Xpo, Inc. · NYSE:XPO
Xpo — XPO Logistics — Sell-Side Brokerage Day June 2022
49 slides from Xpo's conference presentation, Jun 22, 2022
Slide 1: Sell-Side Brokerage Day June 2022
JUNE 2022 Sell - Side Brokerage Day Exhibit 99.1
Slide 2: Disclaimer: Non-GAAP Financial Measures
2 Disclaimer NON - GAAP FINANCIAL MEASURES As required by the rules of the Securities and Exchange Commission ("SEC"), we provide reconciliations of the non - GAAP financial measures contained in this presentation to the most directly comparable measure under GAAP, which are set forth in the financi
Slide 3: Disclaimer (continued): Forward-Looking Statements
3 Disclaimer (continued) FORWARD - LOOKING STATEMENTS This document includes forward - looking statements within the meaning of Section 27 A of the Securities Act of 1933 , as amended, and Section 21 E of the Securities Exchange Act of 1934 , as amended, including our future growth prospects for our
Slide 4: Truck Brokerage is the Largest Driver of SpinCo Financial Performance
4 Truck Brokerage is the Largest Driver of SpinCo Financial Performance ▪ 2021, Truck Brokerage drove o 57% of SpinCo revenue o 84% of SpinCo operating income
Slide 5: Presenters and Q&A
5 Presenters and Q&A YOAV AMIEL SVP of Technology - North American Transportation CIO Elect SpinCo ALYSSA MYERS VP, Technology - Brokerage LOUIS AMO President, Brokerage DREW WILKERSON President, Transportation – North America CEO Elect - SpinCo
Slide 6: Executive Summary
Executive Summary
Slide 7: XPO Brokerage: A Tech-Enabled Brokerage Platform
7 XPO Brokerage: A Tech - Enabled Brokerage Platform ~$400 billion Total Addressable Opportunity 1 ~$88 billion Industry Size 1 4 th Largest Full Truckload Broker 1,600 employees 74% of loads created or covered digitally >700K downloads of Drive XPO mobile app Top 10 customers have been with us for
Slide 8: XPO is Growing Truck Brokerage at 3x the Industry Rate
8 XPO is Growing Truck Brokerage at 3x the Industry Rate Over 90% of our revenue growth was organic $42 billion $88 billion 2013 2021 $397 million $2.75 billion 2013 2021 Source: Third - party research 1 US truck brokerage industry size; reflects brokered component of ~$400 billion total addressable
Slide 9: Key Drivers of Value Creation
9 Key Drivers of Value Creation 1 Expanding industry with low penetration and secular tailwinds 2 Differentiated scaled platform with market leadership in the US 3 Long - tenured, blue - chip customer relationships in attractive verticals 4 Proprietary technology with first mover advantage 5 Asset -
Slide 10: Industry Backdrop
Industry Backdrop
Slide 11: Rapid Industry Growth Propelled by Multiple Tailwinds
11 Rapid Industry Growth Propelled by Multiple Tailwinds Continued outsourcing of transportation services due to increasingly complex supply chains Source: Third - party research Adoption of differentiated digital solutions and automation Growing demand for supply chain visibility and access to data
Slide 12: Consistent Increases in US Truck Brokerage Industry Penetration
Source: Third - party research 12 Consistent Increases in US Truck Brokerage Industry Penetration BROKER PENETRATION OF US TRUCKLOAD INDUSTRY 7% 7% 8% 9% 10% 10% 10% 11% 12% 12% 13% 13% 13% 14% 14% 15% 16% 18% 20% 20% 21% 22% 24% 25% 25% 26% 28% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Slide 13: Truck Brokerage Industry Poised to Outgrow GDP
Truck Brokerage Industry Poised to Outgrow GDP ▪ Outsourcing ▪ Digitization ▪ Demand for visibility ▪ Supply - side shortages Source: Third - party research Drivers TRUCK BROKERAGE VOLUME AND REAL GDP Y AXIS 2021 INDEXED TO 100 Load growth GDP The brokerage industry is poised to continue outgrowing
Slide 14: A Powerful Combination of Scale, Technology and Services
A Powerful Combination of Scale, Technology and Services
Slide 15: Powerful Combination of Scale, Technology and Services
15 Powerful Combination of Scale, Technology and Services ▪ Best - in - class truck broker with track record of outperforming the industry ▪ Thousands of loads available on a daily basis from customer relationships, access to capacity, technology, and service ▪ Fourth largest broker of full truckloa
Slide 16: 4th Largest FTL Brokerage Company in the US After Just 10 Years
16 4 th Largest FTL Brokerage Company in the US After Just 11 Years 1.6 1.8 1.8 2.1 2.2 2.4 2.7 2.9 7.3 11.4 + + (UPS) ~4% Market Share 2021 FTL BROKERAGE US GROSS REVENUE BILLION USD CRITICAL SCALE TO GROW MARKET REACH Source: Third - party research
Slide 17: Powerful Combination of Scale, Technology and Services: Services
17 Powerful Combination of Scale, Technology and Services SERVICES Full truckload Dry van, refrigerated, haz - mat Flatbed US cross - border Mexico, Canada Capacity for transloaded OTR containers Drop trailers Expedite Time - critical, special handling
Slide 18: Flexibility to Succeed in All Market Environments
18 Flexibility to Succeed in All Market Environments ▪ XPO Load - to - truck ratio ▪ Outbound tender rejections ▪ Inventory load scans through customer integrations ▪ Results of dynamic pricing exercises WE DEPLOY LEADING INDICATORS TO ANTICIPATE THE DIRECTION OF THE MARKET All of those moves are en
Slide 19: Flexibility to Succeed in All Market Environments (Cont'd)
19 Flexibility to Succeed in All Market Environments (Cont’d) ▪ Look for opportunities to reduce carrier costs to expand margin ▪ Slow hiring, lean into productivity , benefit from variable cost structure ▪ Lean into contractual business ▪ Revisit contract rates , and optimize margin dollars through
Slide 20: Strong Growth Across Key Financial Metrics
20 Strong Growth Across Key Financial Metrics 1,372 1,684 2,749 2019A 2020A 2021A 2019A 2020A 2021A REVENUE BROKERAGE LOADS ADJUSTED EBITDA MARGIN $ in millions 91 120 204 2019A 2020A 2021A 230 286 427 2019A 2020A 2021A $ in millions 16.7% 17.0% 15.5% 6.6% 7.1% 7.4% Margin Rate: Margin: $ in million
Slide 21: Asset-light Model Generates High Returns and Substantial Free Cash Flow
21 Asset - light Model Generates High Returns and Substantial Free Cash Flow ▪ Highly variable cost structure, with less than 10% fixed costs, driven by purchased transportation ▪ Ability to reduce costs when demand is soft and flex resources to find trucks once demand returns ▪ Second largest expen
Slide 22: Brokerage has Diversified Exposure Across Attractive End Markets
22 Brokerage has Diversified Exposure Across Attractive End Markets Healthy diversification across attractive verticals with low concentration risk; strategic focus on growing e - commerce and consumer goods All major verticals expected to use brokers for 20 – 30% of their truckload needs by 2026E X
Slide 23: Long-tenured, Blue-chip Customer Relationships In Attractive Verticals
Customer 1 - 5 20% Customer 6 - 10 8% Customer 11 - 20 11% Customer 21 - 100 31% Others 30% 23 Long - tenured, Blue - chip Customer Relationships In Attractive Verticals SELECT CUSTOMERS 2021 REVENUE BY CUSTOMER
Slide 24: Proprietary Technology
Dynamic pricing algorithms use machine learning to optimize margin Automated processes and messaging improve productivity per head Captures volume and revenue at lower cost - to - serve, with fewer touches Manages capacity to best cover customer loads under all demand environments Automated processe
Slide 25: Tiered Approach to Sales to Target Sustainable Growth
25 Tiered Approach to Sales to Target Sustainable Growth Strategic Account Manager Team (SAMs) ▪ Targets large enterprise customers ▪ Key account managers have vertical - specific expertise ▪ Tailored solutions to customer’s exact needs National Account Manager Team (NAMs) ▪ Targets national custome
Slide 26: Case Study – Industrial
26 Case Study – Industrial ▪ Customer needed help with flatbed solutions in 2013 ▪ Due to the mission critical nature of the company’s products, supply chain continuity is critical RELATIONSHIP ORIGIN / CUSTOMER NEED ▪ Progressed from small flatbed carrier to the largest brokered flatbed provider in
Slide 27: Case Study – Retailer (Durable Goods)
27 Case Study – Retailer (Durable Goods) ▪ Dry van service commenced in 2014 ▪ Customer needs extensive project support RELATIONSHIP ORIGIN / CUSTOMER NEED ▪ Now provide flatbed, seasonal projects, transload services (helped with backlogs at ports) ▪ Leading emergency freight provider (managing hurr
Slide 28: Case Study – Food & Beverage
28 Case Study – Food & Beverage ▪ Relationship originated in 2004 with Canadian bottling counterpart (later brought in - house) for cross - border freight ▪ XPO committed to take every uncovered load RELATIONSHIP ORIGIN / CUSTOMER NEED ▪ Deep IT integration ▪ Extensive drop trailer effort ▪ 99% of l
Slide 29: Case Study – Apparel Retailer
29 Case Study – Apparel Retailer ▪ Relationship grew enormously from 2020 ▪ We were able to satisfy outsized demand at peak when other brokers turned it down RELATIONSHIP ORIGIN / CUSTOMER NEED ▪ Dry van, transloading, drop trailers ▪ We flex up massively with peak ▪ The customer appreciates our cus
Slide 30: Case Study – Food & Beverage
30 ▪ Relationship began in 2012 RELATIONSHIP ORIGIN / CUSTOMER NEED ▪ Transloading, refrigerated, drop trailer ▪ Massive contracted award ▪ Carrier of the Year, 2021 ▪ 99% of loads created or covered digitally XPO SOLUTION >$50 million of revenue, up >5X since 2015 KEY RESULTS Case Study – Food & Be
Slide 31: Case Study – Automotive
31 ▪ Services include cross - border brokerage, intra - Mexico brokerage, expedite, air charter, port diversion, drop trailers, air charter ▪ Award reflected XPO winning “Supplier of the Year” from two other auto OEMs Case Study – Automotive ( Key Managed Transportation Collaborations) RELATIONSHIP
Slide 32: A Disruptive Digital Brokerage Platform
A Disruptive Digital Brokerage Platform
Slide 33: XPO is Leading Technological Disruption
33 XPO is Leading Technological Disruption YEARS IN OPERATION 4 4 1 4 6 6 6 8 8 8 9 10 Uber Freight JB Hunt Navisphere Convoy FR8star Next Trucking Coyote Trucker Path Cargomatic Cargo Chief XPO KEY XPO CONNECT INNOVATIONS ▪ Digital freight marketplace ▪ Launched April 2018 ▪ XPO Connect’s proprieta
Slide 34: Executing Profit Initiatives Driven by Technology
34 Executing Profit Initiatives Driven by Technology Volume EXPAND XPO CONNECT TM ▪ Increases volume via API deployments, integration, automation and digital interfaces ▪ Generates “touchless” revenue through marketplace interfaces with smaller customers Productivity OPERATIONAL IMPROVEMENT ▪ Automa
Slide 35: XPO Connect Video
35 XPO Connect TM Video
Slide 36: XPO Connect is a Powerful, Digital Ecosystem
36 XPO Connect Πis a Powerful, Digital Ecosystem Encapsulates the business DNA FREIGHT OPTIMIZER CARRIERS DRIVE XPO ΠAPP CARRIER INTERFACE CARRIER MOBILE INTERFACE REAL - TIME TRACKING ENGINE CUSTOMER INTERFACE CUSTOMER MOBILE INTERFACE CUSTOMERS API SUPPLY DEMAND SOLUTIONS ORIENTATION OPERATIONAL
Slide 37: XPO Connect's Freight Optimizer is a Scalable Freight Management Engine
XPO Connect’s Freight Optimizer is a Scalable Freight Management Engine ▪ Leverages machine learning to procure the optimal capacity for each load by analyzing data from multiple sources, weighted by cost and performance ▪ Draws on ~88,000 registered carriers in XPO Connect Œ for rapid load - matchi
Slide 38: XPO Connect Generates Efficiencies for all Stakeholders
38 XPO Connect Œ Generates Efficiencies for all Stakeholders ▪ Quote and buy different kinds of capacity online through one point of access ▪ Leverage self - service analytics for decision - making ▪ Gain real - time visibility of shipments CUSTOMER ENABLEMENT CARRIER FUNCTIONALITY PERSONALIZED FREI
Slide 39: Drive XPO App Benefits Customers and Carriers
FREIGHT M ANA G E M E N T CARRIER SCORE AND REWARDS CAPACITY POSTING LOAD BOOKING 39 Drive XPO Œ App Benefits Customers and Carriers by Helping to Automate the Procurement Process ▪ Carriers use Drive XPO Œ self - service dashboard to access XPO Connect Œ on their mobile devices ▪ Over 700,000 drive
Slide 40: XPO Connect Tech Demo
XPO Connect ΠTech Demo
Slide 41: XPO Connect is Widely Adopted and Growing Fast
- 2,000 4,000 6,000 8,000 10,000 12,000 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Total registered customer users 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1
Slide 42: XPO Connect Captures Share and Reduces Costs
42 XPO Connect ΠCaptures Share and Reduces Costs 1 Significant opportunity to unlock incremental revenue and profit well beyond current levels 2 Comprehensive digital platform enhances offering beyond traditional full truckload 3 Reaches emerging growth customers with low - cost model: primarily di
Slide 43: Productivity Measures Enhance Margins
43 Productivity Measures Enhance Margins ▪ Simplifying pricing execution with proprietary tools, including direct link to operational TMS ▪ Reducing time required to operate across modes via visibility in XPO Connect Œ LOAD PER HEAD / DAY (6+ MONTHS TENURE) Q1’2017 indexed to 100% 35% Increase in Pr
Slide 44: Pricing Levers Boost Revenue and Margins
44 Pricing Levers Boost Revenue and Margins Proprietary machine - learning pricing engine for carrier procurement ▪ Costing algorithms and digital freight match capability ▪ Purchases transportation at optimal rates and expands margins ▪ Outperformed large competitors on margin 15 consecutive quarte
Slide 45: Experienced and Cohesive Leadership
45 Note: Number of years indicate years of industry - relevant experience; company logos under each name denote the individual’s pri or work experience Experienced and Cohesive Leadership LOUIS AMO President, Brokerage 23 years YOAV AMIEL Senior Vice President, Technology - North American Transporta
Slide 46: Key Drivers of Value Creation
46 Key Drivers of Value Creation 1 Expanding industry with low penetration and secular tailwinds 2 Differentiated scaled platform with market leadership in the US 3 Long - tenured, blue - chip customer relationships in attractive verticals 4 Proprietary technology with first mover advantage 5 Asset
Slide 47: Q&A
Q&A
Slide 48: Reconciliation of North American Truck Brokerage Adjusted EBITDA
48 Reconciliation of North American Truck Brokerage Adjusted EBITDA 1 The following table reconciles XPO’s operating income attributable to its North American Truck Brokerage business for the years ended December 31, 2019, 2020 and 2021, to adjusted EBITDA for the same periods. Operating Income Othe
Slide 49: ROIC Definition and Reconciliation
49 We believe that return on invested capital (ROIC) is an important metric, as it measures how effectively we deploy our capital base. ROIC is calculated as net operating profit after tax (NOPAT) for the trailing twelve months ended March 31, 2022, divided by inves ted capital as of March 31, 2022.