Management Presentation May 1, 2014 Exhibit 99.2 |
2 Forward-Looking Statements Disclaimer 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 the company’s full year 2014 and full year 2017 financial targets and expected cost synergies from the Pacer integration. 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, but are not limited to, 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 acquisitions, including the expected impact on XPO’s results of operations; XPO’s ability to raise debt and equity capital; XPO’s ability to attract and retain key employees to execute its growth strategy; 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 businesses’ largest customers; XPO’s ability to successfully integrate acquired businesses and realize anticipated synergies and cost savings; 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. |
3 One of the Largest 3PLs in North America We facilitate over 25,000 deliveries per day Sources for rankings: Transport Topics, Journal of Commerce and company data #4 freight brokerage firm and Top 50 logistics company #3 provider of intermodal services #1 provider of cross-border Mexico intermodal #1 manager of expedited shipments #1 provider of last-mile logistics for heavy goods International and domestic freight forwarder Growing presence in managed transportation and LTL |
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 continue to be on track or ahead of plan with all three legs of our growth strategy |
5 Completed 11 strategic acquisitions and established 24 cold-starts in two 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 |
6 Massive Commitment to Shipper Satisfaction Integrated network across North America with global reach – Primarily in the manufacturing, industrial, retail, food and beverage, commercial, life sciences and government sectors 123 locations in the U.S., Canada, Mexico, Asia and Europe Approximately 3,000 employees Over 14,000 customers More than 1,000 owner-operator trucks under contract for drayage and expedited subsidiaries Relationships with an additional 26,000 vetted carriers |
7 Significant Growth Embedded in XPO’s Model Strategic accounts: market 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 IT Supply chain offering: build leadership positions in the fastest-growing areas of logistics Performance: become the logistics partner of choice due to our relentless focus on on-time pickup and delivery M&A program: focus on the top 100 pipeline prospects |
8 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 |
9 Comprehensive North American Network Source: Company data 123 locations Approximately 3,000 employees Over 26,000 active, vetted carriers Access to 60,000 miles of network rail routes |
10 Acquired Pacer in March 2014 Provides instant scale in the $15 billion intermodal sector, the fastest-growing freight mode in North America – Third largest provider of intermodal services – Largest provider of cross-border Mexico intermodal Enhances XPO’s value proposition as a large, single-source supply chain partner with deep capacity Creates company-wide cross-selling opportunities in every area of XPO service Access to 60,000 miles of network rail routes Sources: SJ Consulting Group, Inc., American Trucking Associations and company data |
11 Largest provider of heavy goods, last-mile logistics in North America High value, high margin business, growing rapidly due to e-commerce and outsourcing Strengthens XPO’s position with shippers as a large, single-source provider Industry-leading customer experience IT can be used by XPO Acquired Optima Service Solutions in November 2013 – Highly scalable supplier to 3PD, leader in last-mile delivery of large appliances and electronics Acquired 3PD in August 2013 |
12 XPO NLM is the largest manager of expedited shipments in North America Acquired NLM in December 2013 #1 provider of web-based transportation management for expedited Managing over $1 billion of annual 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 |
13 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 companies – 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 Sources: SJ Consulting Group, Inc., company data |
14 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 more than $70 million for 2014 (1) Increasing Productivity through Technology (1) Includes IT budget for Pacer |
15 24 cold-starts – 11 in freight brokerage, including Kansas City opened in March; 12 in freight forwarding; one in expedited Brokerage cold-starts on an annual revenue run rate of more than $190 million – Nearly triple the run rate 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 |
16 Founded and led four highly successful companies, including world-class public corporations Amerex Oil Associates: Built one of world’s largest oil brokerage firms Hamilton Resources: Grew global oil trading company to ~$1 billion United Waste: Created 5th largest solid waste business in North America United Rentals: Built world’s largest equipment rental company United Waste stock outperformed S&P 500 by 5.6x from 1992 to 1997 United Rentals stock outperformed S&P 500 by 2.2x from 1997 to 2007 CEO Bradley S. Jacobs |
17 Highly Skilled Management Team Partial list The full management team can be found on www.xpologistics.com Sean Fernandez Chief Operating Officer Tom Connolly Senior Vice President, Acquisitions Karl Meyer Chief Executive Officer, 3PD division Julie Luna Chief Commercial Officer John Hardig Chief Financial Officer Lou Amo Vice President, Carrier Procurement Dave Rowe Chief Technology Officer Mario Harik Chief Information Officer Gordon Devens General Counsel Scott Malat Chief Strategy Officer Troy Cooper Senior Vice President, Operations and Finance NCR, Avery Dennison, Arrow Electronics EVE Partners Pacer International, Union Pacific Stifel Nicolaus, Alex. Brown Electrolux, Union Pacific, Odyssey Logistics Echo Global Logistics Oakleaf Waste Management United Rentals, United Waste Goldman Sachs, UBS, JPMorgan Chase AutoNation, Skadden Arps 3PD, Inc., Home Depot |
18 Deep Bench of Industry Experience Partial list Jake Schnell Sr. Operational Process and Integration Manager Jenna Sargent Regional Sales and Operation Manager Marie Fields Director of Training Evan Laskaris Director of Operations, Chicago Chris Healy President, Expedited Transportation Jim Commiskey Strategic Accounts Manager Gregory Ritter Senior Vice President, Strategic Accounts Doug George Branch President, Dallas Will O’Shea Chief Sales and Marketing Officer, 3PD division Andrew Armstrong Sales and Operations Manager Drew Wilkerson Branch President, Charlotte Boyd Brothers, Caliber Logistics, Roberts Express C.H. Robinson OHL, Schneider Logistics C.H. Robinson, American Backhaulers AFN, CEVA Logistics, Menlo Pacer International, UPS, Menlo Knight Brokerage, C.H. Robinson AFN, Ryder Integrated Logistics Livingston International, Echo Global Logistics C.H. Robinson Ryder Integrated Logistics, Cardinal Logistics |
19 Revenue trajectory – 2011 revenue of $177 million – Currently at approximately $2 billion annual revenue run rate 1Q growth company-wide, 2014 vs. 2013 – Organic growth up 51% – Gross revenue up 148% – Net revenue up 259% Revenue and Margin Growth Source: Company data Revenue ($ millions) +148% $114 $282 Q1 2013 Q1 2014 |
20 Key Financial Statistics Expedited Transportation Freight Brokerage Freight Forwarding +196% +42% +20% 1Q revenue growth by business unit, 2014 vs. 2013 Organic growth up 75% 34% margin, up from 16% 48% increase in operating income Revenue ($ millions) $78 $232 Q1 '13 Q1 '14 $24 $34 Q1 '13 Q1 '14 $16 $20 Q1 '13 Q1 '14 |
21 First 27 Months of Growth Strategy Source: Company data Revenue ($ millions) 2012 2013 2014 $45 $55 $71 $109 $114 $137 $194 $257 $282 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 |
22 Full year 2014 Annual revenue run rate of at least $2.75 billion by December 31 Annual EBITDA run rate of at least $100 million by December 31 At least $400 million of acquired historical annual revenue, excluding the Pacer acquisition Full year 2017 Revenue of $7.5 billion EBITDA of $425 million Financial Targets |
23 Incentivized XPO Management Equity ownership aligns management team with shareholders Management and directors own approx. 29% of the company (1) Common Stock Equivalent Capitalization as of 4/30/14 Common Shares 52.5 million Preferred Shares 10.5 million Warrants (Strike Price $7 per share) 10.6 million (7.8 million dilutive) (2) Convertible Senior Notes 7.3 million shares (3) Stock Options and RSUs 2.3 million shares dilutive (4) Fully Diluted Shares Outstanding 80.4 million shares Based on SEC beneficial ownership calculation as of April 30, 2014 Dilutive effect of warrants calculated using treasury method (market close price of $27.14 as of 4/30/14); total warrant proceeds of $74.0 million Assumes conversion in full of $120.7 million in aggregate principal amount of outstanding 4.50% convertible senior notes due 2017 As of April 30, 2014, dilutive effect of outstanding RSUs and stock options calculated using treasury method (market close price of $27.14 as of 4/30/14) (1) (2) (3) (4) |
24 Significant growth embedded in XPO’s business model Leading positions in fastest-growing areas of transportation Compelling multi-modal value proposition for shippers of all sizes Passionate culture of on-time performance and productivity Top management talent with skills that uniquely fit growth strategy Positioned as an irreplaceable, single-source provider Clear Path for Significant Value Creation |