XPO to Acquire New Breed Completes Acquisition of ACL July 29, 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. 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 of New Breed and ACL, including the expected impact on XPO's results of operations; the ability to obtain the requisite regulatory approvals and the satisfaction of other conditions to consummation of the New Breed transaction; 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 New Breed’s and ACL’s 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 New Breed, ACL 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. |
3 One of the Largest 3PLs in North America We facilitate over 31,000 deliveries per day #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 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 ahead of plan in transforming XPO Logistics into a leading multi-modal supply chain provider |
5 Completed 12 strategic acquisitions and established 23 cold-starts in less than 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 |
6 Massive Commitment to Shipper Satisfaction Integrated network with cross-company visibility 148 locations in the U.S., Canada, Mexico, Asia and Europe Approximately 3,100 employees Relationships with an additional 27,000 vetted carriers Access to 60,000 miles of network rail routes More than 3,600 owner-operator trucks under contract for drayage, expedited and last mile subsidiaries New Breed will add approximately 6,800 employees and 71 locations |
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 Major Coverage: U.S., Mexico and Canada Source: Company data Serving over Manufacturing Retail Commercial Life Sciences Food and Beverage Governmental 14,000 customers |
10 Planned Acquisition of New Breed Compelling reasons for the transaction Will be transformational for XPO’s scale and value proposition – Combined company of approximately 10,000 employees and over 200 locations – Most differentiated supply chain offering for end-to-end solutions Capitalizes on trend toward outsourcing reverse logistics, transportation management, lean manufacturing and aftermarket support, and other contract logistics services Will create significant cross-selling opportunities with XPO strategic accounts, New Breed customers and their vendors Source: XPO Logistics and New Breed company data |
11 New Breed Is a Preeminent Provider Leads the most desirable sector of contract logistics Complex, highly engineered solutions for blue chip customers – Very stable relationships with low cyclicality Focuses on high-growth industries – Technology, telecom, e-commerce, aerospace and defense, medical equipment and select areas of manufacturing 16% revenue CAGR for the past 10 years Sources: New Breed company data Operations will continue to be led by Louis DeJoy, New Breed’s visionary CEO |
12 New Breed’s Attractive Financial Model Lucrative non-asset based model in line with XPO’s strategy 19% adjusted EBITDA CAGR over the past 10 years 38% return on invested capital (FY 2013) (1) 71% free cash flow conversion (FY 2013) (2) Approximately 99% contractual revenue renewal rate over the past three years Low capex requirements (4.2% of revenue in FY 2013) and largely devoted to IT development (1) Free cash flow conversion equals EBITDA minus capex, divided by EBITDA. (2) Return on invested capital equals ongoing operations EBIT divided by the sum of net working capital and net PP&E. Source: New Breed company data |
13 Industry-defining Technology Integration of proprietary IT will create strong differentiation Combination of two robust managed transportation solutions – XPO NLM is the largest web-based manager of expedited shipments in North America – New Breed’s transportation management system uses sophisticated tools for dynamic freight optimization, routing guide management and carrier selection – XPO will gain over 300 IT professionals from the combination, doubling XPO’s IT workforce Sources: XPO Logistics and New Breed company data |
14 Details of the New Breed Transaction $615 million cash purchase price Adds approximately $597 million of revenue and $77 million of adjusted EBITDA (trailing 12 months ended June 30, 2014) Multiple of approximately 8.0 times trailing 12 months adjusted EBITDA XPO has obtained committed transaction financing from Credit Suisse AG, Morgan Stanley Senior Funding, Inc., Citigroup Inc. and Deutsche Bank AG for a total of up to $645 million in senior secured term loan facilities Transaction is expected to close in Q3 2014, subject to satisfaction of customary closing conditions |
15 Acquisition of Atlantic Central Logistics Compelling reasons for the transaction Non-asset, multi-regional, last mile logistics provider Pipeline still active for last mile acquisitions Moves high volumes of e-commerce purchases for mega-companies Adds approximately 160 employees, 14 locations and 650 contracted trucks to XPO Complementary delivery schedules allow XPO Last Mile to leverage combined capacity |
16 Details of the ACL Transaction $36.5 million cash purchase price Multiple of approximately 5.9 times trailing 12 months adjusted EBITDA Adds approximately $63 million of revenue and $6.2 million of adjusted EBITDA (trailing 12 months ended June 30, 2014) Transaction completed July 28, 2014 |
17 Acquired Pacer in March 2014 Gained instant scale in North American intermodal – Third largest provider of intermodal services – #1 provider of 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 One of the fastest-growing areas of transportation logistics Enables shippers to lower transportation costs for freight traveling 600 miles or more Sources: SJ Consulting Group, Inc., FTR Associates and company data Growing at three to five times GDP Rail is more fuel-efficient than truckload for long haul Intermodal can lower shipper’s cost by up to 20% Growing at three to five times GDP |
19 High-Growth Cross-Border Mexico Sector Mexico is fast becoming the manufacturers’ country of choice for near-shoring – Competitively priced labor force – 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 covert 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 XPO now manages approximately 10% of all domestic intermodal loads in North America Stronger 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 Q2: intermodal revenue up 11.7% and volume up 7.5% YOY On track to realize $15 million of targeted synergies from integration 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 7 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 Exciting 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 Atlantic Central Logistics in July 2014 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 |
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 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 |
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 more than $70 million for 2014 (1) Increasing Productivity through Technology (1) Includes full year IT budget for Pacer |
27 23 cold-starts – 11 in freight brokerage, including Kansas City opened in March; 11 in freight forwarding; one in expedited Freight brokerage cold-starts on an annual revenue run rate of more than $220 million – Up from $90 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 |
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 Paul Smith President, Intermodal division Karl Meyer Chief Executive Officer, XPO Last Mile Chris Healy President, Expedited Transportation John Hardig Chief Financial Officer Tom Connolly Senior Vice President, Acquisitions Dave Rowe Chief Technology Officer Mario Harik Chief Information Officer Julie Luna Chief Commercial Officer Scott Malat Chief Strategy Officer Gordon Devens General Counsel United Rentals, United Waste Pacer International Boyd Brothers, Caliber Logistics, Roberts Express Stifel Nicolaus, Alex. Brown EVE Partners Echo Global Logistics Oakleaf Waste Management AutoNation, Skadden Arps Goldman Sachs, UBS, JPMorgan Chase Pacer International, Union Pacific 3PD, Inc., Home Depot |
30 Deep Bench of Industry Experience Partial list Lou Amo Vice President, Operational Initiatives Jake Schnell Sr. Operational Process and Integration Manager Jenna Sargent Regional Sales and Operation Manager Evan Laskaris Director of Operations, Chicago Bud Workmon President, XPO Last Mile Jim Commiskey Strategic Accounts Manager Greg Ritter Senior Vice President, Strategic Accounts Doug George Branch President, Dallas Will O’Shea Chief Sales and Marketing Officer, XPO Last Mile Andrew Armstrong Sales and Operations Manager Drew Wilkerson Branch President, Charlotte 3PD, Inc., Cardinal Logistics Electrolux, Union Pacific, Odyssey Logistics C.H. Robinson OHL, Schneider Logistics 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 3PD, Inc., Ryder Integrated Logistics, Cardinal Logistics |
31 Revenue trajectory – 2011 revenue of $177 million – Currently at approximately $2.3 billion annual revenue run rate Q2 growth company-wide, 2014 vs. 2013 – Organic growth up 49% – Gross revenue up 324% – Net revenue up 530% Organic growth in freight brokerage up 67% Revenue and Margin Growth Gross Revenue ($ millions) +324% $137 $581 Q2 '13 Q2 '14 |
32 Key Financial Statistics Expedited Transportation Freight Brokerage Freight Forwarding Q2 Revenue Growth by Business Unit, 2014 vs. 2013 Revenue ($ millions) +417% +37% +180% $95 $493 Q2 '13 Q2 '14 $26 $36 Q2 '13 Q2 '14 $19 $54 Q2 '13 Q2 '14 |
33 First 30 Months of Growth Strategy 2012 2013 2014 Revenue ($ millions) $45 $55 $71 $109 $114 $137 $194 $257 $282 $581 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 |
34 Full year 2014 Annual revenue run rate of at least $3 billion by December 31 Annual EBITDA run rate of at least $150 million by December 31 Full year 2017 EBITDA of at least $425 million Financial Targets |
35 Incentivized XPO Management Equity ownership aligns management team with shareholders Management and directors own approx. 29% of the company (1) (1) Based on SEC beneficial ownership calculation as of June 30, 2014 (2) Dilutive effect of warrants calculated using treasury method (avg. closing price of $26.41 for the 3 months ending 6/30/14); total warrant proceeds of $74.0 million (3) Assumes conversion in full of $120.7 million in aggregate principal amount of outstanding 4.50% convertible senior notes due 2017 (4) Common Stock Equivalent Capitalization as of 6/30/14 Common Shares 52.6 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 1.2 million shares dilutive (4) Fully Diluted Shares Outstanding 79.4 million shares Dilutive effect of outstanding RSUs and stock options calculated using treasury method (avg. closing price of $26.41 for the 3 months ending 6/30/14) |
36 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 |