XPO 10-K & 10-Q changes, risk factors and insider trading

•A reduction in overall freight volume reduces our opportunities for growth. In addition, if a downturn in our customers’ businessbusinesses causes a reduction in the volume of freight shipped by those customers, our operating results could be adversely affected;

•The U.S. government has made significant changes in U.S. trade policy and has taken certain actions that have negatively impacted U.S. trade, including imposing tariffs on certain goods imported into the U.S. To date, severalForeign governments, including the European Union (“EU”), have imposed tariffs on certain goods imported from the U.S. These actions may contribute to weakness in the global economy that could adversely affect our results of operations. AnyA furtherdecline or disruption in general domestic and global economic conditions that affects demand for the commodities and products we transport could reduce revenues or have other adverse effects on the Company's cost structure and profitability. Further changes in U.S. or international trade policy could trigger additional retaliatory actions by affected countries, resulting in “trade wars” and further increased costs for goods transported globally, which may reduce customer demand for these products if the parties having to pay those tariffs increase their prices, or in trading partners limiting their trade with countries that impose anti-trade measures. Such conditions could have an adverse effect on our business, results of operations and financial condition, as well as on the price of our common stock; and

We are implementing various cost and revenue initiatives to further increase our profitability, including advanced pricing analytics and revenue management tools, LTL process improvements, workforce productivity, European margin expansion, global procurement and further back-office optimization. Many of these initiatives involve the use of AI technology. If we are not able to successfully implement these cost and revenue initiatives, our future financial results may suffer.

We have grown rapidly and substantially over prior years, including by expanding our internal resources, making acquisitions and entering into new markets, and we intend to continue to focus on growth, including organic growth through new customer wins and increased business with existing customers, as well as additional acquisitions. We may experience difficulties and higher-than-expected expenses in executing this strategy as a result of unfamiliarity with new markets, changes in revenue and business models, entry into new geographic areas and increased pressure on our existing infrastructure and information technology systems from multiple customer project implementations. Further, we cannot be certain that our past or future acquisitions will be accretive to earnings or otherwise meet our operational or strategic expectations. Special risks, including accounting, regulatory, compliance, information technology or human resources issues, may arise in connection with, or as a result of, an acquisition, including the assumption of unanticipated liabilities and contingencies, difficulties in integrating acquired assets or businesses, possible management distractions, or the inability of acquired assets or businesses to achieve the levels of revenue, profit, productivity or synergies we anticipate or otherwise perform as we expect on the timeline contemplated.

A sale or other divestiture of our European business will result in us being a smaller, less diversified company with a more concentrated area of focus and less geographical diversification, as North American LTL would be our only remaining business. Following a potential sale or other divestiture of our European business, our Company likely would become more vulnerable to changing market conditions in the U.S., which could have a material adverse effect on our business, financial condition and results of operations. The diversification of our revenues, costs and cash flows will diminish as a result of a sale or other divestiture of our European business, and our ability to fund capital expenditures,expenditures and investments and service our debt may be diminished. We may also incur ongoing costs and retain certain liabilities that were previously allocated to entities that are sold or otherwise divested. Those costs may exceed our estimates or could diminish the benefits we expect to realize.

At December 31, 2024,2025, we had approximately $1.5 billion of goodwill on our consolidated balance sheet. Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations. We assess potential impairment of our goodwill annually, or more frequently if an event or circumstance indicates an impairment loss may have been incurred. Impairment may result from significant changes in the manner or use of the acquired assets, in connection with the sale, spin off or other divestiture of a business unit, a change in reporting units in connection with a reorganization of our reporting structure, negative industry or economic trends and/or significant underperformance relative to historic or projected operating results. For a discussion of our goodwill impairment testing, see “Critical Accounting Policies and Estimates - Evaluation of Goodwill” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our business depends, in part, on predictable temperate weather patterns. Our productivity historically decreases during the winter season, as it does for the industry in general, because inclement weather impedes operations. Certain seasonal weather conditions and isolated weather events can disrupt our operations and further impact productivity. We frequently incur costs related to snow and ice removal, towing and other maintenance activities during winter months. Our activities in the southern United States are particularly susceptible to the occurrence of hurricanes and tropical storms and, depending on where any particular hurricane or tropical storm makes landfall, our properties and operations could experience significant damage and disruptions. At least some of our operations are constantly at risk of extreme adverse weather conditions. AnyWhile many of our locations have emergency response plans to address extreme weather conditions, unusual or prolonged adverse weather patterns in our areas of operations or markets, whether due to climate change or otherwise, can temporarily impact freight volumes and increase our costs.

Also, concerns relating to climate change have led to a range of local, state, federal, and international regulatory and policy efforts to seek to address greenhouse gas (“GHG”) emissions. InGovernments around the U.S., various approachesworld are being proposed or adopted at the federal, state,proposing and localadopting governmentlaws levels.and Theseregulations effortsregarding GHGs which could lead to additional compliance costs or operational disruption now or in the future, including increased fuel and other capital or operational costs or additional legal requirements on the Company. In addition to the potential for additional GHG regulation or incentives, enhanced corporate, public, and stakeholder attention to fuel-efficiency and emissions transparency could impact the Company’s reputation or require the Company to provide additional GHG related disclosures. Climate change concerns and GHG regulatory efforts could also affect the Company's customers themselves. Any of these factors, individually or combined with one or more factors, or other unforeseen factors or other impacts of climate change, could affect the Company and have an adverse effect on our business, operations, or financial condition.

Our reputation could be harmed if we fail to satisfy evolving stakeholder expectations regarding environmental and social matters.

Companies across all industries have faced scrutiny from stakeholders related to environmental and social matters, including practices and disclosures related to carbon emissions and diversity, equity and inclusion.GHGs. If we are unable to meet stakeholder expectations, or if we are perceived to have not responded appropriately, our reputation could be negatively impacted or we could be the target of litigation. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on environmental and social matters. If, as a result of their assessment of our environmental and social practices, certain investors are unsatisfied with our actions, they may reconsider their investment in our company.

We must ensure that our information technology systems remain competitive. If our information technology systems are unable to manage high volumes with reliability, accuracy and speed as we grow, or if such systems are not suited to manage the various services we offer, our service levels and operating efficiency could decline. In addition, if we fail to hire and retain qualified personnel to implement, protect and maintain our information technology systems, or if we fail to enhance our systems to meet our customers’ needs, our results of operations could be seriously harmed. In addition, the adoption of new and rapid changes in technology, such as the rise in artificial intelligence applications, may impact the transportation and logistics industry. If we do not appropriately adapt our operations to these new technologies as quickly or effectively as our competitors, the Company's business could be adversely affected. This could result in a loss of customers or a decline in the volume of freight we receive from customers.

We process and maintain certain information that is confidential, proprietary, personal, or otherwise sensitive, including financial and confidential business information. In the past, foreign state-sponsored cyber threat actors have targeted networks belonging to critical infrastructure organizations globally, including transportation and logistics infrastructure networks. Our information technology systems, devices, storage and applications, as well as those maintained by our third-party providers, are susceptible to damage, disruptions and shutdowns due to computer viruses, cyberattacks, ransomware or malware attacks, phishing, denial of service attacks, malicious social engineering, attacks by foreign actors, and other attempts to gain unauthorized access. The rapid evolution and increased availability of artificial intelligence may intensify cybersecurity risks by making cyber-attacks more sophisticated and cybersecurity incidents more difficult to detect, contain, and mitigate. Our systems and the systems maintained by our third-party providers have been subject to attempts to gain unauthorized access, breaches, and other system disruptions, and these and similar incidents could happen again. These events could, from time to time, cause material service outages, allow inappropriate or block legitimate access to systems or information, or result in other material interruptions to our business, our customers and other stakeholders could be impacted, and our reputation could be harmed. The techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and the frequency and sophistication of cyber-attacks globally have increased over time. As a result, we may be unable to anticipate these attacks or techniques or to implement adequate measures to recognize, detect or prevent the occurrence of any of the events described above or to adequately mitigate their effects. We also may not discover the occurrence of any of the events described above for a significant period of time after the event occurs. These risks, as well as the number and frequency of cybersecurity events globally, may also be heightened during times of geopolitical tension or instability between countries.

We may in the future be required to raise capital through public or private financing or other arrangements in order to pursue our growth strategy or operate our businesses. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business and/or our ability to execute our strategy. Further debt financing may involve restrictive covenants and could reduce our profitability. We currently have investment grade credit ratings for our secured debt, however, we may not be able to maintain these ratings or obtain investment grade credit ratings for our unsecured debt. Without investment grade credit ratings, we may incur increased interest expense and borrowing costs and may have reduced access to financial markets to obtain additional debt financing or refinance our existing debt, potentially adversely affecting our financial condition and results of operations. If we cannot raise funds on acceptable terms, we may not be able to grow our business as planned or respond to competitive pressures.

The Second Amended and Restated Revolving Loan Credit Agreement, as amended (the “ABLRevolving Credit Facility”), and the senior secured term loan credit agreement, as amended (the “Term Loan Facility”), provideprovides for an interest rate based on the Secured Overnight OfferingFinancing Rate (“SOFR”), the Canadian Overnight Repo Rate (“CORRA”) or a Base Rate, as defined in the agreements,agreement, plus an applicable margin. The Senior Secured Term Loan Credit Agreement, as amended (the “Term Loan Facility”), provides for an interest rate based on SOFR or a Base Rate, as defined in the agreement, plus an applicable margin. Our European trade receivables securitization program (the “Receivables Securitization Program”) provides for an interest rate at lenders’ cost of funds plus an applicable margin. Our financial position may be affected by fluctuations in interest rates since the ABLRevolving Credit Facility, Term Loan Facility and Receivables Securitization Program are subject to floating interest rates. Refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” for the impact on interest expense of a hypothetical 1% increase in the interest rate. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. A significant increase in interest rates could have an adverse effect on our financial position and results of operations.

We use a combination of self-insurance programs and purchased insurance to provide for the costs of employee medical, vehicular collision and accident,accident (including personal injury), cargo loss and damage, property damage, and workers’ compensation claims. Our estimated liability for self-retained insurance claims reflects certain actuarial assumptions and judgments, which are subject to a degree of variability and uncertainty. We reserve for anticipated losses and expenses and periodically evaluate and adjust our claims reserves to reflect our experience.experience and exposure expectation. Estimating the number and severity of claims, as well as related potential judgment or settlement amounts, is inherently difficult. This inherent difficulty, along with legal expenses, incurred but not reported claims, and other uncertainties can cause unfavorable differences between actual self-insurance costs and our reserve estimates. Our operating results could be adversely affected if any of the following were to occur: (i) the number or the severity of claims increases; (ii) we are required to accrue or pay additional amounts because claims as they develop prove to be more severe than our initial assessment; or (iii) claims exceed our coverage. Accordingly, our ultimate results may differ from our initial estimates, which could result in losses over our reserved amounts. We periodically evaluate our level of insurance coverage and adjust insurance levels based on targeted risk tolerance and premium expense. An increase in the number or severity of self-insured claims or an increase in insurance premiums could have an adverse effect on us, while higher self-insured retention levels may increase the impact of loss occurrences on our results of operations.

We are subject to income taxes in the United States and many foreign jurisdictions. Changes to income tax laws and regulations, or the interpretation of such laws, in any of the jurisdictions in which we operate could significantly increase our effective tax rate and ultimately reduce our cash flows from operating activities and otherwise have a material adverse effect on our financial condition, results of operations and cash flows. The U.S. Congress, the Organization for Economic Co-operation and Development (“OECD”), the EU and other government agencies in jurisdictions in which we and our affiliates do business have maintained a focus on the taxation of multinational companies. The OECD has recommended changes to numerous long-standing international tax principles through its base erosion and profit shifting (“BEPS”) project, and many jurisdictions have begun codifying those recommendations into law. During 2023, the OECD issued administrative guidance for the Pillar Two Global Anti-Base Erosion rules (“Pillar Two”), which generally imposes a 15% global minimum tax on multinational companies. Many Pillar Two rules were effective for fiscal years beginning on January 1, 2024, with other aspects effective from 2025. On July 4, 2025, the One Big Beautiful Bill Act (P.L. 119-21) was signed into law. The legislation has multiple effective dates, with certain provisions effective in 2025 and others effective through 2027. These and other tax laws and related regulations changes, to the extent adopted, may increase tax uncertainty and/or our effective tax rate, result in higher compliance cost and adversely affect our provision for income taxes, results of operations and/or cash flows.

InState 2021,and thefederal EPAgovernmental agencies have announced a series of regulations to be implemented to decrease emissions from new heavy-duty vehicles and, in 2022 and 2024, finalized new stringent emission standards to reduce nitrogen oxides and establish new standards for greenhouse gas emissions from heavy-duty engines. In December 2021, CARB adopted its Advanced Clean Truck regulation requiring manufacturers to sell zero-emission trucks as an increasing percentage of their annual California sales. At this point, there are virtually no zero-emissions vehicles widely available that are suitable replacements for current technology used in less-than-truckload operations. If zero-emissionemission compliant vehicles are not available or not commercially viable for the less-than-truckload market, we may be required to modify or curtail our operations in California.applicable Thejurisdictions transition to utilizing zero-emission vehicleswhich could have a material adverse effect on our financial condition, results of operations, and cash flows or may require us to incur significant additional costs, any of which could negatively impact our business.

Future laws and regulations may be more stringent and may require changes to our operating practices that influence the demand for our services or require us to incur significant additional costs. We are unable to predict the impact that recently enacted and future regulations may have on our business. In particular, it is difficult to predict which, and in what form, EPA, CARB and FMCSAemissions regulations may be modified or enforced, and what impact these regulations may have on motor carrier and less-than-truckload operations. If higher costs are incurred by us as a result of future changes in regulations, or by third-party transportation providers who pass increased costs on to us, this could adversely affect our results of operations to the extent we are unable to obtain a corresponding increase in price from our customers.

We are a global company subject to changing laws, policies, sanctions, and other regulatory requirements in the U.S., the U.K. and the E.U. relating to trade compliance and anti-corruption. Economic sanctions and other trade compliance restrictions in the U.S., the U.K., the E.U., and other countries may prohibit us from engaging in business activities with restricted entities or sanctioned countries. The U.S. and other export controls may restrict us from exporting specific products or arranging transportation or other services to or for the benefit of certain entities in specified countries. An imposition of tariffs on imports or other changes to U.S. trade policy could cause demand for shipping from international markets to decrease, and if the declines are significant enough, it could have a material adverse effect on our results of operations, financial condition, and liquidity. Global developments such as the ongoing conflict in Ukraine may result in new and evolving sanctions and trade restrictions. Non-compliance with trade compliance laws, policies, sanctions, and other regulatory requirements could result in reputational harm, operational delays, monetary fines and penalties, loss of revenues, increased costs, loss of export privileges, and criminal sanctions.

XPO is a leading provider of freight transportation services, with company-specific avenues for value creation. We use our proprietary technology to move goods efficiently through our customers’ supply chains for approximately 55,000 customers in North America and Europe.

Our company has two reportable segments: North American Less-Than-Truckload (“LTL”), the largest component of our business,business; and European Transportation. Our North American LTL segment includes the results of our trailer manufacturing operation.

Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 20232024, for a discussion of our financial condition and results of operations for thefull year ended December 31, 20232024, compared towith thefull year ended December 31, 2022.2023.

As a leading provider of freight transportation services, our business can be impacted to varying degrees by factors beyond our control. The overall freight environment continues to be recessionary, due to a mix of macroeconomic pressures on supply and demand. Importantly, we see significant growth potential ahead in our major markets, and we intend to continue expanding theour business by investing in capacity for the long-term, gaining profitable market share,share and aligning price with the value we provide.

Examples of macroeconomic factors that canmay affect our results areinclude volatility inelevated interest rates and; economic inflation, which may have a negative impacteffect on certain of our operating costs, such as salaries, wages and employee benefits, fuel, purchased transportationfuel and insurance.insurance; Weuncertainty mitigateregarding thesethe impacts withof mechanismstariffs inimposed, revoked or reciprocated between the U.S. and its trading partners, including impacts on import costs, export competitiveness and end-market demand for our customercustomers’ contracts, including fuel surcharge clausesproducts; and generalthe rateongoing increases.reluctance of some shippers to route goods through areas unsettled by conflict.

We cannot predict how future macroeconomic conditions, supply chain constraints or global conflicts, if any,conflicts may adversely affect our results of operations.

Our consolidated revenue for 20242025 increased by 4.2%1.1% to $8.1$8.2 billion, compared with 2023. The increase reflects growth in both of our reportable segments, partially offset by a decline in fuel surcharge revenue in our North American LTL segment.2024. Foreign currency movement increased revenue by approximately 0.51.4 percentage points in 2025. After taking into effect the impact of foreign currency movements, revenue was essentially flat compared with 2024.

Salaries, wages and employee benefits includes compensation-related costs for our employees, including salaries, wages, incentive compensation, healthcare-related costs and payroll taxes, and covers drivers and dockworkers, operations and facility workers and employees in support roles and other positions. Salaries, wages and employee benefits in 20242025 was $3.4$3.42 billion, or 42.0% of revenue, compared with $3.38 billion, or 41.8% of revenue, compared with $3.2 billion, or 40.8% of revenue, in 2023.2024. The year-over-year increase as a percentage of revenue primarily reflects thehigher impactcosts ofdue inflation on our cost base andto the insourcing of a greater proportion of linehaul from third-party transportation providers.providers in our North American LTL segment and wage inflation.

Purchased transportation includes costs of procuring third-party freight transportation. Purchased transportation in 20242025 was $1.7$1.66 billion, or 20.4% of revenue, compared with $1.70 billion, or 21.1% of revenue, compared with $1.8 billion, or 22.7% of revenue, in 2023.2024. The year-over-year decrease as a percentage of revenue primarily reflects the insourcing of a greater proportion of linehaul from third-party transportation providers and, to a lesser extent, lower rates paid to third-party providers for purchased transportation miles in our North American LTL segment, partially offset by higher purchased transportation in our European Transportation segment.

Fuel, operating expenses and supplies includes the cost of fuel purchased for use in our vehicles as well as related taxes, maintenance and lease costs for our equipment, including tractors and trailers, costs related to operating our owned and leased facilities, bad debt expense, third-party professional fees, information technology expenses and supplies expense. Fuel, operating expenses and supplies was $1.59$1.57 billion in 2024,2025, or 19.3% of revenue, compared with $1.59 billion, or 19.7% of revenue, compared with $1.62 billion, or 21.0% of revenue, in 2023.2024. The year-over-year decrease as a percentage of revenue primarily reflects lower fuel costs due to lower diesel prices.costs.

Operating taxes and licenses includes tax expenses related to our vehicles and our owned and leased facilities as well as license expenses to operate our vehicles. Operating taxes and licenses in 20242025 was $80$83 million, compared with $60$80 million in 2023. The year-over-year increase primarily reflects property taxes on service centers acquired in the Yellow Asset Acquisition.2024.

Insurance and claims includes costs related to vehicular and cargo claims for both purchased insurance and self-insurance programs. Insurance and claims in 20242025 was $134$167 million, compared with $167$134 million in 2023.2024. The year-over-year decreaseincrease primarily reflects lower expense due to improved damage frequency, partially offset by higher vehicular insurance costs.costs in our North American LTL segment.

Gains on sales of property and equipment in 20242025 was $40$17 million, compared with $5$40 million in 2023.2024. The year-over-year increasedecrease primarily reflects $34 million inlower gains on real estate transactions in our North American LTL segment in 20242025 from a planned service center relocationcompared with no comparable gains in 2023.2024.

Depreciation and amortization expense in 20242025 was $490$521 million, compared with $432$490 million in 2023.2024. The year-over-year increase reflects the impact of capital investments,investments in particularproperty, tractors and trailers, as well as service centers acquiredtrailers in theour YellowNorth AssetAmerican Acquisition.LTL segment.

Transaction and integration costs in 20242025 were $53$8 million, compared with $58$53 million in 2023.2024. TransactionThe andyear-over-year integration costs for 2024 and 2023 aredecrease primarily comprisedrelates ofto no further stock-based compensation costs in the current year for certain employees related to strategic initiatives, as well as retention awards for certain employees related to strategic initiatives in 2023. Stock-based compensation costs related to our previously announced strategic initiatives concluded in the fourth quarter of 2024.initiatives.

Restructuring costs in 20242025 were $27$59 million, compared with $44$27 million in 2023.2024. We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure,infrastructure. includingIn actions2025, restructuring costs primarily reflect share-based compensation in Corporate, and severance and related charges incurred in connection with spin-offsheadcount andreduction divestmentinitiatives activities.in our European Transportation segment. In 2024, restructuring costs primarily related to headcount reduction initiatives in our European Transportation segment. For more information, see Note 65—Restructuring Charges to our Consolidated Financial Statements.

Other income primarily consists of pension income for both 20242025 and 2023,2024, while 2024 also includes investment income. Other income for 20242025 was $37$6 million, compared with $15$37 million in 2023.2024. The year-over-year increasedecrease reflects a $19 million decline in pension income and a $13 million ofdecline in investment income inrelated 2024to inthe Corporatesale onof a past investment in a private company that was sold during the year, compared with no investment income in 2023, as well as an increase in net periodic pension income in 2024.

Debt extinguishment loss was $0$6 million in 2024,2025, compared with $25 million in 2023. The debt extinguishment loss in 2023which related to the refinancing of our Existingterm Termloan Loanfacility Facility (as defined below) andin the redemptionfirst quarter of our2025. outstandingThere 6.25%was seniorno notesdebt dueextinguishment 2025loss (“Seniorin Notes due 2025”).2024.

Interest expense for 20242025 increaseddecreased 32.7%1.8% to $223$219 million, from $168$223 million in 2023.2024. The increasedecrease is primarily due to thea reduction in our debt issuancecoupled inwith thelower fourthinterest quarterrates ofon 2023our tovariable financerate thedebt, Yellowpartially Assetoffset Acquisition.by lower interest income. We anticipate interest expense to be between $220$205 million and $230$215 million in 2025.2026.

Our consolidated income from continuing operations before income taxestax provision in 20242025 was $473$437 million, compared with $260$473 million in 2023.2024. The increasedecrease was primarily driven by higherlower other income and operating income partially offset by higher interest expense.income. With respect to our U.S. operations, income from continuing operations before income taxestax provision was $456 million in 2025, compared with income of $486 million in 2024, compared with income of $286 million in 2023.2024. The increasedecrease was primarily due to higherlower revenue, lowerhigher purchased transportationinsurance and higherclaims, lower gains on real estate transactions, higher depreciation and amortization, higher costs related to legal matters, higher restructuring costs, and lower other income, partially offset by higherlower salaries,purchased wagestransportation and employeelower benefits, depreciationtransaction and amortizationintegration and interest expense.costs. With respect to our non-U.S. operations, loss from continuing operations before income taxestax provision was $13$19 million in 2024,2025, compared with a loss of $26$13 million in 2023.2024. The decreaseincrease in the loss is primarily due to higher revenue,purchased transportation, salaries, wages and employee benefits, and restructuring costs, partially offset by higher purchased transportationrevenue and salaries,a wagesgain andon employeelegal benefitsmatters in 2024.2025.

Our effective income tax rates were 18.1%27.8% and 26.0%18.1% in 20242025 and 2023,2024, respectively. The decreaseincrease in our effective income tax rate for 20242025 compared to 20232024 was primarily driven by a one-time tax benefit of $41 million associated with the legal entity reorganization in our European Transportation business andthat aoccurred reducedin impactthe fromsecond non-deductible executive compensation expense as a resultquarter of higher pre-tax income in 2024 compared to 2023,2024, partially offset by the$6 impactmillion ofin U.S. foreign tax credits recognized in 2025. For 2025, our effective tax rate was impacted by $12 million from non-deductible compensation and $12 million from losses for which no tax benefit can be recognized.recognized partially offset by $6 million in U.S. foreign tax credits. For 2024, our effective tax rate was impacted by $49 million of discrete tax benefits, the largest of which was a $41 million benefit from the legal entity reorganization in our European Transportation business, offset by $16 million from non-deductible compensation and $9 million from losses for which no tax benefit can be recognized. For 2023, our effective tax rate was impacted by $15 million from non-deductible compensation partially offset by $9 million of discrete tax benefits, the largest of which was a $4 million benefit from changes in reserves for uncertain tax positions.

WeAs expectpreviously disclosed, we expected the legal entity reorganization in our European Transportation business to generate a net cash refund of approximately $45 million,million. In 2024, we made tax payments of $7 million and in 2025 we received a cash refund of $49 million. We expect to bereceive receivedthe primarilyremaining $3 million cash refund in 2025.2026.

Our chief operating decision maker (“CODM”) regularly reviews financial information at the operating segment level to allocate resources to the segments and to assess their performance. For our North American LTL and European Transportation segments, our CODM evaluates segment profit (loss) based on adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”), which we define as income from continuing operations before debt extinguishment loss, interest expense, income tax provision, depreciation and amortization expense, goodwill impairment charges, litigationlegal matters, transaction and integration costs, restructuring costs and other adjustments. Segment adjusted EBITDA includes an allocation of corporate costs. See Note 43—Segment Reporting and Geographic Information for further information and a reconciliation of adjusted EBITDA to Income from continuing operations.

Revenue in our North American LTL segment increaseddecreased 4.9%1.4% to $4.8 billion in 2025, compared with $4.9 billion in 2024, compared with $4.7 billion in 2023.2024. Revenue included fuel surcharge revenue of $785$731 million and $857$785 million, respectively, for the years ended December 31, 20242025 and 2023.2024. The decrease in fuel surcharge revenue was primarily driven by lower diesel prices.prices and lower volume.

We evaluate the revenue performance of our LTL business using several commonly used metrics, including volumetonnage (weight per day in pounds) and yield, which is a commonly used measure of LTL pricing trends. We measure yield using gross revenue per hundredweight, excluding fuel surcharges. Impacts on yield can include weight per shipment and length of haul, among other factors, while impacts on volumetonnage can include shipments per day and weight per shipment. The following table summarizes our key revenue metrics:

The year-over-year increasedecrease in revenue for 2024,2025, excluding fuel surcharge revenue, reflects lower tonnage, almost entirely offset by higher yield, primarily related to our improvements in service quality and the benefit of numerous pricing initiatives, partially offset by slightly lower volume.initiatives. The decrease in volumetonnage per day reflects lower shipments per day and lower average weight per shipment partially offset by higher shipments per day.shipment.

Adjusted EBITDA was $1,115$1.14 millionbillion in 2024,2025, compared with $864$1.12 millionbillion in 2023.2024. Adjusted EBITDA included gains from real estate transactions of $34$15 million for the year ended December 31, 20242025 withand no$34 comparable gainsmillion in 2023.2024. Excluding these gains, the increase in adjusted EBITDA reflected higher revenue, excluding fuel surcharge revenue, driven by the pricing and volume dynamics explained above, andyield, lower purchased transportation, damageproductivity claims,improvements fueland costs,lower maintenance costs, and bad debt expense. These items were partially offset by lower tonnage, lower fuel surcharge revenuerevenue, andwage inflation, higher salaries, wages and employee benefits and vehicular insurance costs.costs and lower pension income.

Depreciation and amortization expense increased to $381 million in 2025 compared with $346 million in 2024 compared with $291 million in 2023 due to the impact of capital investments,investments in particularproperty, tractors and trailers, as well as service centers acquired in the Yellow Asset Acquisition.trailers.

Revenue in our European Transportation segment increased 3.3%4.8% to $3.3 billion in 2025, compared with $3.2 billion in 2024, compared with $3.1 billion in 2023.2024. Foreign currency movement increased revenue by approximately 1.33.6 percentage points in 2024. The increase in revenue compared to 2023, after taking into effect the impact of foreign currency movement, primarily reflects higher yield.2025.

Adjusted EBITDA was $147 million in 2025, compared with $158 million in 2024, compared with $163 million in 2023.2024. The decrease in adjusted EBITDA was primarily driven by higher purchased transportation,transportation and salaries, wages and employee benefits and lease and facility costs. These items werebenefits, partially offset by thehigher increase in revenue after taking into effect the impact of foreign currency movement, described above, and lower fuel costs and insurance and claims.revenue.

Depreciation and amortization expense increaseddecreased to $136 million in 2025 compared with $140 million in 2024 compared with $136 million in 2023 primarily due to the impact of capital investments.2024.

Our cash and cash equivalents balance was $310 million as of December 31, 2025, compared to $246 million as of December 31, 2024, compared to $412 million as of December 31, 2023.2024. Our principal existing sources of cash are (i) cash generated from operations; (ii) borrowings available under our Second Amended and Restated Revolving Loan Credit Agreement,Facility (as amendeddefined (the “ABL Facility”below); and (iii) proceeds from the issuance of other debt. As of December 31, 2024,2025, we have $511$600 million available to draw under our ABLRevolving Credit Facility, basedafter on a borrowing base of $512 million andconsidering outstanding letters of credit of less than $1 million. Commitments under our ABL Facility are $600 million and the maturity date is April 30, 2026. Additionally, under a credit agreement, we have a $200 million uncommitted secured evergreen letter of credit facility, under which we have issued $137$133 million in aggregate face amount of letters of credit as of December 31, 2024.2025.

We sell certain of our trade accounts receivable on a non-recourse basis to third-party financial institutions under factoring agreements. We also sell trade accounts receivable under a securitization program for our European transportation business. We use trade receivables securitization and factoring programs to help manage our cash flows and offset the impact of extended payment terms for some of our customers. For more information, see Note 2 —Basis of Presentation and Significant Accounting Policies to our Consolidated Financial Statements.

The maximum amount of net cash proceeds available at any one time under our securitization program, inclusive of any unsecured borrowings, is €200 million (approximately $207$235 million as of December 31, 20242025). As of December 31, 2024,2025, the maximum amount available under the program was utilized. Under the securitization program, we service the receivables we sell on behalf of the purchasers. TheIn January 2026, the program expireswas inamended Julyto 2026.extend the maturity date through March 2029.

XPO, Inc., together with its subsidiaries (“XPO,” “we” or the “Company”), is a leading provider of freight transportation services, with company-specific avenues for value creation. We use our proprietary technology to move goods efficiently through our customers’ supply chains in North America and Europe. As of MarchJune 31,30, 2026, we had approximately 37,00038,000 employees serving approximately 55,000 customers through 594586 owned and leased locations in 17 countries.

LTL in North America is a bedrock industry providing a critical service to the economy, with secular growth drivers, a favorable pricing environment and an established competitive landscape. XPO isoperates one of the largest LTL networks in North America, with approximately 9% share of the U.S. market, estimated to be $52 billion in 2025.

This positions us to capture profitable market share gains and drive higher incremental margins whenas market conditions improve. LTL industry capacity is currently constrained below pre-pandemic levels in North America, and we believe that our combination of capacity and technology puts us in a unique position to respond quickly to rebounds in demand whenas the freight recession eases.

An LTL network of our scale has hundreds of thousands of activities underway at any given time, all managed on our technology. For the trailing 12 months ended MarchJune 31,30, 2026, we moved approximately 16 billion pounds of freight 775784 million miles, including moving linehaul freight an average of 2.5 million miles a day.

With intelligent route-building, we can reduce empty miles in our linehaul network and improve load factor. Our proprietary optimization models analyze massive amounts of data including volume, capacity, and dimensions and generate instructions to maximize trailer utilization, reduce cost, and enhance service. We use our real-time visualization tools to drive efficiencies with pickups and deliveries and developed a robust pricing platform for contractual account management.

Three and Six Months Ended MarchJune 31,30, 2026 Compared with Three and Six Months Ended MarchJune 31,30, 2025

Our consolidated revenue for the second quarter of 2026 increased 13.2% to $2.4 billion, compared with the same quarter in 2025. Our consolidated revenue for the first quartersix months of 2026 increased 7.3%10.3% to $2.1$4.5 billion, compared with the same quarterperiod in 2025. Foreign currency movement increased revenue by approximately 4.41.0 percentage point in the second quarter of 2026 and by approximately 2.6 percentage points in the first quartersix months of 2026. The increase in revenue during the second quarter of 2026 and the first quartersix months of 2026 compared to the same periodperiods in 2025, after taking into effect the impact of foreign currency movements, primarily reflects higher revenue in both our North American LTL segment,and drivenEuropean byTransportation segments, further explained below, and includes the impact of higher yieldrevenue and shipments per day and higherfrom fuel surcharge revenue.surcharges.

Salaries, wages and employee benefits includes compensation-related costs for our employees, including salaries, wages, incentive compensation, healthcare-related costs and payroll taxes, and covers drivers and dockworkers, operations and facility workers and employees in support roles and other positions. Salaries, wages and employee benefits for the firstsecond quarter of 2026 was $880$929 million, or 42.0%39.4% of revenue, compared with $832$871 million, or 42.6%41.9% of revenue, for the same quarter in 2025. Salaries, wages and employee benefits for the first six months of 2026 was $1.8 billion, or 40.6% of revenue, compared with $1.7 billion, or 42.2% of revenue, for the same period in 2025. The year-over-year decreaseincrease asin aboth percentage of revenueperiods primarily reflects wage inflation, higher volumes and higher incentive compensation, partially offset by productivity improvements enabled by our AI-driven optimization tools,tools. partiallyAs offseta bypercentage higherof revenue, the year-over-year decrease reflects leveraging compensation costs due to the insourcing ofacross a greaterlarger proportionrevenue of linehaul from third-party transportation providers in our North American LTL segment and wage inflation.base.

Purchased transportation includes costs of procuring third-party freight transportation. Purchased transportation for the firstsecond quarter of 2026 was $423$464 million, or 20.2%19.7% of revenue, compared with $399$426 million, or 20.4%20.5% of revenue, for the same quarter in 2025. Purchased transportation for the first six months of 2026 was $887 million, or 19.9% of revenue, compared with $826 million, or 20.5% of revenue, for the same period in 2025. The year-over-year decreaseincrease asin aboth percentage of revenueperiods primarily reflects higher prices for purchased transportation, driven in part by higher fuel prices, partially offset by the insourcing of a greater proportion of linehaul from third-party transportation providers in our North American LTL segment. As a percentage of revenue, the year-over-year decrease reflects proportionally higher revenue growth.

Fuel, operating expenses and supplies includes the cost of fuel purchased for use in our vehicles as well as related taxes, maintenance and lease costs for our equipment, including tractors and trailers, costs related to operating our owned and leased facilities, bad debt expense, third-party professional fees, information technology expenses and supplies expense. Fuel, operating expenses and supplies for the firstsecond quarter of 2026 was $423$476 million, or 20.2% of revenue, compared with $393$384 million, or 20.1%18.5% of revenue, for the same quarter in 2025. TheFuel, year-over-yearoperating increaseexpenses asand supplies for the first six months of 2026 was $899 million, or 20.2% of revenue, compared with $777 million, or 19.3% of revenue, for the same period in 2025. As a percentage of revenuerevenue, the year-over-year increase in both periods primarily reflects higher fuel costs and higher weather-related costs in our North American LTL segment, partially offset by lower maintenance costs in our North American LTL segment.costs.

Operating taxes and licenses includes tax expenses related to our vehicles and our owned and leased facilities as well as license expenses to operate our vehicles. Operating taxes and licenses for the firstsecond quarter of 2026 was $21$22 million, compared with $19$21 million for the same period in 2025. Operating taxes and licenses for the first six months of 2026 was $43 million, compared with $40 million for the same period in 2025.

Insurance and claims includes costs related to vehicular and cargo claims for both purchased insurance and self-insurance programs. Insurance and claims for the firstsecond quarter of 2026 was $34$40 million, compared with $35$40 million for the same quarter in 2025. Insurance and claims for the first six months of 2026 was $75 million, compared with $75 million for the same period in 2025.

DepreciationGains on sales of property and amortization expenseequipment for the firstsecond quarter of 2026 was $131$7 million, compared with $123$1 million for the same quarter in 2025. Gains on sales of property and equipment for the first six months of 2026 was $8 million, compared with $3 million for the same period in 2025. The year-over-year increase primarilywas reflectsdue to the impacttiming of capitalgains investmentson inreal property,estate tractors and trailerstransactions in our North American LTL segment.

OtherDepreciation incomeand amortization expense for the firstsecond quarter of 2026 was $3$134 million, compared with $1$131 million for the same quarter in 2025. Depreciation and amortization expense for the first six months of 2026 was $265 million, compared with $254 million for the same period in 2025. The year-over-year increase primarily reflects athe $2impact millionof increasecapital investments in netproperty, periodictractors pensionand income.trailers in our North American LTL segment.

DebtTransaction extinguishmentand lossintegration was not materialcosts for the firstsecond quarter of 2026,2026 were $2 million, compared with $5$3 million for the same quarter in 2025,2025. whichTransaction relatedand tointegration costs for the refinancingfirst six months of our2026 termwere loan$4 facility.million, compared with $6 million for the same period in 2025.

Interest expense decreased to $53$51 million for the firstsecond quarter of 2026, compared with $56 million for the same quarter in 2025. Interest expense decreased to $104 million for the first six months of 2026, compared with $112 million for the same period in 2025. The year-over-year decrease is primarily due to athe lowerrepayment averageof debt balance as well as lower interest rates on our variable rate debt.

Our effective income tax rates were 18.4% and 24.2% for the first quarters of 2026 and 2025, respectively. The effective income tax rates for the first quarter of 2026 and 2025 were based on forecasted full-year effective income tax rates, adjusted for discrete items that occurred within the periods presented. The decrease in our effective income tax rate for the first quartersix months of 2026 compared to the same period in 2025 was primarily driven by an increase in a discrete tax benefit from stock-based compensation and a change in estimate related to the discrete benefit associated with a legal entity reorganization in our European Transportation business that occurred in 2024.2024, Inpartially theoffset firstby quarterlosses offor 2026,which no tax benefit can be recognized. The primary items impacting the effective tax rate was impacted by discrete tax benefits of $11 million in the aggregate related to stock-based compensation and a change in estimate associated with the legal entity reorganization. Infor the first quartersix months of 2025,2026 the effective tax rate was impacted bywere losses for which no tax benefit can be recognized and forecasted non-deductible executive compensation expense, partially offset by a discrete tax benefit of $5 million from stock-based compensation.

Revenue in our North American LTL segment increased 4.9%15.2% to $1.23$1.4 billion for the firstsecond quarter of 2026, compared with $1.17$1.2 billion for the same quarter in 2025. Revenue in our North American LTL segment increased 10.2% to $2.7 billion for the first six months of 2026, compared with $2.4 billion for the same period in 2025. Revenue included fuel surcharge revenue of $201$314 million and $178$183 million, respectively, for the second quarters of 2026 and 2025, and $515 million and $361 million, respectively, for the first quarterssix months of 2026 and 2025. The increase in fuel surcharge revenue was primarily driven by higher diesel prices.

The year-over-year increase in revenue, excluding fuel surcharge revenue, for both the second quarter and first quartersix months of 2026 reflects higher yield, primarily related to our improvements in service quality and the benefit of numerous pricing initiatives.initiatives, and higher tonnage. The increase in tonnage perfor day forboth the second quarter and first quartersix months of 2026 reflects higher shipments per day partially offset by lower average weight per shipment.

Adjusted EBITDA was $290$390 million for the firstsecond quarter of 2026, compared with $250$300 million for the same quarter in 2025. Adjusted EBITDA was $680 million for the first six months of 2026, compared with $550 million for the same period in 2025. The increase in adjusted EBITDA reflects higher yield andyield, shipments per day,day higherand fuel surcharge revenue, as well as productivity improvements, lower purchased transportation, and lower vehicular insurance costs, partially offset by lower average weight per shipment, higher fuel costs and wage inflation.

Depreciation and amortization expense increased to $97$100 million in the firstsecond quarter of 2026 compared with $90$96 million for the same quarter in 2025,2025. Depreciation and amortization expense increased to $197 million in the first six months of 2026 compared with $185 million for the same period in 2025. The year-over-year increase was primarily due to the impact of capital investments in property, tractors and trailers.

Revenue in our European Transportation segment increased 11.0%10.2% to $868$927 million for the firstsecond quarter of 2026, compared with $782$841 million for the same quarter in 2025. Revenue increased 10.6% to $1.8 billion for the first six months of 2026, compared with $1.6 billion for the same period in 2025. Foreign currency movement increased revenue by approximately 10.92.4 percentage points in the second quarter of 2026 and by approximately 6.4 percentage points in the first quartersix months of 2026. AfterThe takingincrease intoin effectrevenue reflects improved pricing, the impact of foreign currency movement,movements revenueand washigher essentiallyfuel flat in the first quarter of 2026 compared to the same period in 2025.revenue.

Depreciation and amortization expense increaseddecreased to $33 million in the firstsecond quarter of 2026, compared with $32$34 million for the same quarter in 2025. Depreciation and amortization expense decreased to $66 million in the first six months of 2026, compared with $67 million for the same period in 2025.

Our cash and cash equivalents balance was $237$298 million as of MarchJune 31,30, 2026, compared to $310 million as of December 31, 2025. Our principal existing sources of cash are: (i) cash generated from operations; (ii) borrowings available under our Revolving Credit Facility (as defined below); and (iii) proceeds from the issuance of other debt. As of MarchJune 31,30, 2026, we have approximately $600 million available to draw under our Revolving Credit Facility, after considering outstanding letters of credit of less than $1 million. Additionally, we have a $200 million uncommitted secured evergreen letter of credit facility, under which we had issued $132$131 million in aggregate face amount of letters of credit as of MarchJune 31,30, 2026.

As of MarchJune 31,30, 2026, wetotal hadliquidity, comprised of cash and cash equivalents and availability under the Revolving Credit Facility, was approximately $837$898 million of total liquidity.million. We continually evaluate our liquidity requirements in light of our operating needs, growth initiatives and capital resources. We believe that our existing liquidity and sources of capital are sufficient to support our operations over the next 12 months.months and for the foreseeable future thereafter.

The maximum amount of net cash proceeds available at any one time under our securitization program, inclusive of any unsecured borrowings, is €200 million (approximately $231$228 million as of MarchJune 31,30, 2026). As of MarchJune 31,30, 2026, lessthe thanmaximum €1 million (less than $1 million) wasamount available under the program.program was utilized. Under the securitization program, we service the receivables we sell on behalf of the purchasers. In January 2026, the program was amended to extend the maturity date through March 2029.

Term Loan A Facility

As of June 30, 2026, we were in compliance with the Term Loan A Facility’s financial covenants. The weighted average interest rate ofon our termTerm loansLoan A Facility was approximately 5.42%4.87% as of MarchJune 31,30, 2026.

In the firstsecond quarter of 2026, we repurchased 156341 thousand shares of common stock with an aggregate value of $30$70 million at an average price of $192.19$205.22 per share. In the first six months of 2026, we repurchased 497 thousand shares of common stock with an aggregate value of $100 million at an average price of $201.13 per share. The share repurchases were funded by cash on hand. There were no share repurchases duringIn the firstsecond quarter and first six months of 2025.2025, we repurchased 83 thousand shares of common stock with an aggregate value of $10 million at an average price of $120.41 per share. As of MarchJune 31,30, 2026, our remaining share repurchase authorization was $595$525 million, reflecting $155$225 million of cumulative repurchases to date under the program.

As of MarchJune 31,30, 2026, we were in compliance with the covenants and other provisions of our debt agreements. Any failure to comply with any material provision or covenant of these agreements could have a material adverse effect on our liquidity and operations.

During the threesix months ended MarchJune 31,30, 2026, we (i) generated cash from operating activities of $183$491 million.million and (ii) received proceeds of $885 million from the issuance of the Term Loan A Facility and the 2026 Term Loan B Facility. We used cash during the period primarily to: (i) repay $985 million of outstanding principal under our existing term loan B credit agreement; (ii) purchase property and equipment of $111$238 million; (iiiii) repurchase common stock of $100 million; (iv) make net payments of $88 million related to tax withholding obligations in connection with the vesting of stock compensation awards; (iii) repurchase common stock of $30 million; and (ivv) repay $30$39 million of outstandingfinance principalleases underand theother Refinancing Term Loan B-2 Facility.debt.

During the threesix months ended MarchJune 31,30, 2025, we generated cash from operating activities of $142$389 million. We used cash during this period primarily to: (i) purchase property and equipment of $199$395 million and; (ii) make net payments of $47$48 million related to tax withholding obligations in connection with the vesting of stock compensation awards.awards; and (iii) repay $36 million of finance leases and other debt.

Cash flows from operating activities for the threesix months ended MarchJune 31,30, 2026 increased by $41$102 million, compared with the same period in 2025. The increase primarily reflects higher net income of $32$88 million in the first threesix months of 2026, compared with the same period in 2025.

Investing activities used $107$208 million of cash in the threesix months ended MarchJune 31,30, 2026 and $191$382 million of cash in the threesix months ended MarchJune 31,30, 2025. During the threesix months ended MarchJune 31,30, 2026, we used $111$238 million to purchase property and equipment, as compared to a $199$395 million usage of cash in the same period in 2025. The decrease is due to planned reductions in capital expenditures in 2026 compared to 2025.

Financing activities used $147$300 million of cash in the threesix months ended MarchJune 31,30, 2026 and $30$74 million of cash in the threesix months ended MarchJune 31,30, 2025. The primary uses of cash from financing activities during the first threesix months of 2026 were $985 million to repay outstanding principal under our existing term loan B credit agreement, $100 million to repurchase common stock, $88 million to make net payments for tax withholdings on vested stock compensation awards, $30primarily millionduring tothe repurchasefirst commonquarter stock,of $302026, and $39 million to repay outstandingfinance principal under the Refinancing Term Loan B-2 Facility, which was scheduled to mature in 2028,leases and $20other million used to repay borrowings, primarily related to finance lease obligations.debt. The primary uses of cash from financing activities during the first threesix months of 2025 were $47$48 million to make net payments for tax withholdings on vested stock compensation awardsawards, primarily during the first quarter of 2025, and $18$36 million used to repay borrowings, primarily related to finance leaseleases obligations.and other debt. The primary source of cash from financing activities during the first threesix months of 2026 was $20$885 million of proceeds from the issuance of the Term Loan A Facility and the 2026 Term Loan B Facility and $26 million of proceeds from bank overdrafts, compared to $38$22 million of proceeds from bank overdrafts in the same period of 2025.

ThereExcept as set forth above under Term Loan A Facility and Term Loan B Facility, there were no material changes to our December 31, 2025 contractual obligations during the threesix months ended MarchJune 31,30, 2026. We anticipate full year gross capital expenditures to be between $500 million and $600 million in 2026, funded by cash on hand, cash generated from operations and available liquidity.