Xpo, Inc. · NYSE:XPO
Xpo — XPO Logistics — Investor Presentation (May 2021)
59 slides from Xpo's investor presentation, May 3, 2021
Slide 1: Investor Presentation May 2021
INVESTOR PRESENTATION MAY 2021 v MAY 2021 Investor Presentation
Slide 2: Disclaimers
INVESTOR PRESENTATION MAY 2021 Disclaimers 2 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, wh
Slide 3: Table of contents
INVESTOR PRESENTATION MAY 2021 Table of contents 3 KEY FACTORS DRIVING GROWTH AND RETURNS 4 BUSINESS OVERVIEW 5 Q1 2021 KEY FINANCIAL RESULTS 8 GXO: LOGISTICS 14 XPO: TRANSPORTATION 23 SUPPLEMENTAL MATERIALS 39 APPENDIX 53
Slide 4: Key factors driving growth and returns
INVESTOR PRESENTATION MAY 2021 Key factors driving growth and returns 4 Scale positions in large, growing markets ▪ Core markets are large, fragmented and growing, providing multiple opportunities to grow the business organically and through M&A ▪ Market - leading positions across business units, wi
Slide 5: Business overview
INVESTOR PRESENTATION MAY 2021 Business overview
Slide 6: Planned spin-off will create two pure-play industry powerhouses
INVESTOR PRESENTATION MAY 2021 Planned spin - off will create two pure - play industry powerhouses 6 Second largest contract logistics provider globally, with one of the largest outsourced e - commerce fulfillment platforms Leading global provider of freight transportation, primarily truck brokerage
Slide 7: Average annual investment in innovative supply chain technology
INVESTOR PRESENTATION MAY 2021 ~$ 500 million average annual investment in innovative supply chain technology 7 LOGISTICS ▪ Proprietary warehouse management system manages all distribution processes and warehouse operations ▪ Provides in - house control of robotics and other advanced automation ▪ In
Slide 8: Q1 2021 key financial results
INVESTOR PRESENTATION MAY 2021 Q1 2021 key financial results
Slide 9: Industry-leading growth in revenue and adjusted EBITDA
INVESTOR PRESENTATION MAY 2021 Industry - leading growth in revenue and adjusted EBITDA 9 REVENUE ADJUSTED EBITDA Note: Both charts exclude the impact of the North American truckload unit divested in October 2016 Refer to the “Non - GAAP Financial Measures” section on page 2 and Appendix for related
Slide 10: Strong free cash flow generation
INVESTOR PRESENTATION MAY 2021 Strong free cash flow generation 10 FREE CASH FLOW Note: 2016 and 2017 data have been recast to reflect the impact of Accounting Standards Update 2016 - 2018 Refer to the “Non - GAAP Financial Measures” section on page 2 and Appendix for related information $ in millio
Slide 11: Balance sheet and liquidity as of March 31, 2021
INVESTOR PRESENTATION MAY 2021 Balance sheet and liquidity as of March 31, 2021 11 NET DEBT 1 $4.6 billion CASH AND CASH EQUIVALENTS $629 million NET LEVERAGE 2 3.1x TOTAL LIQUIDITY $1.7 billion Recent activities ▪ In January, the company redeemed $1.2 billion of 6.5% Senior Notes due 2022 ▪ In Marc
Slide 12: First quarter 2021 results
INVESTOR PRESENTATION MAY 2021 First quarter 2021 results 12 REVENUE $4.77 billion NET INCOME 1 $115 million DILUTED EARNINGS PER SHARE $1.02 ADJUSTED NET INCOME 1 $164 million ADJUSTED DILUTED EARNINGS PER SHARE ADJUSTED EBITDA $443 million CASH FLOW FROM OPERATIONS $173 million FREE CASH FLOW $69
Slide 13: Full year 2021 guidance, updated May 3, 2021
INVESTOR PRESENTATION MAY 2021 2021 guidance excludes impacts associated with the planned spin - off of the logistics segment previously announced; assumes 113 m illion diluted shares outstanding. ADJUSTED EBITDA $1.825 billion – $1.875 billion, a year - over - year increase of 31% to 35% DEPRECIATI
Slide 14: GXO: Logistics
INVESTOR PRESENTATION MAY 2021 GXO: Logistics
Slide 15: GXO will be the second largest contract logistics provider globally
INVESTOR PRESENTATION MAY 2021 US 35% France 10% UK 27% Spain 7% Other 21% Retail / E - commerce … Food and beverage 13% Consumer packaged goods 13% Consumer technology 11% Other 23% GXO will be the second largest contract logistics provider globally Logistics is an asset - light business characteri
Slide 16: Global leader in warehouse automation, expertise and quality of performance
INVESTOR PRESENTATION MAY 2021 Global leader in warehouse automation, expertise and quality of performance 16 Strong positioning in a fast - growing industry with massive tailwinds ▪ #2 contract logistics provider in a $130 billion industry in North America and Europe, with 5% share ▪ Well - positio
Slide 17: Key metrics for global logistics business
INVESTOR PRESENTATION MAY 2021 TTM revenue 1 $6.6 billion Countries of operation 27 Warehouses 885 Team members 2 ~93,000 Total warehouse space ~ 210 million sq. ft. – Capacity in Europe ~ 104 million sq. ft. – Capacity in North America ~ 99 million sq. ft. – Capacity in Asia ~ 7 million sq. ft. Key
Slide 18: Decades of vertical expertise and prominent customers
INVESTOR PRESENTATION MAY 2021 XPO has decades of vertical expertise and prominent customers 18 TOP VERTICALS % REVENUE TTM 3/31/21 Ecommerce and retail Food and beverage Consumer packaged goods Consumer technology 11% 13% 13% 40% XPO’s top four verticals account for ~77% of annual global logistics
Slide 19: Customization positions GXO as a mission-critical partner
INVESTOR PRESENTATION MAY 2021 19 Customization positions GXO as a mission - critical partner for customers Differentiated by consistently superior outcomes tailored to customer expectations ▪ Drives significant improvements in labor productivity and throughput ▪ In - house control with warehouse ma
Slide 20: Intelligent warehouse automation generates measurable improvements
INVESTOR PRESENTATION MAY 2021 20 Intelligent warehouse automation generates measurable improvements ROBOTICS GOODS - TO - PERSON SYSTEMS ADVANCED SORTATION SYSTEMS VISION TECHNOLOGY ▪ Automation delivers reliable, consistent outcomes for customers, with increased speed and accuracy ▪ Warehouse mana
Slide 21: XPO Smart productivity tools optimize variable labor cost
INVESTOR PRESENTATION MAY 2021 21 Proprietary XPO Smart Œ suite of productivity tools optimizes ~$3 billion of variable labor cost in logistics operations ▪ Provides deep visibility into current warehouse labor activities in real time, as well as pre - scheduled labor for future periods ▪ Manages ma
Slide 22: XPO Direct flexible distribution network in North America
INVESTOR PRESENTATION MAY 2021 XPO Direct Œ flexible distribution network in North America 22 ADVANTAGES FOR CUSTOMERS ADVANTAGES FOR XPO ▪ Retailers, e - tailers and manufacturers have access to logistics scale, expertise and technology without adding high - fixed - cost distribution centers ▪ Shor
Slide 23: XPO: Transportation
INVESTOR PRESENTATION MAY 2021 XPO: Transportation
Slide 24: Less-than-truckload (LTL)
INVESTOR PRESENTATION MAY 2021 Less - than - truckload (LTL)
Slide 25: XPO is a top three provider of LTL service in North America
INVESTOR PRESENTATION MAY 2021 XPO is a top three provider of LTL service in North America 25 LTL is the transportation of a quantity of freight that is larger than a parcel but too small to require an entire truck, often shipped on pallets. Freight for different customers are consolidated in the sa
Slide 26: Dramatic improvement since 2015 acquisition, with more upside ahead
INVESTOR PRESENTATION MAY 2021 26 Dramatic improvement since 2015 acquisition, with significantly more upside ahead ▪ XPO has the second best adjusted operating ratio in the North American LTL industry ▪ Resilient cash flow generation achieved through diligent working capital and capex management XP
Slide 27: Key metrics for XPO's North American LTL business
INVESTOR PRESENTATION MAY 2021 TTM revenue 1 $3.6 billion Locations 291 Team members 2 ~20,900 Number of tractors / trailers ~ 7,900 / 25,000 Shipments per year 3 ~12.4 million Key metrics for XPO’s North American LTL business 27 1 As of March 31, 2021, North America only 2 ~20,700 employees and ~ 2
Slide 28: +960 basis point improvement in operating margin 2015-20
INVESTOR PRESENTATION MAY 2021 +960 basis point improvement in operating margin 2015 – 2020, with more to come Company - specific initiatives are optimizing every component of LTL service 28 North American LTL’s dramatic margin expansion is being driven by technology implementations and operational
Slide 29: XPO Smart tools optimize LTL variable labor spend
INVESTOR PRESENTATION MAY 2021 XPO Smart Œ intelligent productivity tools optimize LTL variable labor spend 29 Proprietary technology uses machine learning to become continually smarter at site - specific optimization ▪ Analyzes all major productivity levers simultaneously, giving managers the data
Slide 30: A leading provider of LTL transportation in France, Spain and UK
INVESTOR PRESENTATION MAY 2021 A leading provider of LTL transportation in France, Spain and UK 30 #1 LTL provider in France and Spain #3 LTL provider in the UK Optimal operating model utilized for each national market: contracted capacity, owned capacity or blended capacity ▪ Approximately 100 LTL
Slide 31: Truck brokerage
INVESTOR PRESENTATION MAY 2021 Truck brokerage
Slide 32: XPO is a brokerage leader with first-mover advantage in digital technology
INVESTOR PRESENTATION MAY 2021 Retail / E - commerce 24% Food and beverage 20% Industrial / manufacturing 18% Logistics and Transportation 14% Other 24% XPO is a brokerage leader with first - mover advantage in digital technology 32 Truck brokerage is a non - asset business that facilitates the move
Slide 33: Compelling value proposition underpins long track record of outperformance
INVESTOR PRESENTATION MAY 2021 Compelling value proposition underpins long track record of outperformance 33 Critical scale and capacity ▪ #2 broker worldwide; #3 in North America, with $1.9 billion revenue TTM March 31, 2021 ▪ A top three transportation provider across the UK, France, Spain, Portug
Slide 34: Broker penetration of US truckload industry
INVESTOR PRESENTATION MAY 2021 Proportion of outsourced freight transportation is shifting from asset - based trucking companies to brokers, as shippers seek more reliable access to capacity and agility 6% 7% 7% 7% 8% 9% 10% 10% 10% 11% 11% 12% 12% 13% 14% 14% 16% 17% 19% 20% 21% 2000 2001 2002 2003
Slide 35: XPO brokerage revenue growth vs industry
INVESTOR PRESENTATION MAY 2021 REVENUE GROWTH 2013 – 2019 ⏤ XPO BROKERAGE VS INDUSTRY XPO’s brokerage revenue CAGR has outperformed the industry by more than 3x 35 US brokerage industry size $38 – 41 billion $58 – 61 billion 2013 2019 Source: Third - party research
Slide 36: XPO Connect digital brokerage platform
INVESTOR PRESENTATION MAY 2021 XPO CONNECT 䉼 DIGITAL BROKERAGE PLATFORM DELIVERS VALUE FOR SHIPPERS, CARRIER S AND XPO CUSTOMER FUNCTIONALITY CARRIER FUNCTIONALITY PERSONALIZED FREIGHT MANAGEMENT TAILORED CAPACITY MANAGEMENT ▪ Posts loads and buys different kinds of truck capacity online through a s
Slide 37: Drive XPO mobile app
INVESTOR PRESENTATION MAY 2021 ▪ Proprietary mobile app gives drivers access to the XPO Connect Ʀ platform from the road ▪ Fully automated transactions, tracking solution and intuitive tools for bidding, booking loads and more ▪ Enhances access to truckload capacity for XPO customers regardless of m
Slide 38: XPO's digital marketplace is widely adopted and growing fast
INVESTOR PRESENTATION MAY 2021 Total Drive XPO app downloads Total registered carrier users Total registered customer users XPO CONNECT ΠCARRIERS Total digital brokerage orders Note: All data is cumulative XPO CONNECT ΠCUSTOMERS 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,
Slide 39: Supplemental materials
INVESTOR PRESENTATION MAY 2021 Supplemental materials
Slide 40: Planned spin-off of the logistics segment
INVESTOR PRESENTATION MAY 2021 40 Planned spin - off of the logistics segment In December 2020, XPO announced its plan to pursue a spin - off of its logistics segment as a separate, publicly traded company. The intended transaction would be generally tax - free for US federal income tax purposes to
Slide 41: Rationale for the GXO spin-off
INVESTOR PRESENTATION MAY 2021 Rationale for the GXO spin - off 41 Strategic focus ▪ XPO and GXO would both benefit from an undiluted focus on their specific strategic priorities and customer requirements Differentiation ▪ Each company can deepen its differentiation by enhancing the proprietary tech
Slide 42: Highly skilled management team
INVESTOR PRESENTATION MAY 2021 Highly skilled management team 42 Brad Jacobs Chief Executive Officer United Rentals, United Waste Aroon Amarnani Vice President, Strategy TIAA, Barclays Capital Josephine Berisha Chief Human Resources Officer Morgan Stanley Tony Brooks President, Less - Than - Trucklo
Slide 43: Highly skilled management team (cont.)
INVESTOR PRESENTATION MAY 2021 Highly skilled management team (cont.) 43 Tavio Headley Vice President, Investor Relations Jefferies, American Trucking Associations LaQuenta Jacobs Chief Diversity Officer Delta Air Lines, Home Depot, Turner Broadcasting Katrina Liddell President, Global Forwarding an
Slide 44: Business glossary
INVESTOR PRESENTATION MAY 2021 Business glossary 44 XPO SERVICES ▪ Less - than - truckload (LTL): LTL is the transportation of a quantity of freight that is larger than a parcel but too small to require an entire truck, and is often shipped on a pallet. LTL shipments are priced according to the weig
Slide 45: Business glossary (cont.)
INVESTOR PRESENTATION MAY 2021 Business glossary (cont.) 45 XPO TECHNOLOGY ▪ XPO Connect Œ : XPO’s proprietary, fully automated, self - learning digital freight marketplace connects shippers and carriers directly, as well as through company operations. XPO Connect Œ gives shippers comprehensive visi
Slide 46: Potential profit growth opportunity of ~$700 million to $1 billion
INVESTOR PRESENTATION MAY 2021 Potential profit growth opportunity of ~$700 million to $1 billion 46 Pricing benefits 20% New business initiatives 20% Cost initiatives 60% Revenue initiatives POOL OF COST OPPORTUNITIES ▪ XPO Smart Ρ optimization of ~$5 billion of variable labor cost ▪ Greater effici
Slide 47: Last mile logistics for heavy goods
INVESTOR PRESENTATION MAY 2021 ▪ XPO is the largest last mile provider for heavy goods ▪ Customers include omnichannel retail, e - commerce and direct - to - consumer manufacturers ▪ Asset - light platform positioned within 125 miles of 90% of the US population; independent contractor network ▪ Cons
Slide 48: XPO is widely recognized for performance and culture
INVESTOR PRESENTATION MAY 2021 XPO is widely recognized for performance and culture 48 ▪ Named one of the World’s Most Admired Companies by Fortune, 2018, 2019, 2020, 2021 ▪ Ranked #1 in the Fortune 500 category of Transportation and Logistics, 2017, 2018, 2019, 2020 ▪ Awarded silver CSR rating in E
Slide 49: XPO is widely recognized for performance and culture (cont.)
INVESTOR PRESENTATION MAY 2021 XPO is widely recognized for performance and culture (cont.) 49 ▪ Ranked in top 100 of America's Most Responsible Companies by Newsweek, 2019 ▪ Named a Winning “W” Company by 2020 Women on Boards for gender diversity of the board of directors, 2019 ▪ Named a Great Supp
Slide 50: Select highlights of XPO's people-first culture
INVESTOR PRESENTATION MAY 2021 Select highlights of XPO’s people - first culture 50 ▪ XPO’s US warehouse safety record for OSHA reportable incidents is more than four times better than industry average ▪ Road to Zero program helped decrease the percentages of distracted driving, lost work days and c
Slide 51: Strongly committed to sustainability in transportation and logistics
INVESTOR PRESENTATION MAY 2021 Strongly committed to sustainability in transportation and logistics 51 TRANSPORTATION ▪ Named a Top 75 Green Supply Chain Partner by Inbound Logistics for 2016, 2017, 2018, 2019, 2020 ▪ Awarded Trophées EVE 2020 for implementing an “urban river” solution to reduce CO
Slide 52: Sustainability in transportation and logistics (cont.)
INVESTOR PRESENTATION MAY 2021 Strongly committed to sustainability in transportation and logistics (cont.) 52 LOGISTICS ▪ XPO’s Digital Distribution Warehouse of the Future for Nestlé in the UK is an environmentally advanced facility, with ammonia refrigeration, LED lighting, air - source heat pump
Slide 53: Appendix
INVESTOR PRESENTATION MAY 2021 Appendix
Slide 54: Financial reconciliations
INVESTOR PRESENTATION MAY 2021 Financial reconciliations 54 The following table reconciles XPO’s net income attributable to common shareholders for the periods ended March 31, 2021 and 2020 to adjusted EBITDA for the same periods. 1 Relates to the Series A Preferred Stock and is comprised of actual
Slide 55: Financial reconciliations (cont.)
INVESTOR PRESENTATION MAY 2021 GAAP net income attributable to common shareholders $ 115 $ 21 Debt extinguishment loss 8 - Unrealized gain on foreign currency option and forward contracts (1) (4) Amortization of acquisition-related intangible assets 36 35 Transaction and integration costs 18 44 Rest
Slide 56: Financial reconciliations (cont.)
INVESTOR PRESENTATION MAY 2021 Financial reconciliations (cont.) 56 Note: 2016 and 2017 data have been recast to reflect the impact of Accounting Standards Update 2016 - 18 Refer to the “Non - GAAP Financial Measures” section on page 2 of this document The following table reconciles XPO’s net cash p
Slide 57: Financial reconciliations (cont.)
INVESTOR PRESENTATION MAY 2021 Financial reconciliations (cont.) 57 The following table reconciles XPO’s operating income attributable to its North American less - than - truckload business for the quarters ended March 31 2021 and 2020, and for the years ended December 31, 2020, 2019, 2018, 2017, 20
Slide 58: Financial reconciliations (cont.)
INVESTOR PRESENTATION MAY 2021 Financial reconciliations (cont.) 58 1 Relates to the conversion of 69,445 shares of the company's Series A Preferred Stock 2 Relates to the Series A Preferred Stock and is comprised of actual preferred stock dividends and the non - cash allocation of und istributed ea
Slide 59: Financial reconciliations (cont.)
INVESTOR PRESENTATION MAY 2021 Financial reconciliations (cont.) 59 1 2020 charge relates to the conversion of 69,445 shares of the company's Series A Preferred Stock Note: Adjusted EBITDA was prepared assuming 100% ownership of XPO Logistics Europe Refer to the “Non - GAAP Financial Measures” secti