Xpo, Inc. · NYSE:XPO
Xpo — XPO Logistics — Investor Presentation (October 2018)
45 slides from Xpo's investor presentation, Oct 31, 2018
Slide 1: Investor Presentation October 2018
Investor Presentation October 2018 Exhibit 99.2
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 document to the most directly comparable measure under GAAP, which are set forth in the financial table
Slide 3: Key Factors Driving High Growth and High Returns
Fortune named XPO to its 2018 Fortune Future 50 list of US companies best positioned for breakout growth Key Factors Driving High Growth and High Returns Strategy of investing in secular drivers of outsized organic growth Leadership in fast-growing areas of transportation and logistics Strong positi
Slide 4: Top 10 Global Provider of Supply Chain Services
Note: Revenue data as reported for FY 2017 Move all types of freight using optimal mode or combination of modes Full truckload via brokered, contracted and owned truck capacity Less-than-truckload Last mile delivery, assembly and installation of heavy goods via contracted capacity Intermodal rail LO
Slide 5: Global Scale with Well-Diversified Business Mix
By Country of Operation By Customer Vertical Global Scale with Well-Diversified Business Mix Customers Over 50,000 Employees Over 98,000 Locations 1,529 Countries of Operation 32 Contract Logistics Facilities 185 million sq. feet (17 million sq. meters) Key Metrics Gross Revenue Profile Investor Pre
Slide 6: Network Composition Creates Value
Note: Revenue mix for FY 2017 Network Composition Creates Value Ground transportation assets: 16,000 owned tractors; 39,000 trailers; 9,500 53-ft. intermodal boxes; and 5,000 chassis Non-asset transportation network: 12,000 trucks contracted via independent owner-operators; and more than 1 million b
Slide 7: Fast Pace of Innovation
$450+ million annual investment in technology is a key competitive advantage Global technology team of more than 1,700 professionals Over 100 data scientists focused on predictive analytics and machine learning XPO Connect digital freight marketplace gives shippers and carriers real-time visibility
Slide 8: Highly Skilled Management Team
Note: Partial list in alphabetical order Highly Skilled Management Team Bradley Jacobs Chief Executive Officer United Rentals, United Waste Josephine Berisha Senior Vice President, Global Compensation and Benefits Morgan Stanley Erik Caldwell Chief Operating Officer, Supply Chain–Americas and Asia P
Slide 9: Highly Skilled Management Team (Cont'd)
Note: Partial list in alphabetical order Highly Skilled Management Team (Cont’d) Julie Katigan Senior Vice President, Human Resources, Supply Chain–North America Electrolux, Mead Johnson Nutrition Erin Kurtz Senior Vice President, Communications Thomson Reuters, AOL Katrina Liddell Senior Vice Presi
Slide 10: Current Share of $1 Trillion Addressable Opportunity
< 2% Current Share of $1 Trillion Addressable Opportunity Larger Salesforce Closed a Record $3 Billion of Sales YTD through 9/30/18 More than tripled the number of strategic account managers over last two years In Europe, deepened bench strength of senior-level sales talent in both logistics and tra
Slide 11: Leading Positions in Fast-Growing Industry Sectors
Revenue mix for FY 2017 Sources: Armstrong & Associates, Norbridge, Inc., EVE Partners LLC, FTR Associates, SJ Consulting Group, Inc., Bureau of Economic Analysis, US Department of Commerce, A.T. Kearney, Transport Intelligence, American Trucking Associations, Technavio, Wall Street Research and man
Slide 12: Expanding Share of High-Growth E-Commerce Market
Expanding Share of High-Growth E-Commerce Market Largest e-fulfillment 3PL in Europe, with a strong position in North America Omnichannel and reverse logistics/returns management leader in North America Customers include pure-play e-commerce companies and omnichannel retail giants Logistics experien
Slide 13: 2018 Investments Drive Long-Term Growth
2018 Investments Drive Long-Term Growth Investor Presentation October 2018 Benefits propelled by scale Expanding contract logistics infrastructure: warehouse management software, automation and robotic solutions, and data-driven workforce planning tools Completed expansion of last mile network to 85
Slide 14: Targeting ~$1.585 Billion of Adjusted EBITDA in 2018
Targeting ~$1.585 Billion of Adjusted EBITDA in 2018 Investor Presentation October 2018 Expecting 16% adjusted EBITDA growth this year, due to numerous drivers Investments in salesforce expansion and effectiveness Execution of pricing initiatives Continued improvement in overtime and temporary labor
Slide 15: Opportunity to Create Substantial Value through M&A
Opportunity to Create Substantial Value through M&A Exploring acquisitions that are strategically and financially compelling Mainly interested in existing or complementary lines of business, where revenue is derived from long-term, contractual relationships with customers Primarily focused on busine
Slide 16: Strong Track Record of Optimizing Acquired Operations
October 2015 acquisition of Con-way Instilled a culture of accountability by focusing employees on results that matter Invested in sales force recruitment and training to optimize business mix Realized approximately $200 million of cost improvements More than doubled adjusted operating income from F
Slide 17: XPOLogistics Key Lines of Business
XPOLogistics Key Lines of Business
Slide 18: Contract Logistics
Contract Logistics Competitive Position as Technology Leader Asset-light business characterized by long-term, recurring contractual relationships, low cyclicality and a high-value-add component that minimizes commoditization Deep expertise in high-growth sectors that trend toward outsourcing: retail
Slide 19: Truck Brokerage
Truck Brokerage Broad Opportunity to Cross-Sell Massive Capacity Non-asset business that matches shippers’ freight with an established network of over 38,000 pre-qualified trucking carriers Continuously improving productivity through proprietary Freight Optimizer technology Drive XPO mobile app and
Slide 20: Last Mile
Last Mile Demand Propelled by E-Commerce and Omnichannel Investor Presentation October 2018 Asset-light business that arranges the final stage of heavy goods deliveries from distribution centers, cross-docks or retail stores to consumers’ homes Customers include nearly all of the top 30 big-box reta
Slide 21: North American Less-Than-Truckload
North American Less-Than-Truckload Second Largest LTL Carrier in North America Investor Presentation October 2018 Asset-based business utilizing employee drivers, fleet of tractors and trailers for line-haul, pick-up and delivery of pallets, and network of terminals Covers 99% of all US zip codes La
Slide 22: Intermodal Rail
Intermodal Rail Long-term Sales Potential for Truck-to-Rail Conversion Investor Presentation October 2018 Asset-light business that arranges the long-haul portion of containerized freight, including rail brokerage, local drayage and on-site operational services Third largest intermodal provider 9,50
Slide 23: European Transport
European Transport Cross-Fertilizing Best Practices with North America Investor Presentation October 2018 Leading platform for dedicated and non-dedicated truckload, less-than-truckload, truck brokerage, and new last mile service LTL, truck brokerage and dedicated transport combined account for abou
Slide 24: Global Forwarding
Global Forwarding Integrated Global Network Investor Presentation October 2018 Non-asset logistics solution for domestic, cross-border and international shipments, including customs brokerage Freight forwarding is a $150 billion industry, of which XPO has less than a 1% share Ability to leverage gro
Slide 25: XPOLogistics Financial Performance
XPOLogistics Financial Performance
Slide 26: Industry-Leading Growth in Revenue and EBITDA
Industry-Leading Growth in Revenue and EBITDA Revenue Adjusted EBITDA $ in millions $ in millions CAGR: 32% CAGR: 50% Note: Excludes impact of divested North American truckload unit Note: Refer to the “Non-GAAP Financial Measures” section on page 2 of this document Investor Presentation October 2018
Slide 27: Flexible Asset / Non-Asset Business Mix
Flexible Asset / Non-Asset Business Mix Business model enhances customer service and financial returns % Adjusted EBITDA Net Capex Adjusted EBITDA Minus Net Capex Investor Presentation October 2018 Note: Brokers include CH Robinson, Echo Global Logistics and Expeditors International; Parcel includes
Slide 28: Strong Free Cash Flow Generation
Strong Free Cash Flow Generation 2018 free cash flow expected to be driven by EBITDA growth, lower interest expense and lower integration and rebranding costs Cash Flow from Operations Free Cash Flow Investor Presentation October 2018 Note: 2018F is based on the company’s target for free cash flow a
Slide 29: Third Quarter 2018 Results
Third Quarter 2018 Results $4.34 billion of revenue 10.5% organic revenue growth $100.8 million of net income; $0.74 per diluted share $121.3 million of adjusted net income; $0.89 per diluted share $414.9 million of adjusted EBITDA $288.2 million of cash flow from operations $173.0 million of free c
Slide 30: Financial Targets
Financial Targets On October 31, 2018 Updated full year 2018 adjusted EBITDA to approximately $1.585 billion, from at least $1.6 billion Revised target primarily reflects the $16 million impact of a customer bankruptcy in the third quarter Reaffirmed 2017–2018 cumulative free cash flow of approximat
Slide 31: Fundamentals Established for Value Creation
Fundamentals Established for Value Creation Leading positions in fast-growing areas of transportation and logistics Unique ability to help large customers realize efficiencies across the supply chain Leading-edge technology for operations, customers, carriers and consumers Strong position in rapidly
Slide 32: XPOLogistics Supplemental Materials
XPOLogistics Supplemental Materials
Slide 33: XPO Is Widely Recognized for Performance and Culture
XPO Is Widely Recognized for Performance and Culture Named to the Fortune Future 50 list of US companies best positioned for breakout growth by Fortune, 2018 Named one of the World’s Most Admired Companies by Fortune and ranked #4 in the transportation category, 2018 Ranked #7 of the CMI/Glassdoor T
Slide 34: Strongly Committed to Sustainability
Strongly Committed to Sustainability Transportation Named a Top 75 Green Supply Chain Partner by Inbound Logistics for 2016, 2017, 2018 Honored for excellence in environmental improvement by SmartWay® Awarded the label “Objectif CO2” for outstanding environmental performance of transport operations
Slide 35: Strongly Committed to Sustainability (Cont'd)
Strongly Committed to Sustainability (Cont’d) On track to reduce French fleet emissions by 6% by year-end 2018 vs. 2015 North American LTL operations have energy-saving policies in place and are implementing a phased upgrade to LED lighting Drivers train in responsible eco-driving and fuel usage red
Slide 36: Strongly Committed to Sustainability (Cont'd)
Strongly Committed to Sustainability (Cont’d) Energy efficiency evaluations are performed prior to selecting warehouses to lease, and energy efficient equipment is purchased when feasible Fuel emissions from forklifts are monitored at logistics sites, with protocols in place to take immediate correc
Slide 37: Business Glossary
Business Glossary Contract Logistics: An asset-light, technology-enabled business characterized by long-term contractual relationships with high renewal rates, low cyclicality and a high-value-add component that minimizes commoditization. Contracts are typically structured as either fixed-variable,
Slide 38: Business Glossary (Cont'd)
Business Glossary (Cont’d) Intermodal: An asset-light business that facilitates the movement of long-haul, containerized freight by rail, often with a drayage (trucking) component at either end. Intermodal is a variable cost business, with revenue generated by a mix of contractual and spot market tr
Slide 39: Financial Reconciliations
Financial Reconciliations The following table reconciles XPO’s net income attributable to common shareholders for the periods ended September 30, 2018 and 2017 to adjusted EBITDA for the same periods. Investor Presentation October 2018 Note: Refer to the “Non-GAAP Financial Measures” section on page
Slide 40: Financial Reconciliations (Cont'd)
Financial Reconciliations (Cont’d) Investor Presentation October 2018 The table reconciles XPO’s GAAP net income attributable to common shareholders for the periods ended September 30, 2018 and 2017 to adjusted net income attributable to common shareholders for the same periods. Note: Refer to the “
Slide 41: Financial Reconciliations (Cont'd)
Note: Refer to the “Non-GAAP Financial Measures” section on page 2 of this document Note: 2016 and 2017 data have been recast to reflect the impact of Accounting Standards Update 2016-18 Financial Reconciliations (Cont’d) Investor Presentation October 2018 The following table reconciles XPO’s cash f
Slide 42: Financial Reconciliations (Cont'd)
Financial Reconciliations (Cont’d) The following table reconciles XPO’s operating income attributable to its North American less-than-truckload business for the trailing twelve months ended September 30, 2018, nine months ended September 30, 2018 and 2017, and years ended December 31, 2017 and 2015,
Slide 43: Financial Reconciliations (Cont'd)
Financial Reconciliations (Cont’d) Investor Presentation October 2018 The following table reconciles XPO’s revenue attributable to its North American less-than-truckload business for the periods ended September 30, 2018 and 2017 to adjusted operating ratio for the same periods. Note: Refer to the “N
Slide 44: Financial Reconciliations (Cont'd)
Financial Reconciliations (Cont’d) Note: Refer to the “Non-GAAP Financial Measures” section on page 2 of this document Note: Adjusted EBITDA was prepared assuming 100% ownership of XPO Logistics Europe Investor Presentation October 2018 The following table reconciles XPO’s net income (loss) attribut
Slide 45: Financial Reconciliations (Cont'd)
Financial Reconciliations (Cont’d) Investor Presentation October 2018 The following table reconciles XPO’s GAAP revenue to organic revenue for the three months ended September 30, 2018 and 2017. Note: Refer to the “Non-GAAP Financial Measures” section on page 2 of this document