our $6.5 billion annual labor spend. For example, in LTL, we rolled out game-changing tools that use machine learning to reduce our $1.3 billion annual linehaul spend, our $650 million spend for pickup and delivery and also reduce the $365 million we spend annually in dock operations. In the warehouses where we’ve introduced advanced automation like collaborative robots and autonomous goods-to-person systems, our teams are working 2 times to 4 times more productively. And on the revenue side, we’re applying data science to capture pricing opportunities across our transportation modes. In total, the 10 levers represent a pool of approximately $700 million to $1 billion in potential profit growth by 2022. These are self-driven, company-specific initiatives that are largely independent of the macro. We’re excited about the size of the prize and the meaningful potential uplift to our profitability. Now I’ll turn the call over to Matt to discuss the quarter in more detail. Matt?

Thanks, Brad. As I review the numbers, you’ll see that we’re moving full speed ahead with our tech-driven initiatives across our company, with many milestones marking progress in Q3. We’re confident that these initiatives will deliver significant benefits for our shareholders both today and over time. I’ll start by walking you through the third quarter numbers and our strategic focus by business unit, beginning with our transportation segment. In North American LTL, we drove strong profit growth despite sluggish demand. Yield rose 2.9%, excluding fuel. Price increases on contract renewals grew by 4%. Both of these are a continuation of the trends we saw in the first half of the year, reflecting rational market pricing. Tonnage declined by 3.1% year-over-year. This was driven by lower weight per shipment for many of our industrial customers, consistent with the macro backdrop for the U.S. industrial sector. By contrast, weight per shipment for our customers in the consumer sector remained steady. Our adjusted operating ratio improved by 460 basis points to 80.8%. Excluding gains on sales of real estate both this year and last, our adjusted OR improved by 210 basis points to 83.5%. As Brad said, it’s our best third quarter adjusted OR ever. The improvement in this ratio reflects our continued improvement in yield as well as tight cost control. Tech-driven optimizations on pricing and labor are beginning to contribute to these results. Within freight brokerage, we drove volume while remaining disciplined on margin. Our freight brokerage top line declined by 14% year-over-year, which mirrors Q2. Excluding the reduction in our brokerage business with our largest customer, our underlying freight brokerage revenue declined by just 3%. Our net revenue margin eased across freight brokerage by 60 basis points to 18% as contractual rates declined and the spot market stabilized. In truck…

Thank you. [Operator Instructions] Our first question comes from the line of Bruce Chan with Stifel. Please proceed with your question.

Yes, gentlemen. Thank you for time. Just a quick question here on the LTL yields. When I look at some of the mix characteristics, revenue per hundredweight was down. Length of haul was up fairly meaningfully. And I think both of those tend to increase the revenue per hundredweight, which would imply that core yields are maybe closer to zero. And I just want to get your take. Is that indicative of what's going on in the market and the competitive dynamics? Or is that more of a function of some of your AI and machine learning-enabled pricing tools?

So Bruce, we think that pricing in the LTL market remains healthy and rational. Our yield trends through the year have been consistent. Again, our price increases on contract renewals increased 4%, again we think an indicator of consistency in the pricing environment. We are deploying our pricing analytics in LTL. As we've mentioned, our work in price elasticity has been essential for assessing any individual customer's history as well as current market dynamics for optimizing yield. So we think that pricing in the LTL environment remains consistent and healthy as it's been all year.

Okay. Then just switching gears a little bit to the M&A picture. You guys have done some nice work on the margin front and the cost management front, and it looks like valuations are starting to moderate a little bit out there. Is there any more appetite to get back into the acquisition fray? And if so, are there any changes to your previous strategy, as far as where you want to fill out some of that geographic and/or service white space?

We are in very early stages of conversations with potential sellers. We are very disciplined in general and specifically with respect to M&A. In M&A, we have a very methodical process. We've begun that process, and there's no time frame. M&A is something that we like to talk about retroactively rather than prospectively; and in general, to answer your question about the types of deals we like to look at, are ones that are, a, strategically compelling. There's a reason to do it. There's a strong rationale for doing it. B, from a financial perspective, highly accretive and something that has synergy so that one, we delight the customer, but two, also there’s a clear path to improve both the EBITDA and the free cash flow that we're acquiring. But there's nothing to talk about of substance at this stage.

Okay. And then just one final question here before I hand it over, on the contract logistics side. Can you maybe give us some flavor on how that business would respond if we were to see maybe a modest recession? I mean obviously business volumes would be a little bit lighter, but I would imagine that there would be more of an appetite to outsource from customers that are seeking some cost savings.

I think to some extent you're already seeing how these businesses act in a downturn. We've been in a downturn. We've been in a downturn in general for quite a while, about a year in industrial. Consumer is still strong, but the rest of the economy has not been so hot for quite a while. Remember the tariffs started in March 2018. Nothing really happened. And people weren't paying close attention to them for a good two, three quarters, then it started -- people started seeing the effects. So that's been building up. And now you're seeing the business, in our case, be able to generate positive year-over-year comps, even beats, in a slow economy. In supply chain specifically, there is an interesting phenomenon of what happened in the great financial crisis in the largest of the four contract logistics companies that we bought, New Breed, where their EBITDA actually went up and up substantially in 2008 and 2009. So, we'll see what type of recession we have and when we have it, but so far, so good.

All right, great. Well, appreciate the time, and congrats on the nice results in a tough market.

Thank you, sir.

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

Hi, thanks. Good morning. Thanks for taking the question. I wanted to -- first question, I just wanted to ask about the cadence of earnings with respect to the fourth quarter. So, the full year guidance, even at just the low end, implies a sequential uptick in the EBITDA from what you did in the third quarter, which I don't think has ever happened. And I would argue the business is probably less seasonally 4Q focused now, given the loss of postal injection. So, I understand there's a lot of cost opportunities, so if you can just walk us through maybe the puts and takes on the sequential walk to get you there and just how confident you are in achieving the full year EBITDA guidance. Thanks.

I think you're absolutely right in mentioning postal injection. That was a big bad guy in the fourth quarter of last year, and we don't have that this year. So just walking into the quarter, we've got that wind to our back with not having both postal injection; and France, France the whole yellow vests…

Yes, but I'm talking about the sequential, Brad. The sequential block is what I'm talking about.

And sequentially, last year, we had the hit from postal injection and the hit from France. And this year, we're not going to have that. The full quarter benefit of the cost-out that we did so well in the third quarter didn't hit the whole third quarter. That layered in throughout the quarter. We will get the full benefit for all three months in the fourth quarter. And the biggest contributors will be LTL, where we've got positive yield, got good cost control. And we've got Smart labor tools already showing good results and that they’ll be rolled out to all the LTL facilities by Christmas. Secondly, European supply chain, where we've had growth in new business and we've been very disciplined on labor costs. And last mile, we're cycling the postal injection. We've had new wins, and the consumer is still healthy here in the fourth quarter. And then the final thing that I would mention is the 10 levers, six of which are cost control. And the main one that's most exciting and particularly for the fourth quarter is tackling that $6.5 billion labor spend that we're very zeroed in on, making sure that we're spending that $6.5 billion very wisely.

Okay. So just to bow tie that: You basically are comfortable. You have a line of sight to the earnings power of the enterprise being higher in the fourth quarter than it was in the third quarter. Is that correct?

That's correct. And that's reflected in the guidance that we gave out last night, where we brought down revenue and we kept EBITDA. And we kept free cash flow. That's what we're seeing.

Got it. Okay, I appreciate it. And then just maybe one longer-term question, looking beyond this year and to 2020. I'm not asking you for specific guidance. And no one has really given 2020 guidance in the trucking industry, so I'm not asking you to do that. But just conceptually, given the success you're making and the new business wins -- and the pipeline of new business is up, I don't know, 20% year-over-year or something like that. You're lapping the large customer loss at the beginning of this year. Is it fair to assume, Brad or Matt, that EBITDA growth accelerates next year? Or how should we think about it? Because there are some decent gains on sales this year impacting the outlook for 2020. And so, I just want to think as we look prospectively into 2020, given all the progress that you're making on the costs and the revenue side. Is it conceptually right to assume EBITDA growth year-over-year accelerates in 2020 versus 2019?

We like the setup of how we're going to enter into 2020. We've got a lot of momentum from so many different projects that the team is laser focused on. We're not going to give guidance now. We're going to give guidance once we finish the budget process, around the next quarterly conference call. But we like the way we're set up going into next year.

Okay. I’ll leave it there guys. Thanks for taking my questions. Appreciate it.

Thank you.

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

Hey thanks, and good morning, guys. Maybe on the LTL side. Could you give us an indication of what you guys are seeing so far here in the fourth quarter? I know it's early, but I just wanted to get a sense of what October trends kind of are looking like from a tonnage and pricing standpoint.

Similar as to what it was in the third quarter. Yield is a little bit better, tonnage is a little bit worse. And of those two things, obviously, we prefer yield to be the better of the two, because there's no costs associated with it. It goes right to pretax. In the third quarter, we had the best OR ever -- best third quarter OR in the history of not us but also Con-way, with or without real estate. With real estate, it was 460 basis points improvement. Without real estate, it was 210 basis points improvement. We expect to continue to see similar types of OR improvement for the balance of the year. Yield was up 2.9% in the third quarter. We expect it to be more towards the higher end of the zone that we've had all year long of 3% to 4%, at least that’s how October is starting out. Price increases on renewals have been about 4%. Again, that's the zone it's been all year, 4% to 5%. And I would say the star of the third quarter that we would expect to continue for the fourth quarter, given what we've seen in October, is really load factor from an operational perspective. Load factor was up 6.1% in the third quarter. And we've been getting better productivity from our new linehaul modeling tools. So, I think, for the fourth quarter, you should see OR improvement of about more than 300 basis points with real estate, more than 100 basis points without real estate. And then as Matt was mentioning before on the workforce planning, we've now piloted Smart in 20 LTL service centers, and the results have been amazing. They've been very, very similar to what we saw in the warehouses, where we've had over 5% labor productivity fairly consistently, which is why we've accelerated the rollout. It will be in all 290 LTL service centers in the next 60 days. And we've got very exciting tech projects; in the linehaul, $1.3 billion of costs there; in P&D, $650 million of costs we're reducing there; in the docks, $665 million of costs there. Tech-enabled projects on all of those items. We've seen benefits from that in the first month of the quarter, and we expect it to increase over the whole quarter.

Okay. That's very helpful. I appreciate it. And then you made a comment about buying at better than the DAT benchmark on the brokerage side. And I think you said loads were up there. There's clearly some share gains going on. Can you talk a little bit more about kind of the strategy on the brokerage side, what you think you might be able to kind of accomplish from a market share perspective as we continue through this weak market? And does that strategy shift at all if we do see sort of these early signs of firming in the truckload market and maybe continue to a better, more firm market in 2020?

Well, in brokerage, we both lost market share and gained market share in the sense that, if you take into consideration the largest customer that downsized their business with us in truck brokerage where we were their largest truck broker and they were our largest truck brokerage customer, now they're a small truck brokerage customer of ours, then we've lost market share. If you take that out, if you just pro forma out the largest customer downsizing, business was up. The business was up very nicely. And productivity was up. So, while including the largest customer downsizing, loads were down 4% year-over-year, our head count in brokerage was down 13%. So, we're seeing nice productivity improvement there. And in terms of procuring capacity, that's correct. We have been procuring capacity in the third quarter at 3% better than DAT, and that's because of our XPO Connect tools. XPO Connect is, I hate to use a cliche, but it's on fire. We had 37,000 downloads in the third quarter, which was double what it was over the second quarter. And we're on track to be 100,000 downloads by the end of the year. So, there's good things going on in freight brokerage. At the same time, we're not immune to what's going on in general with the truckload market.

Okay, okay. No, that's helpful. One quick detailed one before I let you go would be just gains on sales. How do you think about the fourth quarter? Any projections you can give us for the models?

Sure. The thought process is likely somewhere in the $20 million to $25 million range in total, and that depends on how deals end up tracking for us in Q4.

Okay, thank you very much. Appreciate it.

Thank you.

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

Thanks very much. Good morning. E-commerce has been a big driver last year and expected to be again this year but a bit of a different customer profile. Curious, Brad and Matt, could you address the approach this year and some of the trends you're seeing thus far?

Yes, Scott. E-com is still our largest and our fastest-growing vertical globally. It's a sticky business because we do it really well. And these are customers that value service and speed and accuracy a lot. We have very high renewal rates in that business. We are the largest e-fulfillment provider in Europe, and we capitalize on that position. Our reverse logistics business, the returns management business, is the fastest-growing subset of that fastest-growing e-commerce vertical, but we're also seeing nice gains in omni-channel. And all the tech investments that we've done to support e-commerce give us the ability to manage peaks better for our e-commerce customers in periods like Black Friday, for example. And the Smart labor tools have been very much appreciated by our customers because we're taking costs out. We're not just only the scale leader in e-commerce. We're also the cost leader in e-commerce. So, we're going to continue pressing our advantage in e-commerce. It's working very well for us and we'll keep doing it.

Thanks very much for that. The logistics margin expanded nicely sequentially. Could you discuss some of the drivers there? And you've covered a nice job on this call discussing efficiency initiatives. I'm just curious what kind of trend we may see going forward in that segment. Thanks.

Well, you're right. EBITDA was up 10.9% in the third quarter in logistics. The margin was up 100 basis points. The revenue was down, though. It was down 0.5% year-over-year. A big chunk of that was the downsizing of our largest customer, which is not all over with. So, we're going to see some more pressure with that going forward. But I think we can see more downward pressure on revenue there but still a strong ability to grow the bottom line strongly, healthily despite adverse revenue trends. Capacity has been growing. We have 195 million square feet today, so it's up 5% year-over-year, but it's down sequentially because of the downsizing of our largest customer. The Smart tools, the Smart labor management tools actually originated in our logistics business before we saw it working and then said, hey, let's try that in LTL as well. So, we've got about an eighth of our 800 or so contract logistics facilities using Smart labor tools right now. We are seeing 5%-plus labor productivity in those 100 or so sites. We are going to roll out smart labor management tools to all of our North American sites by the end of next year. Remember that, of our $6.5 billion labor spend that we're working to improve, $3.5 billion of that is in supply chain. It's in logistics. And to answer your question about what's growing the most there: It's reverse logistics. That's the fastest-growing part of our company as a subset of e-com, which is the fastest one beneath that. In XPO Direct, XPO Direct continues to be on track. We see that as a $1 billion revenue run rate by the end of 2022. Customers love it. They love it because it lowers their costs and it brings their inventory closer to their customers. And customers want faster shipping in a cost-effective way, and that's what XPO Direct does. So, a lot of positive wins there on the bottom line. Top line, I expect to be challenging.

Great. Thanks for that. I’ll turn over.

Thank you.

Thank you. Our next question comes from the line of Kevin Sterling with Seaport Global Securities. Please proceed with your question.

Thank you. Good morning, gentlemen.

Good morning.

Brad, can I dig deeper into a little bit of your longer-term plans? You talk about $1 billion in EBITDA in LTL by 2021. And it sounds like to me you can get there through technology improvements, the reduction in outside power, lane density, obviously pricing and yields seem to be pretty good, but as you know, tonnage is falling. I guess, barring an all-out recession or kind of a big stinker, you're pretty comfortable you can still get to that $1 billion in EBITDA outside of just some industrial kind of slowing, if you will. Am I thinking about that right?

You’re thinking about it exactly correct. Every sentence you just said, I agree with. And the proof is in the pudding. We have been in an industrial recession for the last year, and I say that just based on the objective fact that not only us but the entire LTL industry has seen negative tonnage growth in each of the last four quarters. So, in a contracting market, we’ve still been able to post excellent numbers in LTL. And I attribute that partly to the things you mentioned that are intrinsic to us that we’re doing in order to improve the business every day. We’ve got a great management team in LTL that’s very focused on efficiencies and productivity and cost-out, customer service. But also, to the nature of the LTL business, which is very different than the truckload business. In truckload, you have many tens of thousands of carriers spreading out and sharing the capacity. In LTL, there’s a handful of carriers, less than 10, that control 89% of the capacity. So, there’s more discipline. There’s more pricing power. Secondly, in the truckload business, when rates start going up, it’s so easy for capacity to come in, for supply to come in. You just need a CDL and a few trucks, and bingo, you’re in business. In LTL, you need a network. You need pickup and delivery vehicles. You need service centers. You need the linehaul trucks. You need a whole back office. You need all the technology to plan the whole network. That’s a lot of moving parts. And that moat prevents new capacity from easily coming in. So, the LTL business, from our point of view, is a pretty good business. It’s a business that can perform well even in tough times, provided that the industry and managements of the leading companies are disciplined. And I think, 10 years ago, maybe they weren’t so disciplined. And maybe they weren’t so knowledgeable about how all the different levers affected the P&L. I think today every single management of the top 10 LTL companies is very sophisticated and understand levers very well, particularly price. And I expect them to be disciplined in any future downturn in just the way they’ve been disciplined in the last 12 months.

Got you. Thank you very much. It sounds like we’re driving or you’re driving toward a sub-80% OR in LTL. And is that your ultimate goal?

It’d be nice. We’re moving in that direction. It’s not our main report card. Our main report card is growth in operating income year-over-year, growth in EBITDA, return on capital; and profit margin is one way to do that. We do have a major effort on utilizing our backhaul better and to reduce our empty miles, so from there you have a little pressure on yields. That does pressure the OR, but I’m not going to apologize for our ORs. We had the best operating ratio for a third quarter ever in a third quarter even giving 0% credit for the real estate profits we had, OR improved 210 basis points year-over-year. And you’re right. It’s almost sub-80% but not quite, 80.8%.

Okay. And lastly, any update on a CFO search? Where does that stand? Anything you could share might be new there or incremental.

A CFO search is like M&A. It’s binary. We’ve either done it or we haven’t done it. And we prefer to speak about it retrospectively rather than looking into the future, but the search is active. We’re seeing candidates. We’re – like in general in life, we’re disciplined about it. And we’re looking for that superstar CFO, and when we find that person, we’ll hire them and we’ll announce it promptly.

Got you, okay. Well, Brad, Matt and Tavio, thank you so much for your time this morning, appreciate it. Take care.

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. Congrats on some of these results here. So Brad, to start. Maybe this is going back to Amit’s question, but looking at 2020, you’re lapping the loss of your largest customer. For this year, the low end of your guidance suggests kind of 7% EBITDA growth. Given that you have some of these tailwinds, and as you said, we’ve been in an industrial recession for the past 12 months and you no longer have that loss of the largest customer, is there any reason to think that 7% is kind of a base line in terms of what we can see in terms of EBITDA growth? Is there any reason to think that – kind of where the macro is, that, that level of growth that we’ve seen this year, given all the headwinds that you faced, could be kind of a base line as we look forward to next year or to 2021?

Nice try. And nice try, Amit, but we’re not going to be giving next year guidance on this call, just like all of our competitors aren’t giving guidance either. But I like the setup going into next year. I like the very large number of internal initiatives that we’ve got that are idiosyncratic to us, that are company specific, that are self-help, that are largely independent of the macro; and the deep focus we’ve got on the management team, senior management team and the middle management team on executing with a high level of accountability on each one of those levers. So, I like where the organization is functioning, but we’re not going to give specific guidance at this point in time for next year.

All right. Fair enough. Well, let’s say – or let me ask then a different question, moving on to the $1 billion EBITDA target for 2021, coupled with the, I think you said, $700 million to $1 billion of savings from these 10 tech-driven initiatives. How do we think about those two things interlocking with each other? Is the $1 billion additive – or the $1 billion from EBITDA, is that additive to the $700 million to $1 billion from tech initiatives, or do they kind of overlap?

They do overlap. Look at it like this: In the normal play of things, we have headwinds. We have tailwinds. The main headwinds are inflation, cost inflation in particular. We have pricing pressures with our $6.5 billion of labor costs. And the positive winds are things like price, volume and everything that goes to margin expansion. And good management teams know how to function in good markets and bad markets so that you achieve all those. And the good guys outweigh the bad guys and you grow your profits like we’ve done every year for many years now. In terms of additional pockets besides the normal to and fro of what I just described, we as a team have spent a considerable amount of time to say what can we do above and beyond the normal way we run a business to improve it? Besides normal operational excellence, what kind of strategic levers can we push that will move the needle quite a bit? And we devised 10 major levers that’s a pool of $700 million to $1 billion of potential profit improvement by 2022, that we feel confident we’re going to get a good chunk of that. We’re not going to get $1 billion. We’re not going to achieve 100% of every single lever, but we will achieve hundreds of millions of dollars from that. You can take that to the bank. These are things that have been well thought through that are very, very well grounded. Now a lot of those levers are tech enabled. More than half of them are. And what are we trying to achieve with those tech-enabled initiatives? We’re trying to do things that make the customer very, very happy with us and that improve our bottom line. So, we’re trying to shorten distribution…

Okay, terrific. That’s really great color. Thanks for the time, Brad.

You’re welcome.

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

Hey, good morning, everyone and thanks for taking my questions. I guess, Brad, coming off that answer: the way you guys calculate organic growth, it was negative in the quarter. But I think you said that the pipeline has increased, right? So, can you just remind us the way you look at the pipeline and if that’s netted against business that you think is not going to renew or that you’ve lost? And look, I’m not looking for guidance on 2020, but I guess, when do we see resumption in growth in the business? Or is this just more a macro issue?

The pipeline definition is the precise pipeline definition that we use in our CRM, which is Salesforce.com. And the pipeline stood at $4.3 billion at the end of Q3, so it was up 19% year-over-year. It was up both here, it was up in Europe. It’s only a third time it’s been over $4 billion in three quarters in a row. But I wouldn’t bring out the champagne yet because new business, the closed business, was down. It was down about 2.7%. It was just shy of $900 million. So, two things I would take away from that is, on the one hand, customers are taking more time to transfer, to convert. Secondly, on the other side, on the good piece of news, even though it was down, it was down 2.7%, it was down less than the 5.2% it was down in the second quarter. So, it’s I would look at it as the proverbial mongoose going through the snake. The snake is digesting the mongoose a little slower in this slower macro environment. With respect to your question about when is organic growth going to resume and be positive: That’s a function of two things. That is a function of the macro. We’re not completely immune to the macro. But it’s also how effective we are at selling our services to our customers. And I think, on that score, we’ve got a very superior service offering across our modes. And we have leading positions in these fastest-growing parts of transportation logistics, and I’m pretty confident and optimistic about that.

Okay. Appreciate that answer. And I guess what a lot of people are struggling with is reconciling the growth in EBITDA, and obviously you guys are pointing to improved margins as well in the fourth quarter, but the lack of growth in free cash flow. And I guess I want to look at it through the lens of gross CapEx. Because it looks like, to hit your net CapEx relative to your sale gains, so far, you’re actually going to be spending maybe north of $600 million this year. So longer-term question, what is the right gross level of CapEx? And what do you think the level of sales to offset that can be going forward consistently?

You’re right. All through the year, we’ve expected gross CapEx to track in excess of $600 million, and that is likely to be the case in 2019 as well. That’s certainly the number that’s embedded in our forecast and that we expect to hit for the year. As you know, our maintenance CapEx is dramatically lower than the gross CapEx that we’re expending this year. We’re going through, each year, in our budget process, considering growth initiatives, considering the environment, considering our various uses of capital and planning CapEx from a bottom-up in that way. So, it’s a bit similar to the other questions that we’ve gotten on 2020. We’ll consider the environment, consider how compelling projects are versus other uses of capital and come up with the number at that point in time. As we’ve gone through this year and tightened our belts on costs and increased our discipline on capital allocation, particularly with regards to CapEx, one thing we’re very happy about is that we’ve continued to invest in the tech initiatives that we’ve discussed through the call. If anything, our focus on those initiatives, our commitment and our investment in them, has increased. And we found opportunities away from those strategic efforts to the extent that we need to rein in spending and increase discipline on both capital and SG&A.

Thanks, Matt.

Thank you. End of Q&A:

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I’ll turn the floor back to Mr. Jacobs for any final comments.

Thank you, operator. And thank you, everyone, for spending the hour with us. I’d sum up the quarter in two ways: tough external environment which shows up in the revenue but great bottom line performance by our team. And I’d like to thank and congratulate our operators around the world for delivering a good bottom line performance. Thank you very much.

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