XPO Logistics, Inc. (NYSE:XPO) Q3 2023 Earnings Call Transcript

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We’ve added 2,000 tractors to our fleet, and this is enabling us to be able to take on more customers, but also run more efficiently. You see it here in the third quarter, we were able to handle 8% more shipments, while gaining productivity, I mean, our headcount was down on a year-on-year basis, and our labor hours were up slightly versus an 8% increase in shipments and equipment help us manage that. And on the people side, we’re staffed for current volumes, but we do have headroom as well. And if the demand continues to increase, we can step up for that. The current paper markets are much easier to hire into. We have our driver schools as well. So we feel good from a people perspective. But generally, if you take a step back, we feel great from a capacity perspective, and we continue to invest in the network, and we’re well positioned to capitalize on any upswings in freight.

Brian Ossenbeck: Okay. Great. So as a quick follow-up. Maybe you can — looking longer term, you’ve been able to sort of bridge the different buckets performance and productivity of pricing yield accessorials all things we’re talking about here in terms of starting to narrow the gap with some of your peers. I just wondered if you could lay out some of the thoughts in terms of where those pieces are going to come from and if you’re able to quantify them in some of those buckets like accessorials, yields, productivity, et cetera? Thanks.

Mario Harik: Thank you. The biggest component is going to come from yield. As I mentioned in my prepared remarks, we see a double-digit incremental yield opportunity over the coming years through the three main levers I mentioned, which is one is around service and continuing to get this higher price from customers who understand we’re investing in the network and investing in the business, that’s roughly half the yield opportunity to bridge the gap. And the other half is we expect for the accessorials go from roughly 10% of revenue to the 15-plus percent of revenue range based on the premium services we are implementing. What I like about this program, these are services that our customers are asking for. So we’re taking care of the customer, and we’re making a higher yield and a higher margin.

And then finally, on the local channel side, by growing our local sales force. And here so far this year, we’ve increased our sales team account by 10% to 15% so far. And our goal is to get to more than 30% increase in overall sales headcount by end of next year, and that’s enabling us to gain market share in that local channel that would also help bridge the gap. But the lion’s share of the opportunity does come from price. The second category is around in-sourcing third-party line haul and we are accelerating that with our Road Flex team out and our new program for key drivers, and we will get higher service and lower cost, which is also really good. And we’re going to continue to improve efficiency as well. So when you combine all of these things, again, yield is number one by a long shot, and then all the other areas will help making sure that we are running more efficiently as well.

Operator: Our next question is from the line of Stephanie Moore with Jefferies. Please proceed with your questions.

Stephanie Moore: Hi. Good morning. Thank you.

Mario Harik: Thank you.

Stephanie Moore: I guess you touched on a little bit of this and just in the previous question, but maybe just to double-click on it a little bit more. Can you talk a little bit about kind of the labor additions that you’ve had to make, just given the disruption from the post-yellow bankruptcy, where you think you kind of are positioned today, adequately staffed? What areas were you have added? Maybe you noted a little bit on the sales force and then kind of your view as we go through 2024 kind of incremental hiring needs. Thanks.

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