Xpo, Inc. · NYSE:XPO
Xpo — Investor Presentation (September 2021)
52 slides from Xpo's investor presentation, September 2021
Slide 1: Investor Presentation
SEPTEMBER 2021 Investor Presentation
Slide 2: Disclaimers
Disclaimers 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 or a pro forma measure prepared and pres
Slide 3: Disclaimers (cont.)
Disclaimers (cont.) FORWARD-LOOKING STATEMENTS This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including our future growth prospects for adjusted EBITDA
Slide 4: Table of contents
Table of contents INVESTMENT HIGHLIGHTS 5 LESS-THAN-TRUCKLOAD (LTL) 13 TRUCK BROKERAGE 20 SUPPLEMENTAL MATERIALS 28 I NVESTOR PRESENTATI ON SEPTEMBER 2021 4
Slide 5: Why invest in XPO today?
Why invest in XPO today? 1 High-ROI businesses poised to benefit from secular tailwinds 2 Massive capacity in highly attractive less-than-truckload and truck brokerage sectors 3 Leading technology platform, with soaring industry adoption rates 4 Multiple initiatives to drive above-industry-average r
Slide 6: A leading provider of freight transportation services
A leading provider of freight transportation services T OP -T H R E E IN K E Y GE OGR A P H IE S X P O K E Y ME T R IC S 1 § Third largest provider of less-than-truckload (LTL) TTM revenue $11.8 billion transportation in North America § Second largest truck broker worldwide, and third largest in Loc
Slide 7: Continuing to execute strategy to drive outsized returns
Continuing to execute strategy to drive outsized returns L ON G T R A C K R E C OR D OF S IGN IF IC A N T S H A R E H OL D E R V A L U E C R E A T ION § XPO was the 7th best-performing stock of the last decade on the Fortune 500, based on Bloomberg market data § Spent more than $3 billion on technol
Slide 8: XPO has a long runway for revenue and margin expansion
XPO has a long runway for revenue and margin expansion R E V E N U E GR OWT H D R IV E R S MA R GIN E X P A N S ION D R IV E R S § Industrial recovery: XPO is benefiting from the § XPO Connect™: Managing more volume at lower cost, ongoing increase in industrial demand, as supply as shipper and carri
Slide 9: XPO second quarter 2021 pro forma results
XPO second quarter 2021 pro forma results1 REVENUE $3.19 billion Commentary § Achieved record revenue and adjusted EBITDA NET INCOME 2 $103 million § Revenue was the highest of any quarter in XPO’s history at $3.19 billion, increasing by 50% from prior year Q2 DILUTED EARNINGS § Operating income inc
Slide 10: XPO 2021 guidance
XPO 2021 guidance On July 28, 2021, XPO updated its pro forma full year financial targets in anticipation of the spin-off of its logistics segment1. These targets have been calculated as if the spin-off had been completed on January 1, 2021. $1.195 billion to $1.235 billion, including adjusted EBITD
Slide 11: Pro forma balance sheet and liquidity as of June 30, 2021
Pro forma balance sheet and liquidity as of June 30, 20211 NET DEBT 2 $3.2 billion Commentary § In July, GXO issued $800 million of five-year and 10-year notes; $794 million of net proceeds were used for a cash NET LEVERAGE 3 2.7x distribution to XPO in conjunction with the spin-off § In July, XPO r
Slide 12: Strong ESG culture, with chief diversity officer leading DE&I
Strong ESG culture, with chief diversity officer leading DE&I ESG targets tie to executive compensation ESG Scorecard Target Areas program Core DE&I objectives relate to recruitment and retention Workforce Information § Working to significantly increase the and Talent Security diversity of talent in
Slide 13: Less-than-truckload (LTL)
Less-than-truckload (LTL)
Slide 14: XPO is a top three provider of LTL transportation in North America
XPO is a top three provider of LTL transportation in North America D R IV E R S OF X P O’S L T L R E V E N U E A N D MA R GIN GR OWT H § Significant competitive advantages from one of the few national LTL networks, and ~20,000 customer accounts, including many longstanding relationships § Favorable
Slide 15: Key LTL operating and financial metrics
Key LTL operating and financial metrics Industry size, North America ~$42 billion1 X P O L T L F IN A N C IA L ME T R IC S A S OF J U N E 3 0 , 2 0 2 1 XPO’s industry share ~8% TTM revenue $3.9 billion Largest customer as % of TTM adjusted operating ratio 83.0%2 2% annual revenue Shipments per year
Slide 16: Scaled LTL network represents multiple decades of investment
Scaled LTL network represents multiple decades of investment 291 terminals ensure LTL coverage in every major area, including ~99% of all US zip codes and key coverage in Canada Note: As of August 30, 2021 I NVESTOR PRESENTATI ON SEPTEMBER 2021 16
Slide 17: Over 1,000 bps improvement in LTL adjusted operating margin since 2015
Over 1,000 bps improvement in LTL adjusted operating margin since 2015 XPO’s optimization technology has already XPO N OR TH A MER IC A N LTL A D JU STED OPER A TIN G MA R GIN 1 delivered significant margin expansion, with extensive room for more gains in four areas: § Routing: Dynamic routing for p
Slide 18: North America LTL pricing fundamentals are favorable for long-term expansion
North America LTL pricing fundamentals are favorable for long-term expansion XPO LTL GROSS REVENUE PER HUNDREDWEIGHT 1 $19.03 $18.63 $18.27 $17.70 $17.32 $17.20 $16.48 2015 2016 2017 2018 2019 2020 TTM June 30, 2021 Steady increases in yield enhanced by company-specific initiatives 1 Excludes the im
Slide 19: XPO Smart intelligent productivity tools optimize LTL variable labor spend
XPO Smart™ intelligent productivity tools optimize LTL variable labor spend Proprietary technology uses machine learning to become continually smarter at site-specific optimization § Analyzes all major productivity levers simultaneously, giving managers the data to make the best overall decisions ab
Slide 20: Truck brokerage
Truck brokerage
Slide 21: XPO is the second largest truck broker worldwide
XPO is the second largest truck broker worldwide D R IV E R S OF X P O’S B R OK E R A GE R E V E N U E A N D MA R GIN GR OWT H § Massive capacity of 85,000 carriers globally, representing a total of one million trucks § First-mover technology advantage with investments in automation starting in 2011
Slide 22: Key truck brokerage operating and financial metrics
Key truck brokerage operating and financial metrics Industry size, North America $64 billion1 X P O B R OK E R A GE F IN A N C IA L ME T R IC XPO’s industry share ~3% TTM revenue June 30, 2021 $2.2 billion Average tenure of XPO’s ~13 years top 10 customers Full truckload market $360 billion1 opportu
Slide 23: Brokers have been steadily capturing truckload share for decades
Brokers have been steadily capturing truckload share for decades BROKER PENETRATION OF NORTH AMERICAN TRUCKLOAD INDUSTRY 21% 20% 19% 17% 16% 14% 14% 13% 12% 12% 11% 11% 10% 10% 10% 9% 8% 7% 7% 7% 6% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2
Slide 24: XPO's brokerage revenue CAGR has outperformed industry by more than 3x
XPO’s brokerage revenue CAGR has outperformed industry by more than 3x US BROKERAGE INDUSTRY GROWTH XPO BROKERAGE REVENUE GROWTH 2013-2020 1 2013-2020 $1.66 billion % 23 R: AG % R: 7 $64 billion OC AG TRYC US XP IND $39 billion $397 million 2013 2020 2013 2020 1 Third-party research: North American
Slide 25: XPO Connect is our cutting-edge digital freight platform
XPO Connect™ is our cutting-edge digital freight platform X P O E N V IS ION E D D E MA N D F OR A F U L L Y A U T OMA T E D , C L OU D -B A S E D D IGIT A L F R E IGH T -MA T C H IN G P L A T F OR M A D E C A D E A GO § Improves transportation procurement by providing deep visibility into available
Slide 26: XPO's digital marketplace is widely adopted and growing hyper-fast
XPO’s digital marketplace is widely adopted and growing hyper-fast CARRIERS WANT DIGITAL ACCESS TO LOADS THAT XPO CONNECT™ OFFERS 500,000 100,000 Total Drive XPO app downloads Total registered carrier users 450,000 90,000 400,000 80,000 350,000 70,000 300,000 60,000 250,000 50,000 200,000 40,000 150
Slide 27: Drivers have downloaded the Drive XPO app over 500,000 times
Drivers have downloaded the Drive XPO™ app over 500,000 times § Proprietary mobile app gives truck drivers access to the XPO Connect™ platform from the road § Fully automated transactions, tracking solution and intuitive tools for bidding, booking loads and more § Enhances access to truckload capaci
Slide 28: Supplemental materials
Supplemental materials
Slide 29: Highly skilled management team
Highly skilled management team LEADERSHIP PRIOR EXPERIENCE Brad Jacobs United Rentals, United Waste Chief Executive Officer Lou Amo Electrolux, Union Pacific, Odyssey Logistics President, Truck Brokerage – North America Josephine Berisha Morgan Stanley Chief Human Resources Officer Tony Brooks Sysco
Slide 30: Highly diversified revenue across attractive verticals
Highly diversified revenue across attractive verticals X P O R E V E N U E D IV E R S IF IC A T ION B Y V E R T IC A L S TTM June 30, 2021 Pro forma for spin-off of logistics segment Other 17% Industrial and Logistics and Manufacturing Transportation 38% 8% Food and Beverage 8% Consumer Retail and G
Slide 31: #1 last mile logistics provider for heavy goods
#1 last mile logistics provider for heavy goods Note: Last mile logistics is the facilitation of deliveries to consumer homes, often with white-glove service. XPO specializes in last mile logistics for heavy goods, such as appliances, furniture and large electronics. North American industry size: ~$
Slide 32: XPO holds leading transportation positions in key European geographies
XPO holds leading transportation positions in key European geographies T R U C K B R OK E R A GE #1 broker in France and Iberia (Spain / Portugal) #3 broker in the UK L E S S -T H A N -T R U C K L OA D #1 LTL provider in France and Iberia #1 single-owner LTL network in the UK § Approximately 100 LTL
Slide 33: XPO is widely recognized for performance and culture
XPO is widely recognized for performance and culture § 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, 2021 § Named one of Spain’s Best Companies to Work For by Forbes,
Slide 34: Selected highlights of XPO's people-first culture
Selected highlights of XPO’s people-first culture § Road to Zero program helped decrease the percentages of distracted driving, lost work days and crashes by double-digits in 2020 § Appointed a Chief Diversity Officer and launched a Diversity and Inclusion Council in 2020 § Launched a Sustainability
Slide 35: XPO is strongly committed to sustainability
XPO is strongly committed to sustainability § CarbonNET, XPO’s proprietary, cloud-based calculator, helps document emission sources, activity data and CO2 calculations § Named a Top 75 Green Supply Chain Partner by Inbound Logistics for 2016, 2017, 2018, 2019, 2020, 2021 § Awarded Trophées EVE 2020
Slide 36: Business glossary
Business glossary 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 weight of the freight, its commodity class
Slide 37: Financial reconciliations
Financial reconciliations The following table reconciles XPO’s pro forma net income (loss) attributable to common shareholders for the periods ended June 30, 2021 and 2020 to pro forma adjusted EBITDA for the same periods. RECONCILIATION OF PRO FORMA ADJUSTED EBITDA $ in millions (unaudited) Three M
Slide 38: Financial reconciliations (cont.)
Financial reconciliations (cont.) The following table reconciles XPO’s pro forma net income (loss) attributable to common shareholders for the periods ended June 30, 2021 and 2020 to pro forma adjusted net income (loss) attributable to common shareholders for the same periods. R E C ON C IL IA T ION
Slide 39: Financial reconciliations (cont.)
Financial reconciliations (cont.) The following table reconciles XPO’s pro forma operating income (loss) for the periods ended June 30, 2021 and 2020 to pro forma adjusted operating income (loss). R E C ON C IL IA T ION OF P R O F OR MA A D J U S T E D OP E R A T IN G IN C OME (L OS S ) $ in million
Slide 40: Financial reconciliations (cont.)
Financial reconciliations (cont.) The following table reconciles XPO’s operating income attributable to the company’s North American less-than-truckload business for the trailing twelve months ended June 30, 2021, the quarters ended June 30, 2021 and 2020, the six-month periods ended June 30, 2021 a
Slide 41: Financial reconciliations (cont.)
Financial reconciliations (cont.) The following table reconciles XPO’s pro forma net income (loss) attributable to common shareholders for the trailing twelve months ended June 30, 2021 to pro forma adjusted EBITDA for the same period. RECONCILIATION OF PRO FORMA ADJUSTED EBITDA $ in millions (unaud
Slide 42: Presentation Script and Slides
September 2021 Presentation Script and Slides The following script should be read in conjunction with the accompanying slide presentation, which contains, among other information, source data for certain information set forth in the script. Thank you for joining us. Over the past 10 years, we’ve bui
Slide 43: Strong culture: Our secret sauce has always been the world-class people
• Strong culture: Our secret sauce has always been the world-class people we attract to XPO — not just our senior executives, but also the thousands of other professionals who contribute to our exceptional performance while representing our values. XPO is a top-three player in two highly compelling
Slide 44: Our deployment of proprietary technology is also a significant growth driver
In addition to scale, our deployment of proprietary technology is also a significant growth driver. We use intelligent route-building to move LTL freight across North America, increasing the utilization of our linehaul fleet and optimizing our load factor. To improve pickup-and-delivery performance,
Slide 45: Our brokerage segment also includes exposure to last mile logistics
Our brokerage segment also includes exposure to one of the fastest-growing brokerage subsectors — our asset-light last mile logistics service for the home delivery of heavy goods. This business is benefitting from the consumer trend toward purchasing large products through e-commerce, omnichannel re
Slide 46: Drive XPO and XPO Smart
Drive XPO™ Truck drivers can access XPO Connect™ from the road through our proprietary mobile app, Drive XPO™. The app connects carriers to shippers with the capability for fully automated transactions, tracks freight during transit and includes intuitive tools for finding, bidding and booking loads
Slide 47: Our women employees can request pregnancy accommodations without fear of discrimination
Our women employees can request pregnancy accommodations without fear of discrimination. This includes "automatic yes" accommodations, such as changes to work schedules and the timing or frequency of breaks, or assistance with certain tasks. More extensive accommodations are easily determined with i
Slide 48: $204 million of adjusted operating income, compared with a loss of $41 million
• $204 million of adjusted operating income, compared with a loss of $41 million2 in Q2 2020 • $103 million of net income3 • $0.91 diluted earnings per share • $144 million of adjusted net income3 • $1.28 adjusted diluted earnings per share • $331 million of adjusted EBITDA4, compared with $84 milli
Slide 49: Gartner has ranked us as a Magic Quadrant 3PL leader for four consecutive years
Gartner has ranked us as a Magic Quadrant 3PL leader for four consecutive years. Forbes ranked us as the top-performing US company on the Global 2000 and one of the best employers in the US. In February of this year, Fortune named us one of the World's Most Admired Companies for the fourth consecuti
Slide 50: Non-GAAP financial measures (script)
business operations because they exclude items that may not be reflective of, or are unrelated to, XPO and its business segments' core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses. Other companies may calculate th
Slide 51: Forward-looking Statements
Forward-looking Statements This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including our future growth prospects for adjusted EBITDA in our North America
Slide 52: Forward-looking statements (cont.)
to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law. 11