Attached files
| file | filename |
|---|---|
| 8-K - 8-K - XPO Logistics, Inc. | d868912d8k.htm |
| EX-99.1 - EX-99.1 - XPO Logistics, Inc. | d868912dex991.htm |
| EX-99.3 - EX-99.3 - XPO Logistics, Inc. | d868912dex993.htm |
 Investor Presentation
February 2015
Exhibit 99.2 |
 2
Disclaimers
Forward-Looking Statements
This
document
includes
forward-looking
statements
within
the
meaning
of
Section
27A
of
Securities
Act
of
1933,
as
amended,
and
Section
21E
of
the
Securities
Exchange
Act
of
1934,
as
amended.
All
statements
other
than
statements
of
historical
fact
are,
or
may
be
deemed
to
be,
forward-looking
statements.
In
some
cases,
forward-looking statements can be identified by the use of forward-looking
terms such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan,"
"potential," "predict," "should," "will,"
"expect," "objective," "projection,"
"forecast," "goal," "guidance," "outlook," "effort," "target" or the negative of these terms or other
comparable terms. However, the absence of
these words does not mean that the statements are not forward-looking. These
forward-looking statements are based on certain assumptions and analyses
made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other
factors we believe are appropriate in the circumstances.
These
forward-looking
statements
are
subject
to
known
and
unknown
risks,
uncertainties
and
assumptions
that
may
cause
actual
results,
levels
of
activity,
performance
or
achievements
to
be
materially
different
from
any
future
results,
levels
of
activity,
performance
or
achievements
expressed
or
implied
by
such
forward-looking
statements.
Factors
that
might
cause
or
contribute
to
a
material
difference
include
those
discussed
in
XPO’s
filings
with
the
SEC
and
the
following:
economic
conditions
generally;
competition;
XPO’s
ability
to
find
suitable
acquisition
candidates
and
execute
its
acquisition
strategy;
the
expected
impact
of
the
acquisitions,
including
the
expected
impact
on
XPO's
results
of
operations;
the
ability
to
realize
anticipated
synergies
and
cost
savings
with
respect
to
acquired
companies;
XPO’s
ability
to
raise
debt
and
equity
capital;
XPO’s
ability
to
attract
and
retain
key
employees
to
execute
its
growth
strategy,
including
acquired
companies’
management
teams;
litigation,
including
litigation
related
to
alleged
misclassification
of
independent
contractors;
the
ability
to
develop
and
implement
a
suitable
information
technology
system;
the
ability
to
maintain
positive
relationships
with
XPO’s
networks
of
third-party
transportation
providers;
the
ability
to
retain
XPO’s
and
acquired
companies’
largest
customers;
XPO’s
ability
to
successfully
integrate
UX
Specialized
Logistics
and
other
acquired
businesses;
rail
and
other
network
changes;
weather
and
other
service
disruptions;
and
governmental
regulation.
All
forward-looking
statements
set
forth
in
this
document
are
qualified
by
these
cautionary
statements
and
there
can
be
no
assurance
that
the
actual
results
or
developments
anticipated
will
be
realized
or,
even
if
substantially
realized,
that
they
will
have
the
expected
consequences
to,
or
effects
on,
XPO
or
its
businesses
or
operations.
Forward-looking
statements
set
forth
in
this
document
speak
only
as
of
the
date
hereof,
and
XPO
undertakes
no
obligation
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.
Non-GAAP Financial Measures
This
report
contains
certain
non-GAAP
financial
measures
as
defined
under
Securities
and
Exchange
Commission
(“SEC”)
rules,
such
as
adjusted
earnings
(loss)
before
interest,
taxes,
depreciation
and
amortization
(“EBITDA”)
for
the
quarter
ended
December
31
2014.
As
required
by
SEC
rules,
we
provide
reconciliations
of
this
measure
to
the
most
directly
comparable
measure
under
United
States
generally
accepted
accounting
principles
(“GAAP”),
which
are
set
forth
in
this
report.
We
believe
that
adjusted
EBITDA
improves
comparability
from
period
to
period
by
removing
the
impact
of
our
capital
structure
(interest
expense
from
our
outstanding
debt),
asset
base
(depreciation
and
amortization),
tax
consequences
and
transaction
and
integration
costs
related
to
certain
acquisitions
we
have
completed.
In
addition
to
its
use
by
management,
we
believe
that
adjusted
EBITDA
is
a
measure
widely
used
by
securities
analysts,
investors
and
others
to
evaluate
the
financial
performance
of
companies
in
our
industry.
Other
companies
may
calculate
adjusted
EBITDA
differently,
and
therefore
our
measure
may
not
be
comparable
to
similarly
titled
measures
of
other
companies.
Adjusted
EBITDA
is
not
a
measure
of
financial
performance
or
liquidity
under
GAAP
and
should
not
be
considered
in
isolation
or
as
an
alternative
to
net
income,
cash
flows
from
operating
activities
and
other
measures
determined
in
accordance
with
GAAP.
Items
excluded
from
adjusted
EBITDA
are
significant
and
necessary
components
of
the
operations
of
our
business,
and,
therefore,
adjusted
EBITDA
should
only
be
used
as
a
supplemental
measure
of
our
operating
performance. |
 3
One of the Largest 3PLs in North America
We facilitate over 37,000 deliveries per day
#3 freight brokerage firm and Top 50 logistics company
#3 provider of intermodal services, and a leader in
cross-border Mexico intermodal
#1 manager of expedited shipments
#1 provider of last mile logistics for heavy goods
Leading provider of technology-enabled contract logistics
Growing presence in freight forwarding, LTL and managed
transportation
Sources for rankings: Transport Topics, Journal of Commerce and company data
|
 4
Clearly Defined Strategy for Value Creation
Acquire companies that bring value and are highly scalable
Significantly scale up and optimize existing operations
Open cold-starts where sales recruitment can drive revenue
We
are
committed
to
providing
world
class
service
to
customers
as
the
industry’s
most
innovative
and
comprehensive
multi-modal
logistics
provider |
 5
$700 Million Strategic Investment in XPO
Three global institutions invested a total of $700 million of equity
to further XPO’s growth strategy
–
PSP Investments, GIC of Singapore and Ontario Teachers’
Pension Plan
–
Transaction completed September 17, 2014
Strong endorsement of XPO’s plan for value creation
Capital primarily will be used to capitalize on acquisition pipeline
2017 financial targets raised in light of the investment to
$9 billion of revenue and $575 million of EBITDA |
 6
$400 Million Senior Unsecured Notes
Capital primarily will be used to capitalize on acquisition pipeline
Add-on to existing 7.875% senior notes due 2019
–
Gross proceeds $416 million
–
Yield to maturity of 6.836%
–
Callable starting in September 2016
Settlement date February 13, 2015
XPO will have over $1.0 billion in cash and close to
$1.5 billion of available capital |
 7
Completed 14 strategic acquisitions and established
23 cold-starts in about three years
Created leading-edge recruiting and training programs
Introduced scalable IT platform
Added national operations centers for shared services, carrier
procurement and last-mile operations
Stratified customers, assigned a single point of contact to each
Created a culture of passionate on-time performance
Disciplined focus on operational excellence
Precise Execution of Growth Plan |
 8
Strong Commitment to Shipper Satisfaction
Integrated network with cross-company visibility
201 locations in the U.S., Canada, Mexico, Asia and Europe
Approximately 11,500 employees
More than 4,900 owner-operator trucks under contract for
drayage, expedited and last mile subsidiaries
Relationships with an additional 28,000 vetted carriers
representing approximately 700,000 trucks
Access to 60,000 miles of network rail routes |
 9
Major Coverage: U.S., Mexico and Canada
Source: Company data
Serving over
15,000 customers
Manufacturing
Retail, E-commerce
Industrial
Technology
Aerospace
Commercial
Life Sciences
Governmental |
 10
Significant Growth Embedded in XPO’s Model
Strategic
accounts:
market
multiple
services
to
large
shippers
Cold-starts:
expand
footprint
in
markets
with
best
access
to
sales
talent
Scale
and
productivity:
recruit
sales
reps
and
provide
state-of-the-art
training
and
information
technology
Market
demand:
build
leadership
positions
in
the
fastest-
growing
areas
of
logistics
Multi-modal:
become
the
logistics
partner
of
choice
by
offering
the
most
compelling
range
of
transportation
solutions
M&A
program:
focus
on
the
top
pipeline
prospects |
 11
Secular Trends Driving Industry Growth
Growth in e-commerce retailing
Outsourcing of logistics services and capacity
Conversion from over-the-road to intermodal rail
Near-shoring of manufacturing in Mexico
Just-in-time lean production
Driver shortage
Automation of the transportation logistics process
We have positioned XPO’s service offering
to capitalize on each of these trends |
 12
Leading Positions in High-Growth Sectors
Sources: Armstrong & Associates, Norbridge, Inc., EVE Partners LLC, FTR
Associates, SJ Consulting Group, Inc., Bureau of Economic Analysis, US
Department of Commerce Sector
Market
Size
($ billions)
Projected
Growth
(x GDP)
Growth Drivers
Truck brokerage
$50
2-3 times
Outsourcing and technology
Intermodal
$15
3-5 times
Long-haul rail efficiencies and
near-sourcing of
manufacturing in Mexico
Heavy goods,
last-mile
$13
5-6 times
Outsourcing and e-commerce |
 13
Acquired UX Specialized Logistics
Compelling reasons for the transaction
Non-asset, highly scalable last mile logistics provider for
heavy goods home delivery and e-commerce
Long-term contracts
with blue chip retailers and e-tailers
who can use XPO’s full range of services
19% revenue CAGR for the past five years
Boosts XPO’s capacity by over 1,600 contract carriers
and independent installers
Adds approximately 700 employees and four locations |
 14
Details of the UX Transaction
$59 million purchase price
Adds approximately $113 million of revenue (full year 2014)
Multiple of approximately seven times full year 2014 adjusted
EBITDA of $8.2 million
Transaction completed February 9, 2015
Expected to be immediately accretive to earnings before the
benefits of cross-selling and other synergies
Funded with cash on hand |
 15
Acquired New Breed in September 2014
Leads the most desirable sector of contract logistics
–
Technology-enabled solutions for blue chip customers
–
Focus on industries with strong potential for outsourcing contract
logistics: technology, telecom, e-commerce, aerospace and
defense, medical equipment, and select areas of manufacturing
Capitalizes on trend toward outsourcing reverse logistics, lean
manufacturing and aftermarket support, transportation
management and other contract logistics services
Significant cross-selling opportunities with XPO strategic
accounts, New Breed customers and their vendors |
 16
New Breed’s Attractive Business Model
Very stable relationships with low cyclicality
–
Approximately 99% contractual revenue renewal rate over the
past three years
–
Top 10 customers have utilized New Breed for an average of 10
years
38% return on invested capital (FY 2013)
(1)
Low capex requirements (4.2% of revenue in FY 2013) and largely
devoted to IT development
(1)
Return on invested capital equals ongoing operations EBIT divided by the sum of
net working capital and net PP&E Source: Company data
|
 17
Acquired Pacer in March 2014
Gained instant scale in North American intermodal
–
Third largest provider of intermodal services
–
A leading provider in cross-border Mexico intermodal, with
30 years’
experience
–
Access to 60,000 miles of network rail routes
–
Decades-deep relationships with the railroads
Added $980 million of revenue (FY 2013), 31 locations and
approximately 800 employees
Sources:
SJ
Consulting
Group,
Inc.,
Bureau
of
Economic
Analysis,
US
Department
of
Commerce
and
company
data |
 18
Major Intermodal Market Opportunity
$15 billion sector in North America
–
Growing at three to five times GDP
One of the fastest-growing areas of transportation logistics
Enables shippers to lower transportation costs for freight
traveling 600 miles or more
–
Rail is more fuel-efficient than truckload for long haul
–
Intermodal can lower shipper’s cost by up to 20%
Sources: SJ Consulting Group, Inc., FTR Associates and
company data |
 19
High-Growth Cross-Border Mexico Sector
Near-shoring in Mexico –
fast becoming the manufacturing
country of choice
–
Competitively priced labor force versus China
–
Faster speed-to-market than overseas locales
–
Can be more cost effective than cross-border truckload
–
Growth driven by billions of dollars invested by major
manufacturers, Mexican government and the rails
Large opportunity to convert to intermodal: an estimated
2.8 million trucks move cross-border each year
Sources: AlixPartners and company data |
 20
Integration of Intermodal Is Driving Results
Strong value proposition as a large, single-source supply chain
partner with deep capacity
Energetically cross-selling intermodal to XPO customer base,
and selling full service range to intermodal customers
New Rail Optimizer technology platform in beta test
$15 million of targeted cost synergies largely realized
Source: Company data |
 21
Rebranded as XPO Last Mile
Largest provider of last-mile logistics for heavy goods home
delivery in North America
Facilitates approximately eight million last-mile deliveries
per year
Leading, proprietary software for workflow and customer
experience management
Strong customer-centric culture built by experienced leaders
who now run the business for XPO
Acquired 3PD in August 2013
Source: Company data |
 22
XPO Last Mile serves one of the fastest-growing sectors of
non-asset, third party logistics
–
Heavy goods home delivery
growing at five to six times GDP
–
Strong tailwinds from e-commerce and outsourcing
$13 billion market for heavy goods home deliveries
–
Only 30% currently going through 3PLs
Highly fragmented with many small, regional providers
Last Mile’s Expansive Market Potential
Sources: Norbridge, Inc. and EVE Partners LLC |
 23
Capitalizing on major advantages of scale and growing
–
Cost efficiencies, productivity, access to trucks, rigorous
quality control systems, expertise
Acquired Optima Service Solutions in November 2013
–
Highly scalable supplier, leading arranger of last mile
installations of large appliances and electronics
Acquired ACL in July 2014 and UX in February 2015
–
Expanded business with blue chip customers in retailing
and e-tailing
XPO Has a Strong Platform for Last Mile
Source: Company data |
 24
Rebranded as XPO NLM
#1 web-based expediter, made XPO the #1 manager of
expedited shipments in North America
Manages an annual run rate of more than three quarters of a
billion dollars of gross transportation spend
–
Online auction system proprietary to XPO
–
Carriers bid on loads that are awarded electronically
Benefits from trend toward just-in-time inventories, and
supply chain disruptions
Acquired NLM in December 2013
Source: Company data |
 25
Focused Sales and Marketing Effort
Differentiate XPO by providing a passionate commitment to
customer satisfaction across a range of services
Single point of contact for each customer
–
Strategic accounts team marketing to largest 2,000 shippers
–
National accounts team focused on next largest 5,000 shippers
–
Branch network expands our reach to hundreds of thousands of
small and medium-sized shippers
Capture more of the $32 billion less-than-truckload opportunity
72% of top 50 customers are using multiple XPO services
Sources: SJ Consulting Group, Inc., company data |
 26
One common IT platform for freight brokerage in all cold-starts
and acquired companies
Proprietary freight optimizer tools for pricing and load-covering
put in place in 2012
Highly scalable load execution and tendering via automated
load-to-carrier matching
Total IT budget of approximately $125 million for 2015
Increasing Productivity through Technology |
 27
23 cold-starts
–
12 freight brokerage; 10 freight forwarding; one expedited
Freight brokerage cold-starts on an annual revenue run rate of
more than $250 million
Up from $120 million 12 months ago
Low capital investment can deliver outsized returns
Hire strong industry veterans as branch presidents
Position in prime recruitment areas and scale up
Growth through Cold-starts
Source: Company data |
 28
Founded and led four highly successful companies,
including world-class public corporations
United
Rentals:
Built
world’s
largest
equipment
rental
company
United
Waste:
Created
5th
largest
solid
waste
business
in
North
America
Hamilton
Resources:
Grew
global
oil
trading
company
to
~$1
billion
Amerex
Oil
Associates:
Built
one
of
world’s
largest
oil
brokerage
firms
United Rentals stock outperformed S&P 500 by 2.2x from 1997 to 2007
United Waste stock outperformed S&P 500 by 5.6x from 1992 to 1997
CEO Bradley S. Jacobs |
 29
Highly Skilled Management Team
Partial list
The full management team can be found on www.xpologistics.com
Troy Cooper
Chief Operating Officer
Greg Ritter
Senior Vice President, Strategic Accounts
Dominick Muzi
President, Freight Forwarding division
Julie Luna
Chief Commercial Officer
John Hardig
Chief Financial Officer
Mario Harik
Chief Information Officer
Paul Smith
President, Intermodal division
Karl Meyer
Chief Executive Officer, XPO Last Mile
Louis DeJoy
Chief Executive Officer, New Breed
Scott Malat
Chief Strategy Officer
Gordon Devens
General Counsel
United Rentals, United Waste
Knight Brokerage, C.H. Robinson
Pacer International, Union Pacific
Stifel Nicolaus, Alex. Brown
Oakleaf Waste Management
Pacer International
3PD, Home Depot
AutoNation, Skadden Arps
Goldman Sachs, UBS, JPMorgan Chase
New Breed Logistics
CGL, Priority Solutions Int., AIT Worldwide |
 30
Deep Bench of Industry Experience Partial list
Tom Connolly
Senior Vice President, Acquisitions
Drew Wilkerson
Regional Vice President
Doug George
Regional Vice President
Jim Commiskey
Strategic Accounts Manager
Dave Rowe
Chief Technology Officer
Jenna Sargent
Regional Sales and Operations Manager
Will O’Shea
Chief Sales and Marketing Officer, XPO Last Mile
Bud Workmon
President, XPO Last Mile
Chris Duffell
Vice President, Strategic Initiatives
Jake Schnell
Sr. Operational Process and Integration Manager
Lou Amo
Vice President, Operational Initiatives
Echo Global Logistics
EVE Partners
C.H. Robinson
AFN, Ryder Integrated Logistics
Pacer International, UPS, Menlo
OHL, Schneider Logistics
3PD, Ryder Integrated Logistics, Cardinal Logistics
Electrolux, Union Pacific, Odyssey Logistics
United Rentals
C.H. Robinson
3PD, Cardinal Logistics |
 31
4Q Results Exceeded Expectations
Achieved year-end 2014 targets for an annual revenue run rate of at least
$3 billion and an EBITDA run rate of at least $150 million
EBITDA ($ millions)
(2)
Revenue ($ millions)
+223% YOY
(1)
$39 to $42
$825 to $835
(1)
Based on the midpoint of pre-released results
(2)
For a reconciliation of EBITDA to GAAP net loss, see Appendix
$0.3
Q4 '13
Q4 '14
$257
Q4 '13
Q4 '14 |
 32
$45
$55
$71
$109
$114
$137
$194
$245
$295
$581
$662
$830
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
First 36 Months of Growth Strategy
2012
2013
2014
(1) Q4 2014 based on the midpoint of pre-released $825-$835 million in
revenue (1)
Revenue ($ millions) |
 33
Incentivized XPO Management
Equity ownership aligns management team with shareholders
Management and directors own approx. 22% of the company
(1)
Based on SEC beneficial ownership calculation as of September 30, 2014; includes
22.8 million shares issued pursuant to the September 2014 private placement
of common stock (2)
Dilutive effect of warrants calculated using treasury method (using XPO closing
price of $37.67 on September 30, 2014); total warrant proceeds of $74.0
million (3)
Assumes conversion in full of $120.7 million in aggregate principal amount of
4.50% convertible senior notes due 2017 outstanding at September 30, 2014
(4)
Dilutive
effect
of
RSUs
and
stock
options
outstanding
at
September
30,
2014,
calculated
using
treasury
method
(using
XPO
closing
price
of
$37.67
on
September 30, 2014)
Common Stock Equivalent Capitalization as of 9/30/14
Common Shares
76.6 million
(1)
Preferred Shares
10.5 million
Warrants (Strike Price $7 per share)
10.6
million
(8.6
million
dilutive)
(2)
Convertible Senior Notes
7.3
million
shares
(3)
Stock Options and RSUs
2.6
million
shares
dilutive
(4)
Fully Diluted Shares Outstanding
105.7 million shares |
 34
Significant growth embedded in XPO’s business model
Leading positions in fastest-growing areas of transportation
Compelling value proposition as a multi-modal, single-source
provider
Passionate culture of on-time performance and productivity
Top management talent with skills that uniquely fit XPO’s
growth strategy
Clear Path for Significant Value Creation |
 35
Three Months
Ended
December 31,
2014
Range:
From
To
Net loss available to common shareholders
$(55.3)
$ (49.3)
Preferred dividends
0.7
0.7
Non-cash accounting preferred stock beneficial conversion charge
40.9
40.9
Net loss
(13.7)
(7.7)
Interest expense
16.7
16.7
Income tax expense (benefit)
1.0
(4.0)
Other depreciation and amortization
34.0
35.0
EBITDA
$ 38.0
$ 40.0
Transaction and integration costs
1.0
2.0
XPO Express and XPO Last Mile rebranding costs
—
—
Adjusted EBITDA
$ 39.0
$ 42.0
The following table reconciles management’s estimated net loss available to
common stockholders for the three months
ended
December
31,
2014,
to
management’s
estimate
for
adjusted
EBITDA
for
the
same
period.
Appendix
Reconciliation of Non-GAAP Measures
XPO Logistics, Inc.
Consolidated Reconciliation of EBITDA to Net Loss
(In millions) |