Xpo, Inc. · NYSE:XPO
Xpo — XPO Logistics — Investor Day (July 2021)
78 slides from Xpo's investor day presentation, Jul 13, 2021
Slide 1: Game-Changing Opportunities Investor Day, July 13, 2021
GAME-CHANGING OPPORTUNITIES Investor Day | July 13, 2021
Slide 2: Disclaimer
Disclaimer Additional Information References herein to “GXO” refer to GXO Logistics, Inc., a wholly owned subsidiary of XPO Logistics, Inc. (“XPO”). For additional information with respect to GXO and the proposed spin-off, please refer to the Form 10 Registration Statement, as it may be further amen
Slide 3: Agenda
INTRODUCTION INVESTMENT HIGHLIGHTS INDUSTRY OVERVIEW A WINNING CULTURE MARGIN-ENHANCING TECHNOLOGY FINANCIAL OVERVIEW
Slide 4: Introduction
Introduction
Slide 5: Management team
B r ad Jaco b s Chairman M a l c o l m W i ls o n Chief Executive Officer B a ri s O ra n Chief Financial Officer M ar k M a nduc a Chief Investment Officer E dua r do P el leisso n e President – Americas and Asia Pacific R i ch ar d C aw st o n President – Europe B il l Fr a i ne Chief Commercial O
Slide 6: Key financial highlights
10% 2021E – 2022E Revenue growth1 17% 2021E – 2022E Adjusted EBITDA growth1 $1.5 billion 2022E Adjusted EBITDAR1 28% Return on invested capital² INVESTMENT-GRADE CAPITAL STRUCTURE Represents midpoint of 2022E guidance See ROIC reconciliation in appendix for calculation
Slide 7: Introducing GXO, logistics at full potential
Introducing GXO, logistics at full potential je i. tT a
Slide 8: Investment highlights
Investment highlights
Slide 9: Key investment highlights
Key investment highlights Massive secular tailwinds Long-term relationships with blue-chip customers Critical scale in a growing market Revenue-and margin-enhancing technology Largest global pure-play contract logistics provider Attractive, resilient financial profile World-class team 9
Slide 10: Megatrends at early stage with significant runway
E - CO M M E RCEWAREHOUSE AUTOMATIONOUTSOURCING E-commerce penetration1 Warehouse automation penetration2 % of logistics that is outsourced3 E-commerce opportunity 80% Global e-commerce 20% Automation opportunity 95% Automated warehouses 5% Currently insourced 70% $300 billion Outsourced 30% $130 bi
Slide 11: GXO's vertical mix and key highlights
GXO’S VERTICAL MIX KEY HIGHLIGHTS % of 2020 revenue Other 24% E-commerce, omnichannel and technology 50% 11% 2021E – 2025E e-commerce industry CAGR1 Consumer packaged goods 13% Food and beverage 13% 76% GXO revenue coming from non-cyclical consumer end markets Source: Third-party industry research 1
Slide 12: End markets and key customers
END MARKETSKEY CUSTOMERS E-commerce, omnichannel and technology Food and beverage Consumer packaged goods MULTI-YEAR CONTRACTS WITH 93% AVERAGE HISTORICAL REVENUE RETENTION RATE AVERAGE TENURE OF TOP 20 CUSTOMERS IS 15 YEARS NO ONE CUSTOMER ACCOUNTS FOR MORE THAN 4% OF TOTAL REVENUE1 1 Based on 2020
Slide 13: Locations in North America and Europe
885 locations, primarily in North America and Europe
Slide 14: Key metrics and revenue vs. pure-play peers
KE Y M E T RI CS 1 2022E R EVEN U E VS. PU R E - P L AY PEER S 4 Countries of operation 27 Locations 885 Team members2 ~93,000 Total addressable opportunity3 ~$430 billion Total warehouse space ~210 million sq. ft. Total customers >1,000 GXOPeer APeer BPeer C Approximately 4x – 8x the size of neares
Slide 15: Technology driving productivity, revenue and margin growth
ROBOTICSGOODS-TO-PERSON SYSTEMS ADVANCED SORTATION SYSTEMS VISION TECHNOLOGY Driving improved productivity, revenue and margin growth Up to 6x labor productivity improvement with automation Faster, more consistent outcomes for customers
Slide 16: Sophisticated, technology-driven solutions
G Sophisticated, technology-driven solutions
Slide 17: Our strengths position us to win
O U R S TR E N G TH S P O S I TI O N U S TO W I NKE Y S E L E CTI O N CRI TE RI A 1 Initial RFP 3-5 bidders 2 Initial Down Select 2-3 bidders 3 Finalists 1-2 bidders 4 Winner Higher-value-add services (e.g., reverse logistics) Scale and ability to service customers globally Robotics and advanced aut
Slide 18: Contract structure
Customer typically covers most upfront costs Variable rate; based on output Leases are generally co-terminus with contracts Protections against labor cost inflation Long durations create durable partnerships
Slide 19: Spectrum of typical contracts
Open book Higher ROIC Spectrum of typical contracts Closed book Higher margin HYBRID CONTRACTS INCLUDE ELEMENTS OF BOTH OPEN AND CLOSED BOOK STRUCTURES BASED ON: RegionVerticalServices
Slide 20: Target payback and ROIC
~3 yrs. Target payback period Day 1 Target contract profitability 28% 2021E GXO ROIC1 Long-duration contracts create visibility into future revenue 1 See ROIC reconciliation in appendix for calculation
Slide 21: GXO has shown resilience through all cycles
5GXO has shown resilience through all cycles $ in billions Grew through COVID 6.16.16.2 M &A M I L EST O N ES 2008: Acquisition of Salvesen Logistics Stable through Great Financial Crisis1 2.4 2.32.2 2.8 3.2 3.6 4.0 4.8 5.2 2011: Acquisition of TDG (Laxey Logistics) 2015: Full-year impact of New Bre
Slide 22: Growth profile and 2022E earnings
5Best-in-class growth profile on track to deliver strong earnings in 2022E 2021E – 2 0 2 2 E O RG ANI C RE V E NUE G RO W TH¹ P RO FO RMA ADJ US TE D E BI TDA1 $ in millions +3 – 4% +8 – 12% 700 - 735 +5 – 8% 457 Business wins²Growth in existing facilities 2022E organic growth 2020⁴2022E Grow th pro
Slide 23: Industry overview
Industry overview
Slide 24: Total addressable opportunity
~$430 billion Total addressable opportunity1 ~$130 billion Current addressable opportunity2 <25% Market share of top five players3 ~2x Growth advantage for top players Source: third-party industry research Represents total addressable logistics market in North America and Europe, includes $300 billi
Slide 25: GXO's country positions
KEY REGIONS% OF 2020 REVENUEGXO’S COUNTRY POSITION United States United Kingdom France The Netherlands Spain 10% 8% 7% 36% #2 #2 25% #4 #2 #2 GXO is a top logistics provider in all of its key geographies
Slide 26: Top verticals and value proposition
TOP VERTICALS% OF 2020 REVENUE STRONG VALUE PROPOSITION E-commerce, omnichannel and technology 50% Comprehensive B2C services, including sophisticated supply chain management facilitated by advanced automation and data science High-value-add services include order personalization, reverse logistics,
Slide 27: Contract logistics industry growth
CO NTRACT LO G I S TI CS I NDUS TRY G RO W TH 1 $ in billions P RI MAR Y G RO W TH DRI V E RS FO R TO P P LAY E R S 153 >10% 130 111 ~4.0% growth GXO’s favorable geographic and vertical mix coupled w ith technology leadership are driving even greater levels of grow th Sources: Management estimates a
Slide 28: North American and European e-commerce growth
NO RTH AME RI C AN E - CO MME RCE I NDUS TRY G RO W TH $ in billions G X O ’ S G E O GR AP H I C M I X 2020 revenue mix E URO P E AN E - CO MME RCE I NDUS TRY G RO W TH $ in billions Other 2% 1,290 809 829 North America 36% 550 Europe 62% 2021E2025E 2021E2025E
Slide 29: E-commerce drives higher warehouse demand
E - CO MME RCE DRI V E S HI G HE R W ARE HO US E DE MAN D 3x – 10x G X O RE V E RS E LO G I S TI CS RE V E NUE TRE ND $ in millions Revenue uplift when a customer switches to e-commerce 522 2x – 5x Revenue uplift from reverse logistics vs. outbound parcel 389 20182020 GXO plays a pivotal role in the
Slide 30: Customer needs becoming more complex
CUSTOMER NEEDS BECOMING MORE COMPLEX1 43% Expected annual growth in same-day deliveries OUTSOURCED SHARE OF SUPPLY CHAIN ACTIVITY 90%90% 1 in 3 E-commerce products are returned 60% 30% 60% Retail apparel purchases are omnichannel or online Full truckloadCourier, express and parcel services Ocean and
Slide 31: A winning culture
A winning culture
Slide 32: We solve complex supply chain problems
We solve complex supply chain problems 32
Slide 33: Customers choose GXO for its unrivaled capabilities
Global scale Deep expertise Trusted partner Customers choose GXO for its unrivaled capabilities 1 Includes only publicly listed peers 33
Slide 34: Scale versus pure-play peers
Pure-play peers1 ~16,000 Number of team members ~93,000 Number of team members2 ~29 million Warehouse space, sq. ft. ~210 million Warehouse space, sq. ft.3 Source: Public filings Figures represent median of selected peers (CLG, WIN, IDL) as of latest filings As of March 31, 2021; ~66,000 employees a
Slide 35: Customer problems and GXO solutions
CUSTOMER PROBLEMGXO SOLUTION “We need a comprehensive ommerce supply chain solution” Full-service offerings for entire e-commerce supply chain “We need a single provider to manage our multinational supply chain” Unified offering across global footprint “Our warehouse rents are too high” Strong real
Slide 36: Disney MagicBand case study
The Disney MagicBand is an all-in-one, personalized wristband technology that gives a guest access to the Park, unlocks the Disney hotel room and is used to buy food and merchandise CUSTOMER NEED In 2013, Disney sought a partner to collaborate in creating a supply chain for the new MagicBand product
Slide 37: Digital capabilities create value
CUSTOMER PROBLEMGXO SOLUTION “1 in 3 pairs of shoes we sell are being returned and it’s causing significant disruption” Reverse logistics “We’re sending customers the wrong products at a high rate” Advanced automation and robotics “Labor availability has become less predictable during Covid” GXO Sma
Slide 38: Nike reverse logistics case study
CUSTOMER NEED Nike is one of the world’s most recognizable brands for athletic footwear, apparel, equipment and accessories In 2017, Nike sought a logistics partner to manage product returns An increase in returns was adversely impacting Nike’s bottom line GXO SOLUTION GXO facilitated the set-up of
Slide 39: Customer case study: Nike Rebound
Customer case study — Nike Rebound: Hyper-fast returns
Slide 40: Customers trust GXO with their reputation
CUSTOMER PROBLEMGXO SOLUTION “We need a trusted 3PL partner without channel conflict” Largest global pure-play contract logistics provider “We’re selling a high-profile new product and need to ensure a smooth rollout” Long-tenured track record of superior execution “We need to reduce the carbon foot
Slide 41: Continuous improvement drives best-in-class solutions
Focus on continuous improvement (“CI”) drives best-in-class solutions and outcomes Identifies best CI tools available and shares universal best practices across footprint Identifies best vertical-specific practices, clearly differentiating GXO to customers and market Annual efficiency gains of 1% to
Slide 42: GXO Direct national distribution solution
National distribution solution that gives customers fluid fulfillment with more flexibility than traditional distribution models, and at lower cost ADV ANT AG E S FO R CUS TO ME RSADV ANT AG E S FO R G X O Maintain independent brand identity and value chain Access to logistics scale, expertise and t
Slide 43: ESG targets
30% Greenhouse gas emission reduction by 2030 vs. 2019 100% Carbon neutral by 2040 50% Renewable global electricity by 2030 80% Global operations using LED lighting by 2025 80% Global landfill conversion rate by 2025 GXO is focused on attaining its ow n ESG targets and helping customers attain their
Slide 44: Kering luxury logistics case study
CUSTOMER NEED Kering sought an experienced contract logistics provider to help ship its luxury goods under various brands on a global scale The solution must include value-added services, including drop shipments and reverse logistics GXO SOLUTION GXO’s comprehensive solution includes multi-shuttle
Slide 45: Safety, diversity and community
Favorable mix of employees and agency labor Best-in-class safety record Diversity, inclusion and belonging steering committee High level of employee engagement Ongoing employee education to raise awareness about inclusion Numerous community outreach programs 78% of 2020 US hires w ere diverse1 1 Def
Slide 46: GXO's culture of safety and diversity
GXO’s culture of safety and diversity
Slide 47: Pipeline near all-time highs
PIPELINE NEAR ALL-TIME HIGHS1 DRIVING SUBSTANTIAL NEW BUSINESS $ in billions 1.81.8 2.0 Annualized revenue from new business won $ in billions 0.6 0.8 201920202021 YTD 20192020 OUTSIZED EXPOSURE TO FAST GROWING E-COMMERCE VERTICAL1 % of current pipeline 34% Other 66% E-commerce, omnichannel retail a
Slide 48: Margin-enhancing technology
Margin-enhancing technology
Slide 49: Warehouse of the past vs. future
Warehouse of the past Warehouse of the future Labor intensive Advanced automation Lack of spe Poor service and accuracy Reduced productivity ed Intelligent robotics Artificial intelligence and machine learning Improved efficiency Reduced footprint Lack of visibility and interconnectivity Cloud-based
Slide 50: Benefits of automation
Revenue Growth Margin Expansion Scale and Retention Automated customer solutions have higher revenue growth than GXO’s average Automation drives improved productivity and higher margins Automated customers are bigger and stay with GXO longer Pipeline and Implementation Efficiency and Sustainability
Slide 51: Automation technologies
Provides superior visibility and control Increases fulfillment speed and accuracy Eliminates data silos ROBOTICS AUTOMATED GUIDED VEHICLES Overcomes space and labor constraints Mitigates safety risks ADVANCED SORTATION SYSTEMS VISION TECHNOLOGY 3,100+ robots and automation systems in place by YE 202
Slide 52: Manual vs. automated productivity
ManualAutomated 210 Cases / hour picking rate Robotic arm +4x 800 Cases / hour picking rate 17 Pallets / hour de-stacking rate Robotic destacker +6x 100 Pallets / hour de-stacking rate 210 Cases per hour rate Automated gantry +16x 3,400 Cases per hour rate Note: Data represents recent GXO deployment
Slide 53: Automation exposure, growth and margins
GREATER AUTOMATION EXPOSURE FASTER REVENUE GROWTH HIGHER AUTOMATED MARGINS Automation revenue as a % of total revenue % revenue growth from customers using automation EBITA margins for customers using automation ~ 30% ~5 % IndustryGXO Non-automatedAutomated Traditional warehousingAutomated solutions
Slide 54: GXO Smart software suite
Enables sophisticated integration of advanced automation Facilitates collaboration with world-class manufacturers to engineer customized solutions Provides in-house control of intelligent solutions, including robotics and goods-to-person systems Speeds startup of customer projects Supports managemen
Slide 55: GXO Smart productivity tools
Proprietary suite of intelligent productivity tools that optimize labor cost Machine learning drives productivity and operational effectiveness Optimizes labor force through peaks and troughs Site-specific modeling helps managers optimize decision-making Delivering tangible EBITDA improvement in 202
Slide 56: GXO Smart productivity management
GXO Smart™ productivity management
Slide 57: Nestlé digital warehouse case study
“I'd like to offer a huge thank you to the many people at Nestlé and [GXO] who have worked so hard to bring our CUSTOMER NEED Nestlé is the world’s largest food and beverage company Nestlé sought to build a state-of-the-art digital warehouse and innovation center in the UK for global product distrib
Slide 58: Customer case study: Nestlé digital warehouse
Customer case study — Nestlé digital warehouse of the future
Slide 59: Financial overview
Financial overview
Slide 60: Key events and timing
Key eventsTiming Note: There can be no assurance that the spin-off will occur or, if it does occur, of its terms or timing
Slide 61: Financial highlights
Best-in-class top-line growth 8% to 12% 2022E YoY revenue growth, underpinned by $2 billion pipeline Attractive returns profile 28% 2021E ROIC1 Robust free cash flow generation Maintenance capex of ~1% of revenue Strong balance sheet Investment-grade capital structure Note: Figures represent 2022E g
Slide 62: Capital allocation priorities
Organic growth Prioritizing above-market growth Productivity and technology Ongoing investment in productivity and automation Balancing acquisitions and capital return Disciplined approach to acquisitions Return of capital to shareholders Near-term investment-grade profile Committed to remaining inv
Slide 63: 2021E ROIC bridge
2021E ROIC BRIDGE 33%5% ROIC target: 28%+ Maintain investment-grade rating 28% Target project payback period: ~3 years Aligned to ESG goals Project ROICCentral costs and investment GXO ROIC ~68% of GXO’s 2021E capex relates to growth projects
Slide 64: 2022E organic revenue growth
+5 – 8% +3 – 4% +8 – 12% COMMENTARY Organic revenue growth of 8% – 12% for FY 2022E, above pro forma 2021E Growth of 5% – 8% from business wins Record sales pipeline of ~$2 billion and growing High-quality opportunities converted to GXO wins Growth of 3% – 4% in revenue from existing customers Long-
Slide 65: Megatrends driving top-line growth
ME G A TRE N DS DRI V I NG TO P LI NE G RO W THG X O ’ S TAI LW I NDS DRI V E A BO V E - M A R KE T G RO W TH E-commerce adoption is accelerating coming out of COVID ~11% e-commerce CAGR over next 5 years Customers are demanding increased automation capabilities GXO is a leader in automation, where
Slide 66: 2021E-2022E adjusted EBITDA bridge
2021E – 2022E adjusted EBITDA bridge $ in millions 600 – 630 40 – 45 26 – 32 30 – 35 700 – 735 2021E adjusted EBITDABusiness wins¹Growth in existing facilitiesOperating efficiencies2022E adjusted EBITDA Revenue growthMargin improvement Note: 2021E adjusted EBITDA is shown on a pro forma basis 1 Net
Slide 67: Margin expansion levers
MARG I N E X P A NS I O N LE V E RS Drive further implementation of GXO SmartTM and other proprietary software tools GXO SmartTM implemented in ~60% of sites Grow base of multinational, high-margin contracts Expand high-value-added services (e.g. reverse logistics) Reverse logistics only being used
Slide 68: Expected capital structure at spin-off
EXPEC T ED C API TAL ST R U C T U R E AT SPI N -O FF C O MME N TARY Cash $100 million Debt $800 million Average cost of debt 2.15% Net debt1 / 2021E pro forma adjusted EBITDA2 1.1x No maturities due before 2026 Expect minimum total liquidity of $900 million Minimum cash balance of $100 million Five-
Slide 69: Cash generation and modest capex requirements
Track record of significant cash generation whilst delivering best-in-class revenue growth SI G N I F I C AN T L EVER S T O EXPAN D E ARNI NG S ACRO S S CY CL E S Pro forma adjusted EBITDA less net capex1 $ in millions 370 Two-thirds of capex relates to growth Maintenance capex on a favorable trend
Slide 70: Summary
Summary
Slide 71: Reasons to invest in GXO
Reasons to invest in GXO MASSIVE SECULAR TAILWINDS CRITICAL SCALE IN A GROWING MARKET LONG-TERM, CONTRACTED AND DIVERSE BLUE-CHIP CUSTOMERS PROPRIETARY TECHNOLOGY IMPROVING CUSTOMER OUTCOMES FAST-GROWING AND HIGH-RETURN FINANCIAL PROFILE Largest global pure-play contract logistics provider, led by a
Slide 72: Appendix
Appendix
Slide 73: Management biographies
Brad Jacobs Chairman Over 40-year career, has started five companies from scratch and led each to become a billion dollar or multi-billion dollar enterprise Includes XPO Logistics (NYSE: XPO) and United Rentals (NYSE: URI), both among the 20 best-performing stocks of the last decade Serves as Chairm
Slide 74: GXO adjusted EBITDA reconciled to outlook
GXO ADJUSTED EBITDA RECONCILED TO OUTLOOK $ in millions 2020 GXO pro forma adjusted EBITDA (as presented in Form 10)442 Adjusted for expected corporate cost run rate10 – 20 2020 GXO pro forma adjusted EBITDA (comparable to 2021 outlook)452 – 462 2021 underlying EBITDA growth148 – 168 2021 GXO pro fo
Slide 75: Net loss reconciled to adjusted EBITDA for 2020
NET LOSS ATTRIBUTABLE TO GXO RECONCILED TO ADJUSTED EBITDA FOR 2020
Slide 76: Spin-off impact on select 2021 financial targets
SPIN-OFF IMPACT ON SELECT 2021 FINANCIAL TARGETS $ in millions GXO Post-Spin-Off Depreciation and amortization1240 – 250 Interest expense220 – 25 Income tax rate26% – 28% Net capital expenditures240 – 250 Cash interest20 – 25 Cash taxes80 – 90 Excludes acquisition-related amortization expense of $55
Slide 77: Select financials and guidance
SELECT FINANCIALS AND GUIDANCE $ in millions Select balance sheet items2 GXO pro forma Equity 2,451 (+) Debt 800 (+) Finance leases 161 (-) Cash 100 (-) Goodwill 2,048 (-) Intangibles 307 Invested capital 957 Per the GXO Form 10
Slide 78: Select financials and guidance
SELECT FINANCIALS AND GUIDANCE $ in millions Midpoint of 2020 GXO pro forma adjusted EBITDA comparable to 2021 outlook (see reconciliations of GXO pro forma adjusted EBITDA in appendix) Calculated as $222 million gross capital expenditures and $12 million gross proceeds per GXO Form 10 Reflects midp