XPO Logistics (XPO) 8 Feb 182017 Q4 Earnings call transcript

Company Profile

Participants

Brad Jacobs	Chief Executive Officer and Chairman
John Hardig	Chief Financial Officer
Scott Malat	Chief Strategy Officer
Ravi Shanker	Morgan Stanley
Brandon Oglenski	Barclays
Amit Mehrotra	Deutsche Bank
Chris Wetherbee	Citi
Jason Seidl	Cowen and Company
Scott Schneeberger	Oppenheimer & Company
Kevin Sterling	Seaport Global
Allison Landry	Credit Suisse
Brian Ossenbeck	JPMorgan
Matt Reustle	Goldman Sachs
Jack Atkins	Stephens
Ariel Rosa	Bank of America
Bascome Majors	Susquehanna

Call transcript

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Operator

Welcome to the XPO Logistics Fourth Quarter 2017 Earnings Conference Call and Webcast. My name is Rob, and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded.

let company a the regarding non-GAAP measures. begins, behalf statement use call financial the of forward-looking the me brief read on of Before statements and

factors actual within company by differ which nature materially could differ SEC is earnings results in factors extent involve that the in risks, filings. forward-looking no projected this certain During that securities as of contained The their will the number made law. from has A and by call, of to Company’s applicable required those company only the call obligation or forward-looking these results statements the this discussion forward-looking of update materially to except statements uncertainties the to a could meaning laws, the of the actual of today make are made cause to forward-looking statements. Company’s other statements release cause and on in any

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Brad Jacobs

Strategy Greenwich everybody. Scott our are of Headley, call. and our me operator, Malat, Officer; in earnings our Tavio CFO; morning, Relations. good Head joining Hardig, for and Investor you, Thank our Chief Thanks John With

our board, was brought XXXX. Adjusted very was we free beats least of which of $XXX and That for XX%. $XXX from flow. two-year year-over-year the cash and above cash just at cash cumulative and delivered contract of million. by acceleration $XXX with results XXXX We the we services. target we momentum on XX% That’s EBITDA Because plan, signed in the saw revenue to tax and of XX.X%. America, last across we finish to quarter free company-wide, for and million. free you XXXX the release, for In $X.XX of grew in We had our in to EPS, an target we revenue, EBITDA record mile revenue brokerage year, fourth approximately flow new quarter In quarter business. $X.X increased logistics adjusted transportation we million posted at we As million our to generated a grow $XXX target. increase press strong flow of the benefit reform, organic North billion a business XXXX continue saw above our demand us from Europe, our our In transportation billion. raised for XXXX, growth billion robust the freight $X our XX%. segment, We to compared in by

in investments at force Our immediately, $X.X long-term More and technology billion, effectiveness excellent off an dividends. we’re ongoing sales XXXX, and pipeline stands pay healthy our will to global start. a sales in

numbers that by ability review in note, another EBITDA this our confident adjusted And more year. ask in at detail. quarter fourth least grow the XX% We’re to to on John I’ll John?

John Hardig

by renewal to in the income accelerated pricing the X.X% and to selectively X.X% yield increased $XXX million years. Tonnage primarily, American million. improvement to third we revenue segment: partially increased X.X% billion. $XXX profitable adjusted and fourth to XX% transportation Contract best our targeting our points, with XX Starting OR operating Operating In more less-than-truckload, EBITDA to XX to grew by increased in XX% quarter. the adjusted offset X.X% XX% basis quarter, due, ratio XX.X%, by we sequentially in year-over-year, accelerated North freight. to $X.X Brad. quarter improved heavier-weight versus shipments, Thanks,

load to our our years age to We the utilize in by continue X.X reduction and fleet, from make better years factor fleet year. and as from investments X.X in of – improvement X.X% our X.X last shown

and XXXX. For exceptional holiday ratio had year, to another mile, started network. mile of revenue demand, solid e-commerce basis earnings by XX% we growth in the brokerage, to growth. handle a amount to another by last we eight sites improve locations carried grew XXX quarter tight the and points open the we we improved we We year. launched XXX additional delivered North to that The this revenue quarter basis full freight both quarter, driving third strong a The season in robust operating points, spot drove expect our XXX significant fourth, XX% in of XX the into points basis increased fourth market expect last and in year-over-year. customer In American In business.

of of dedicated year, by growth from posted in business care was brokerage steadily across driven the revenue accelerated an customers continued XX% transport almost and due foreign organic approximate year. into of We revenue into technology our and market. to brokerage customer the France. growth truck France, and in a XX% UK and benefit solid with year in capacity fourth in saw solid exchange. LTL our increases revenue grew Europe, we Intermodal carried through the and during transportation our Revenue Spain Organic in peaked the the growth operations. quarter took growth good European X% We this XXXX. XX%. We at using January. volume end increased trends find had to Our challenging performance in large wins by The also

to off. Our take is mile European last business starting

UK, actively Ireland, Spain completed mile week. in just last now and goods’ the first France deliveries facilitating Netherlands, we in delivery heavy and the We’re last our

million. XX% Total continues XX% well. increased increased Logistics $XXX million increased $X.X EBITDA logistics Operating to to income $XX Our XX% segment adjusted revenue billion. to perform to and by

strong we’re averaging implementations America Globally, In year. logistics billion pipeline contract majority of week. Europe to vast front-loaded investments The and contracts. and two sales are at exceptionally long-term $X.X in billion per Our last logistics these compared remains North we organic logistics, XX% benefit XX% managed extremely growth exchange. in revenue We peak operations quarter, solid foreign grew grew an approximate service in revenue over and by from the through well through business season. X% and our e-commerce and $X.X European

During the Spain. in Black Friday and the Italy holiday UK, we strongest growth and e-commerce peak, saw Netherlands, the

followed We American revenue our approximately The growth We In also cold X%, drove contract goods. revenue the largest revenue logistics, packaged offset in in e-commerce our industrial transportation. and consumer came gains logistics accelerated business. business double-digit revenue decline X% by chain growth in managed increased quarter. in North by to from

wins clear growth of have sales we year, our new Given last sales visibility in XXXX.

quarter rates win ramps of project the this XX% lower Our was last down, loan of benefit year to term cross-currency year. million due swaps. $XX that end Interest re-pricings our quarter at at the to for our pay expense of biggest and decreased the a debt first the up

We XXXX, expect $XXX interest $XXX in non-cash. of In $XX $XXX million will million. Net year. $XX CapEx expense for to quarter planning to the of CapEx to $XXX in of be and million million million, the million we’re was $XXX net million XXXX which, $XX million

and our we primarily expect approximately strong lower Our In of free cash working flow due flow CapEx, quarter cash XXXX, to cash net offset $XXX healthy $XXX to fourth growth. was partially million, higher free capital million, operations $XXX support was flow a million. by from usage

positive our XX,XXX performance in to results pleased Given XXXX, roughly paying bonuses employees. be we’re to

expect As in a to flow previous result cash of as we quarter, same in years. free negative that, be the first

XXXX. amortization expense depreciation million expect and modeling range to we For purposes, $XXX of in million a $XXX in be to

a tax XX% to forecasting approximately rate XX% $XXX are and million. cash taxes book of of We

increase that, it over adjusted I’ll we to our of guidance $X.X of With Finally, XX%. Scott. reaffirmed turn full EBITDA a billion, year year-over-year

Scott Malat

conditions Thanks, in market with both and North John. are America Starting the macro: positive Europe.

and come of our in it mile. contract XX%, logistics up XXXX, wave approximately our by continued future This the In feeling business their sales. are business online makes chose holiday stickiness strong new We’ve related boom moves a record growth e-commerce of is for now online. to buyers in when and of e-commerce, XXXX, sets for well a a outlook grew e-commerce behavior. purchases and bodes shopping, about retail to customers just company-wide growth. Our we to last consumers in XX% which confident make number our off it When stage

dynamics. can We’re on market these doing get We’ve our a capabilities. up sales benefit increasingly in positive that efforts to amped our customers to lot capitalize of high-potential from front

time Europe, sales new raised XX compensation In talent next sales to analytics serving lines business. people the Our deepen entire in structure We’ve January, focus our we’re strength people profitable logistics on our our to adding want of our customers North programs, senior-level added XXX% organization up over sales American built our be bench LTL, incentive we of emphasis In invested December XX continues another transportation. we capabilities. and in all training and reorganized with large We up beefed both their sales of of multiple sales XX new and support, we to sales in on and to growth. and days.

We performing and the business pipeline in opportunities. wins, dedicated cross-selling team analysis mix changes have to a global extensive new on

is sales propelling huge that’s us. proprietary differentiator is for thing our Another which technology, our a

technology supply choose as of partner. reasons customers a one is Our chain the main XPO

example, additional data only build reason to future with In help our customers superior costs, big our brands. logistics also This these We but predictive not information a experience bring and provide their down forecast developed own critical, to to analytics inventory and this for and consumer demand. models. to mile, satisfaction who customers, our and plan for retail and e-tailers e-commerce last returns can customer we’ve levels. example, industry-leading is minimize machine-learning trust loyalty. is For web-based We us their a technology use protect analyze and retailers sales, generate use

something alerts reschedule from time, using customers your our electronically real one our set in software. you track personalized times you If delivery order buy can online, of and

goods. tight able which is heavy to offer We’re especially installations. delivery windows, home complex important And facilitate with technology our is most geared the to

We’ve business, March. delivery customers It’s technologies. gathers time we’ll a dramatically on proprietary and warehouse customer ramp-up chain supply integrates for on example, with robotics, build very be what other technology new able this is the competitive going our mobile, we’re We’ll million on platform also already you If innovations tools the quickly the It’s those help to we to after for system. actionable host year loyalty. reduce a a projects. a system a in throughout next-generation be kinds rolling feedback over budget an XXXX. advantage. it launch very at new calls to gives fraction of for our out supply that rapid plan robots to bullish real-time Our build management our In to our the chain we’re completely enormous time apps to typical online warehouse $XXX of deploying This management upped flavor bring of of and in pace.

can and adjusted of ago. strengths fourth even investments while by business significant these meet double-digit growing the long-term up truckload quarter, exclude of more business profitability In accelerate our great One growth, still faster robust year-over-year, XX%, that our than continue the divested the organic achieved is we revenue. when from we and year to XX.X% an growth model EBITDA you a

on firing we’re cylinders. So all

We’re growing free even fast accelerating value creating faster, flow. cash and while

of doing We’re our opportunities in line significant entire executing business operating by landscape. growth and this across on every

growth the for XXXX. Operator? value delivering open let’s powerful our With long-term that, through we’re we targets generate for making, expect on up Given trajectory, significant Q&A. to while our investments

Operator

you. Thank Instructions] [Operator you. Thank

line Please first question your today Ravi Stanley. question. Shanker Our the from with coming with is proceed of Morgan

Ravi Shanker

Good everyone. morning, Thanks.

take you a and offset of costs. are of clearly, revenue this number dramatically XXXX to changing XXXX conditions see despite plays Or and remained, puts your some are of, free before truck I guidance dramatically in that or largely the – cash flow investment still you takes there, out market, to EBITDA you, you the want because changing uncertainty numbers going there past strength? for the out of highlighted kind have the and the guidance, how up? into kind unchanged maybe Is XXXX. see On expectations that mean, numbers year, the I think, you

that top the that with If us of be will you can through just interacts how kind walk great. line,

Brad Jacobs

Thanks morning. for the question, Ravi. Good

way the get numbers is we those we it So do bottoms up.

our comes and all organization, of $X.X best-case in of EBITDA have worse-case its we that this more aggregate its part every year. likely-case scenario, we its scenario, scenario, tests, to billion that, and pressure or So

XXXX the to of those them. and are year, generating with very we’re XXXX, and them that billion the numbers ones. we XXXX], those let over are the good flow you sharing So numbers. those XX% we reason, EBITDA internal want about they really growing not same going $X have. just the numbers in that But the over If, free cash we’ll that you XXXX another and for XXXX good feel We are [sic: of we’re we and people Those when about change. feel have, about over very know some us change internally good course because change they’re to numbers, change and

Ravi Shanker

Okay, you do X X% that understood. focusing you rates investments investments? the single-digit that what’s just months? payback high going – into to months? growth XX are on beyond, of And pipeline be those you into is and going that kind Is what again, translate or those given immediate? XXXX expect on And continued to to have? X% making,

Brad Jacobs

investing the we’re reasons organic in about short growth. growth did targets point raise two, up is of and future that or The answer did because one we yes. a is our We

through one let’s by those So go one things, one. them of

very XX XX LTL We and people hired are last we’ve days. experiencing so support another market the a favorable sales in LTL

hire XX days. We’re over next the going to XX another

So sales LTL support another by people hired quarter. end the we’ll have first and XXX of the

that’s one investment. So

our Second which we’ve mile few about the one last last been quarters. hub, talking is

last last XX for our mile open fourth growing contract growing business another We’ll customers new from in in fast. XX%. really, business. fourth know, customers the quarter. implementations mile really is We opened mile for that really demand In hubs did Big our in last XX you hubs XXXX. logistics, we the quarter. It’s As eight

XXXX, customers. week then to in investing as the now averaging million customers area board. technology, a over is on start and And we’re and invest our our a though fourth is earnings, the about for in we’re temporary investing So that’s even sauce, be growth, two we’re may long-term our across for short-term year secret our drag which happy it is benefiting advantage. $XXX that technology, that which we’re competitive And a we

Ravi Shanker

an can Very discussions you we stand you you can Are you helpful. just And stand do few companies? there? where if us I of M&A Where evolved discussions one or process, Are in final them? lastly there? give a vetting squeeze just on the on update in still with

Brad Jacobs

Something in two those between characterizations.

recall, when last large to in that XXXX. scenario end M&A the be year, market of base-case middle we of complete returned or As acquisitions two would we we the you the one the will said by

growth. that turbocharge that, next very looking much forward track and on achieve still We’re we’re the to to being of our

Ravi Shanker

helpful. Very Thank you.

Brad Jacobs

you. Thank

Operator

with comes next Barclays. line the your questions. from The Brandon proceed Please Oglenski question of with

Brandon Oglenski

Hey, good everyone, morning, my taking and thanks question. for

to guess, year than Ravi’s I asking and So I ago, want hasn’t to to you because growth but Brad, to philosophy question, come moved. thought back be core a lot not like going maybe looks the just is your them it better and a numbers, raise understanding EBITDA we’re behind we

you margin saying as much implicitly that’s guess, I XXXX. don’t So expansion expect in

thinking, growth the in just line answers that Is And more with while then the I are think opportunities we about can to So if guys to heard, that and you correct. and looking future. the want towards leverage me capture that way let’s like, to that’s it? we know it sounds top just

Brad Jacobs

right. entirely That’s

taking the across control. lines, cost absolutely an seeing area line focusing looking our are not we’re out and improvement. that’s unnecessary always seeing, this buoyant culture economy to the on the we’re geographies, growth for we of always continuous have board on the growth. top on all and eye waste, in top take part But business all We’re environment with success line to with out in certainly, capitalizing cost take It’s our We’ll off that, be inefficiencies. of

we’re XX%, line these great XX%, have bottom not you high would Now really are in growth. been we levels of – growth, what the said you line top really, growth, seeing see rightly that

they cash even the even investments: implementation contract LTL higher, that. this seeing growth mile technology. short-term new than for decidedly of XX You’re We in are logistics the investing we higher flow investing – ramp-ups in could the the with people, the hubs be and sales but last year, more XXX long-term

and future short-term for us momentum drag this make amounts gives take to to huge investments, growth years. happy earnings those what happy we’re because that of We’re on is

Brandon Oglenski

then the well. normalized start-up you the is lot XXXX? I think would new in new you called there’s logistics appreciate that’s you Can Okay, And think, margin if talk phrased a implementations, this with guys, that. quarter, of think costs to for quarter what also you how as segment, I you XX and that And logistics? referenced likely pace out you in to in it, is the that continue implementations

Scott Malat

the it’s expect efficiency expect We at operational XXXX. fast Brandon, We to logistics Hey Sure. Scott. improvement. continue to contract in in about do a implementations margins and very do improve It’s business pace. our

So very will that fast pace, on our will see with more impact will but continued side, the a we improvement be opportunities for percentage on some on there with cost we offset that drag margins the than margin.

– Now when road. of money first until a on the margin the contract, new a X-X not target. high a day we look a months when It’s as we are we just from up making sign down

Brandon Oglenski

it. Okay, appreciate

Brad Jacobs

Thank you.

Operator

The next proceed Mehrotra Amit Bank. question line comes your Please of question. with from Deutsche with the

Amit Mehrotra

Hey thanks, question. and thanks taking Brad Hey operator. for team, my

So maybe, a a just different to wanted ask way. follow-up,

Thanks. still margins a result the think bit, a revenue EBIT moderate good for of given could how you drop-through changing incremental is XX% making XX% maybe to as that terms us to you’re a and of of If Scott, these you’ve growth? should previously help of in target? some we investments incremental EBITDA, just about talked that Or about that investments. are the

Scott Malat

than have We good bit little that a a this XXXX. in year actually higher still That’s target.

at growing XX%. you to growth and let’s in organic we’re growing XXXX, X% EBITDA notice, X%, If say,

Amit Mehrotra

Right.

well – end growth, incremental laid previously out. still the the of day, all is be you putting prospective the So margin target at you’re investments going the that to the within the into for that

that So about also Just us Can drop-through – am talk that’s remind flow there talked maybe incremental cash to I capital about working flow how the of well. through because that as cash investments? reading you the terms flows correctly? actually you’ve free in

Scott Malat

it right way. of thinking the You’re

best of getting more cash only the also You’re very we’re the EBITDA the free our with business, increasing more not line. to and we margins worlds we’re dropping because both XX%, flow incremental have high

generally X%, expected of growth in accounts we capital, That have put likely cash XX%, difference payables. and working around XXXX be X% in growth the more free about in into sales capital. XXXX. will of X/X, investments some despite – around to We’ll accounts the So flow from X% receivables to working between

Amit Mehrotra

Okay.

Brad Jacobs

free our free Amit, cash year, year, up XX% was cash XX% in we’re projecting And increase trajectory on million. flow so million. flow to Last the was another $XXX in free cash XXXX million, nice this $XXX flow. to it $XXX

Amit Mehrotra

No, that. has that to I a get of mean, some of do But, that. like cash with some Yes. costs, lot trajectory reform, removal things tax integration I

And to that’s as your question out what’s XXXX into the is, to convert XXXX, into look so beyond from double-digit high-single flow really, the case, free and revenue you digit growth growth, XXXX? if ability cash prospectively XXXX mid-

Scott Malat

digits grow double flow in XXXX. will cash growth beyond solidly Free the

have (sic) You drag to remember, XXXX. cash in taxes us is versus on a XXXX

Amit Mehrotra

Right.

Scott Malat

million. delivering been taxes had have XX% flow about cash have cash going had about despite up. of growth we’re $XXX we’ll less in it than not $XX It’s would million but reform, taxes cash We free tax XXXX, XXXX. been

Amit Mehrotra

that the strategic mile? guess, you of mile on interview I market that last – did in give Thank one you market, big heavy of terms talking any and what’s expect costs from? base maybe in Yes. that Brad, expand On European kind are goods if to trying there of in organically you. And to a And ask a then terms you morning, you acquisition a, it it’s me. is an for grow grow to that business? last And we about can one, just okay? Can I that XPD-type for that’s should the opportunity this start-up

Brad Jacobs

is last mile The European off. business taking

and mile to high in very France, last we what Ireland, in of asking is the logistics goods it, this as increasingly Netherlands. in in service. Customers Demand heavy for responding, providing customers type UK, we’re Spain now for the want. do, are always and We’re

business organically, no did there share big has provider and answer we when – bought few those promise. market So that last in high question, replicate United can some integrated mile is do would your very what grow a that. that ago. addition them States has small here very, we To large very in well, can last that we to acquisitions companies and four mile that business in the is years there’s Europe we But a

Amit Mehrotra

it, Got questions for Thanks so it my taking me. That’s for guys. much okay.

Brad Jacobs

Thank you.

Operator

of Wetherbee with next Citi. from line comes question The Chris the

Chris Wetherbee

thanks. Hey, morning, Good guys.

Brad Jacobs

Good morning.

Scott Malat

Good morning.

Chris Wetherbee

a ask to on little more a wanted outlook. I question specifically bit LTL the

tonnage the do Can you, of sort embedded move of, think XXXX? bit XXX us through helpful, update look? what points maybe to assumptions we get a would the target. on do about as is of, can where pricing So with with for a XXX you too, operating are, ratio you load Kind and I sort factors price. improvement does How wanted some basis of tell of expect sense tonnage? a to you little Just and that? of be XQ-to-date What

Brad Jacobs

recall. the was up the XXXX, was Pricing ratio With has So fourth and quarter. and you yield bit that’s X.X%. XX best basis to into trends third first quarter ratio our on a the improved are to the general of negative that’s contract adjusted quarter. in tonnage on XX.X%, and in OR, up which up our in in fourth operating quarter. in XX if renewals continuing X.X% quarter, operating X.X% Those Tonnage respect been little the years. points accelerated. and also yield was It quarter, in the first the renewals up It contract was X.X% was half from third in the up quarter, X.X%

It points. was utilization our third improved quarter. get the still improve percentage can You factor. load Load up points better That’s about factor in line percentage X.X haul. on and factor asked We by load the X.X more accelerating.

LTL, to years operating two we average in LTL, you in in years LTL, ago to if tractor at solidly are terms year our our put million In just all ago. in age a had income track operating $X X.X X.X years LTL about perspective, last fleets this the within we four generate on improved in – billion look of And almost from than the that, more doubled. so bought XX% we And years. we had income. over to we business year, EBITDA it of And about of when $XXX

So life good. is

Chris Wetherbee

Okay.

And quarter, from so, I how guess, go about through that I of, fourth rough trends the XXXX? top quarter sort the you’re, are first you those mean, talking of looks you continuing as proxies think line of kind

Brad Jacobs

Yes, that’s correct.

Chris Wetherbee

more Okay. and turn just And one over. it then LTL, on I’ll

maybe talk a adds, what these Can of you about Just get the focused the wanted LTL and that here. this out get, the of a on focus to you’re – year and heads bit national XXXX? business. sounds of of and sort the sort as can sales of What initiative bit you’re Scott, these of kind have We’ve kind little that here, thought sort about this local you out mix of sort maybe, of the a – the of adding business rolling the sales It mentioned here. always force addition? you incremental you of what with side can more you structure like some what’s this local some of

Scott Malat

national very our both accounts accounts are local us. important On to and Sure. LTL,

door-to-door tools. market We increased need We account them with We executives. the gave of the need relationships to good cover even very And but gave we large better. have them number accounts, increase increased local we training. to

the on selective type of on. very we’re are freight taking We

increasing some in LTL. much replacing organization expect more to the attractive So where that that’s we are of taking that’s it freight the with freight, in we attractive and network out sales and very continue focus the less

Chris Wetherbee

All right. Thanks for the I appreciate it. Okay. time.

Scott Malat

you. Thank

Operator

line proceed comes the Our Cowen your question questions. next Company. Seidl with from with Please of Jason and

Jason Seidl

good Thanks, team, morning. Brad, Hey operator. hey

mark. at at Obviously, and we up should How think e-commerce the growth have going rate. to forward? your sort business, XX%. a customers? growth going the beyond to existing But of I look business, going certain retail-related a it’s we’re of forward it goal you generally looking probably percentage outpace business? about your, to follow of percent are push going demands get an of there was Or Just XX% internal so of, at Obviously, healthy that you’re to to going said the it to your that – you just is

Brad Jacobs

per to demand, not a It’s goal, It’s a responding bit. proactive growing business and just is quite a goal, the Jason. se,

at a whole the If XX% with of doubt, customers, grew last that’s fastest-growing over versus you throughout organization, look e-commerce company-wide, previous as customer. our without year type year. Those the us

course both couple advantage is in and XX% sales, of next So lot in about of bit take we’re over the great well is natural That’s demand of growing of would years anything due not just there. to of of company-wide e-tail. our good a A that. and there’s the It to things. rising more retail We to expect doing. we’re more terms that very it’s go just over e-commerce positioned X/X

Jason Seidl

needs Is beef area lacking going there think you’re maybe you’d any to to that in you up? support customers’ like subsector Something that that forward? your

Brad Jacobs

in we’re to to of Well, where invest main areas exposed and all we those. there are are four continuing e-commerce,

and an States in goods are we in then in last Europe, now largest and there people revenues increasingly the that in more mile online. So pipeline XX% e-fulfillment United types platform – we the logistics, heavy reason Europe, are increasingly in we grew e-fulfillment of specialize all-time the it’s logistics is where things those And buying in why sales those have at our in four the And fourth Europe. quarter, here high. we primary

logistics extra about So we’re in to business, chain And invest reverse to logistics we’re the very, that. growing going business, that omni-channel distribution rolling and been hubs the out contract continue We our call also very supply fast. this XX that’s spoke on earlier our year. in

place. We in infrastructure have the

We’re customers just there. growing with our

Jason Seidl

time always. the Okay. listen Brad, as I well, appreciate

Brad Jacobs

sir. Thank you,

Operator

Schneeberger next line Oppenheimer comes The questions. with of from & with proceed Scott your Company. Please the

Scott Schneeberger

Thanks. Good flow, XXXX morning, that and about earlier, everyone. On XXXX to talking free beyond. cash was helpful

than did of little the was first to, allude and you expected than CapEx in year, a mentioned that something you lighter spring. CapEx, kind have little near-term: fourth on more should a the Elevated in soft. is we Sounds softer a every first lot a be quarter coming driven expecting the a perhaps, little bit Just like John, as quarter, you in But normal? quarter?

John Hardig

be weighted in CapEx end our the front Well, year. the more XXXX towards will of

– million of million is $XXX is in total our we XXXX, this spend, to up did that’s CapEx $XXX of $XXX million to IT. IT Most we about XX% going year. So that

know, secret you As sauce. that’s our

start-ups CapEx at. that goes into contract we’ve talking able higher that much we’re be run year XX% much of about to mainly And front-end on rate utilization we’re opposed there, all go then fleet, the it the saw loaded we’re disciplined year. the more logistics, this more So will fleet. of XX% But last two-per-week to we what the being will drive been because about, as

Scott Schneeberger

we of but XXXX. few in going those, great. can bit occurring just a of profit-improvement overview, on to get deeper what’s be the Okay, a Thanks. Thanks. And into just still working initiatives? categories little on sense Clearly, broad you’re delving more a

Scott Malat

Sure.

run of lot We a procurement. from centralized of $XXX benefit already rate savings in generated getting are We million procurement.

end the about of way by We’re this of towards run working rate million on $XXX savings year. our

at bit our little a quarter. look of about on factor. improvement a to We’re making Brad fleet. a good load of the X.X% way lot utilization That’s our progress talked it, in

percentage road, improvement. point the a of doing is improving more and down price of $XX are network million trucks full utilization around so job our moving We’re much that every and planning of better that the

freight our in of continued expect the have dense LTL, we’re network, taking we initiatives making of of equation, pickup delivery. our sales we’re stops there. both we on lot sure per a Also, existing That’s improvement in a and from are we as routing hour areas that’s side labor technology. of on and well And around where number side overtime. from our to then a supply planning technology, as improvement dock operations temporary have bottom efficient, where Across the dropping especially us making better automation line. we more the for business, lot are the more much on for chain robotics So

Scott Schneeberger

pass job. Great, thanks. along. I’ll Good

Scott Malat

you. Thank

Operator

Sterling with Seaport The Global. next the question. Kevin from of line question Please is your with proceed

Kevin Sterling

Thank you. Good gentlemen. morning,

Scott Malat

morning. Good

Kevin Sterling

growth hire your the to not tight Because think constrain in know, the since someone’s some? home. and I you’re last you’re to drivers, your mile I of going those kind at driver we opportunity driver and as market all for the Brad, going about the market off anyone just there, tight So least growth mean, streets could

to I’m mile. market maybe your growth impacting opportunity last your on the driver just in curious as So thoughts

Brad Jacobs

In last last so mile, position specifically, give because of in independent we’re our operators, towards miles steady they large to us. gravitate able mile, to

levels with to We be reputation want high people service, have associated for a so us. of real

over make while mile, the not into out constraining to So I issues that’s last does because there it of a us. in capacity flow factor wouldn’t light –

our customers, feel just have capacity unless that. we got and on adequate We lined confident about serve it up and to don’t take business we’ve

situation have like X%, of single-digits. in LTL, terms like in driver like X, LTL, we It’s low Now very turnover. driver

a week time. because long-haul night, that’s or two see – get and So see are the at people in where of road every they home kind we you the a pressures trucking for same don’t that on drivers

Kevin Sterling

XXXX we’re just What are tightness for given in as on your and beyond? season market, the particularly intermodal thoughts and think the we and trucking, tremendous about bid seeing intermodal

Brad Jacobs

period they a last lot gotten customer, with with at another big time. It’s up look growth a better automotive capacity. rates very, and for better, two fourth because to In a ramping pretty a the intermodal very but bad nicely. capacity. also alternative long it now signed get was for revenue has our tight, another are With for we for those organic up quarter, of a year, One intermodal but was going X.X%. capacity retailer, intermodal it with really And pretty Intermodal to cost, customers easy there up, trucking look it was lot contracts.

truck to intermodal here stay weather intermodal, came for business of for some come going tightness the back of lines relatively positive think because did all and the is The in while some in a other matter, that January early but disruptions congestion our capacity. in too I weather back. volumes create that’s once

Kevin Sterling

Got you.

here. Okay. And last one question then

using about into the thinking in shippers of that you on force opportunity I it your are an really to truck tightness as staying desperate an kind the market opportunity, sales and other using for about right? Am cross-sell think this products? to theme capacity, come and you this, as we As

Brad Jacobs

service of ago. percent up sales is well. lines, a selling came going years secondary very cross year from our the from fourth XX% in quarter from Yes, two up mid-teens XX% ago,

our XX lines. top look from are year at multiple a of you ago. XX using for service just customers, XXX up now them If us That’s

established presenting So cross-selling because to partly is other relationships absolutely offer It’s products momentum. partly have that it’s of gaining lots great service gotten we to of traction, but in lots customers that with the lines. and because of we’ve we’re capacity,

intensely focusing natural showing years, results. it’s it’s we’ve last So It’s something been couple now a evolution. and for the of on

Kevin Sterling

so I appreciate ` you Great. your much. Thank had. That’s today. time Really all

Brad Jacobs

Thanks, Kevin.

Operator

Please The is with proceed question. of Suisse. question line the your next with Credit Allison from Landry

Allison Landry

good morning. Thanks,

into you expectations rates, we assuming believe for what contract expense? does purchased guys As for your increases OR in is of XXX guess, what then about And figure And how and your basis finally, improvement? flow I LTL haul, guidance points into the for that transportation X/X I outsource line XXXX? incorporated rate truckload of rising you’re that think XXX are to about TL

Brad Jacobs

own our and fleet, budget. we’ve but – we’ve up. cost It haul one our investing our the the own is with that’s third those with increased why are X/X into been to percentage our drivers. we the going factored already the of that been we is. X/X of line moves We’ve increasing trucks put been on of haul we Rates giving do own our reasons About in line party, fleet,

Allison Landry

would that you’re investing thinking if pretty are just – And are great. slowdown degradation, since expansion, be we incremental to see about aggressively a some adding, capture slowdown may if your point, XXXX? full higher-margin such at investments and the occur now, right to say, there in growth, Okay, let’s there a was how guys capturing you margin these that not was variable you

Brad Jacobs

costs, the that’s see not can model. the have have slowdown our we of do variable a that adjust costs. the But cost done structure we we market. We years, and part always to over Well, We’ve fixed right now.

We in now. XX-plus operating we’re all right are seeing the same in synchronized that growth countries global

positive GDP, we’re We’re unemployment. seeing low seeing

seeing We’re growth.

in growth the industrial We’re economies, positive seeing economy. looking seeing consumer we’re there. in growth out the It’s

in near horizon. the see term So we that don’t

we later, unfavorable contract, that the will it the happening but in will our events. geopolitical easily. adjust we’ll don’t future, or when some – see – that then in the cycle turn cost someday, someday, Sooner absent happen does If near and visible structure very

Allison Landry

though Okay. that back are even And pretty that scaling include the these good? returns some would it on investment like of sounds – investments,

Brad Jacobs

near last the down our and fourth certainly any because for continue that’s investment is market. back in in we we’re a among part developing implementations, Well, slow the because market want and scale to We week the we sales mile LTL go technology. down that great want and invest we contract time two We the business. the – our to doing don’t our of slow in don’t to the don’t there want that future for we’re out want to capture all fastest-growing products hubs implementations want logistics for in the great to these to customers,

a ourselves slowing for quite see So down while. that don’t we

Allison Landry

time. the you Okay, great. for Thank

Brad Jacobs

Thank you.

Operator

question. Ossenbeck next JPMorgan. with question line the proceed The Brian comes your with from of Please

Brian Ossenbeck

Hi, thanks, good morning.

in potential in first as went them it – now, effect, that, kind puts and all the any tax the since there there of ones know quick you to when changed for of is – implications started from went couple it here. M&A, a about North has understand Europe? as takes I are law and digest into we either of – Is and you talking the Just but there America or regs,

Brad Jacobs

going M&A affect strategy. It’s not to our really

Our – to One great is shareholders that two tax One two of or side our issue at earnings. doing. of very, valuation. a sort that M&A One like there. to reasonable us buy strategy in company very a a like that’s doing, us compelling. that’s terms really accretive strategically customers our The we’re two or one is that will law doing and one our what or our

Brian Ossenbeck

Okay, it splitting to the value it costs deal when what to comes bring so or no real of it friction could the XPO? on

Brad Jacobs

wagging the the tail our dog. be strategy would force, It’s driving at Taxes not the on all changing M&A. not

Brian Ossenbeck

it. Got

appetite one the per in on about Two what’s market Of pace, like automation for other week in you’re equipment? front. that contract more and more doing the growth sounds Okay. overall And the then and course, the just estate prime a pretty real other warehouse hefty logistics.

Europe? limiting that America offset of So gating trying tight, in Are still growth, you’re in or of labor sort but up factors of some terms is in there either any that. to keeping here North or

Brad Jacobs

real it’s the – gating main well, not The estate.

feet logistics We contract have we now. our – grew estate department. to active able XXX around square square very million world footage the We’re a real

attract labor. We the employer accessing That’s all It’s at have gating access And one people. of footprint a good is fairly we pay core and prime our we we’re anybody. markets. strengths to factor second-largest in the and The labor, of not being really good is of everything quality service levels want right as very that a we level keep sure And high high to of stays want precise. we inventory is our to high make as very it of levels of standard high QA/QC provide, just moves, accuracy, now. of we key

best there’s good is sure that with We factor. and We feel the all that around do Black our the having sites, traveling that making have and in and that. possible that Belts on the in practices are we’re pace implicit XX Lean Six we’re Sigma really of comfortable growth gating

Brian Ossenbeck

details, the for appreciate Thanks it. Okay.

Brad Jacobs

Thanks, Brian.

Operator

proceed Our line question. comes from Reustle Matt next the question Please with with your of Goldman Sachs.

Matt Reustle

Thanks for question. taking my

reforms what in previously? noticed tax Is being and seeing or profile have were added what’s a mentioned know favorable base. that of to we’re of I early business are the still stage You different but you in? customers interested on impact pipeline negotiated shift the having looking types margin customer from here, materially for the a the your you

Brad Jacobs

and board. And confidence. Not too. Matt. seeing to more have a of the of buoyancy Well, industrial here seeing because see we’re contract there, big across part it’s – we exposure of the really, business more course, business LTL economy logistics It’s we our we’re because our

to well fine doing to used now. or are customers that not now years We’re couple We pick were six five have our ago of a seeing have small pallets five four, large pick they up. to of customers pallets see that some doing up, so

to the economy. limited it’s not industrial but So pickup there, there’s a

it’s We’re a at you I poorly. them auto, is for Food It’s there It’s of okay. that’s but real line, it’s auto, everything and automotive. a When years. we had seeing okay. you auto of growing. growth the But rest even the nice But service every every economy, the of vertical see still guess good number doing And one to It growth. – a any United at spurt strong. retail when don’t one other look here the – Obviously, look the Europe, good other in States, not is across is great, in really is it’s that’s line on they’re laggard e-commerce-related growth. beverage doing well. slight economy pocket board.

Matt Reustle

material in strategy Great, there? this market asset-heavy, of the on up value business, outlook whether that’s around then tight change I you just view few Has and about of it Can here, your terms themselves value of a the portion showing just how and of helpful. shifted And times in of assets today. the terms in been of cycle asset-light of has two a the like right it’s business together, about know the but you’re at brought and thinking your kind seems in the are businesses all those up the talk that? terms any asset-heavy

Brad Jacobs

and changed. the asset-light, on complexion that’s asset-light. our perspective doing. Our of the business that like that with blend assets of being And we’re We has a not majority having

Matt Reustle

Great, thank you.

Brad Jacobs

Thank you.

Operator

is your the of line Stephens. with Please from with Atkins proceed question question. Jack next The

Jack Atkins

Hey guys, good here. morning. Thanks for squeezing in me

to synergy little Just, that transaction, you when to a Following guess, in Con-way have or them. And growth? guidance. that of put XXXX, start they between EBITDA, think I tail of attribute of to How tied about underlying incremental continued $XXX to kind a that is XXXX million still place? of and initiatives the progress cost bit seem much Brad, much from and about business off, the the think I it’s your growth so would you the how to you on initiatives EBITDA

Brad Jacobs

rightsized, First order first while. was It’s the of cost haven’t get LTL all, Jack, our to specifically, to you that. In structure hello, both. of a we’ve business done in talked

always trying on cost efficient our for up, on optimal going growth we’re let We’re dock, more line. will forward that to improvement structure, main got emphasis that sales grow to line costs of becoming we’ve have now continuous always not attitude haul, to P&D, on But going with find LTL let’s is, and the we there. an the on ways in to

it that’s so on we’re or more about And LTL that. what Was was general? developing your specifically question

Jack Atkins

– versus was there year No, incremental of improvement that, in put the I that that to was I because this synergy general initial if a initiatives continuous you it correctly, know I think, bit more a capture there were number there’s place. little of the And I – was still remember plan. point

EBITDA just that So incremental to company about think of continuing overall? business those initiatives in just growth much of I versus is dollar consolidated for in when fruit sort bear of that XXXX growth the from XXXX, versus sort underlying how

Scott Malat

Scott. (sic) $XXX combination our On It’s a a basis, be cost will gross It’s that. million savings versus terms saves like in of Jack. a of more cost Sure, savings. of It’s both. XX-XX

But technology about all sales net that to when we and making XXXX. the Although, the are you investments it’s and productivity have are in things growth faster half that. in loop the half driving and

Jack Atkins

it at year-end. you. guess year, net when sheet a versus job but And look Thank declined just follow-up, as great. year-end $XXX question Okay, Great about this then balance roughly for on a I the John. cash a flow million – we cash flow debt,

proceeds. had equity $XXX had million you deal million free or and in I flow, the then You which million midyear, in cash think, $XXX contributed, $XXX about

So drives Can there? that sort about $XXX cash, net but bridge million in was to down about debt help us you million. of $XXX us $XXX million difference that

John Hardig

to are there you had didn’t analysis year. things last of bunch that did up terms cash of Jack, related the a flow, in the that our pick but you we on on Well, fees refinancing

sitting that you see because cash the You short we’re in in a a work real that’s non-cash is real account, about balance $XX to going to on capital sheet of to had space. the – back estate balance estate million due sold that piece the restricted a account, actually we cash put that

on there takes and to puts of number bridge are you help that number. there So that

Jack Atkins

helpful, last a as expect million in that. about to That’s deal, (sic) to follow-up absent debt then expected Okay, of go XXXX, cash think When you And that million] the okay. [$XXX reduction? you that free question would all John. $XXX to flow for

John Hardig

forecasting we’re we’re to have to expenses, the going mean, budget where budget, I that in put our and other about now, going going cash $XX save the what that’s to And we what are the the right go yeah. we year to were as of budget going work, in budget earlier. to nature. terms is be in we million Well, and things versus capital the for – we’re – of of – Capex is, terms is our budget taxes so investments operating into articulated, for what we’re

an absent it debt go So acquisition, reduction. would into

Jack Atkins

Thank for taking you great. my again questions. Okay,

Brad Jacobs

Thank you.

Operator

with Please Our next of Rosa question Bank question. is from of proceed the Ariel America. line with your

Ariel Rosa

Hi, good morning.

quickly logistics So side. I wanted to contract touch on the

If maybe of and you your mix exposure. could there end the market business discuss

increase North you could a maybe Europe, exposure As bit exposure. American for delve little Europe, that like to cross-selling to if I helpful. across would so side? of in an well business, strategy there that be the seems up had more that’d e-commerce you It Is try America recall, market across on balance your and North line the in active end

Brad Jacobs

United our we management in verticals. logistics, our because We omnichannel do business the logistics actually logistics Sure. contract distribution. is reverse contract e-commerce the all returns broad; have that States we and Sure. of of because morning. XX here lot business a the – Good in But the different have business

aerospace technology, small consumer that’s company. whole And that’s reflective and beverage, transportation. and packaged we goods, so We really industrial, have healthcare, agribusiness, is broad-based, oil a of omnichannel government, and we gas, – food and retail, it’s and managed have our have automotive chemical, and portion

We are a of exposed few elsewhere. to America across Europe, economy all the places North and every part

Ariel Rosa

vary does ask me profile a the customers? little margin between you let So those of bit differently, types

Brad Jacobs

of from do the and different we of have do. one They provide service because in levels competition them. those we the another, to They in different verticals – tight varies complexity that

Ariel Rosa

might the the that onboarding, margins segment? for that you’re of XXXX terms impact you’re in that customers in how growth So expecting that and

Brad Jacobs

don’t margins our to customers. a lot, going grow with we’re I expect whole change continue and to to

to mainly help we They usually in more our are scope existing sticky. expand with things logistics, our tend contract very as in Those So term contracts. we customers. and renewed find contracts long customers we can are with. The grow get

a don’t I It’s business e-commerce either though, non-e-commerce in well. mix true, that see here logistics, so And the lot real growing changing or elsewhere in related as related than Europe. we’re contract growing are the ones the ones, but faster

Ariel Rosa

And how recruiting, area any that helpful. in And other if it’s at challenge that you’re XXXX? seeing or bit maybe whether broadly. impact margins XXXX workers little terms all, of you’re a feeling warehouse and know Thanks. touch in of maybe that and I market driver more to somebody could shortage, just that but tightness. if second a That’s then for bit asked I already labor you obviously, Okay, on expand wanted about, great. little my the question,

Brad Jacobs

challenge a part because of always every is the recruiting not Well, just looking in economy for we’re anyone.

who We’re looking warehouse they’re fit Whether want collegial who they’re excellent really great workers. the whether and or dockworkers into drivers for they’re workers, they’re are whether we worker – and and are are safe productive great, or who culture. workers,

a we wage we Wages hire, But inflation the selective put because and we’re we effort temporary there’s the with lot it, on about been pay So we successful at is we up, move who ones into globally. are there We’ve of no basis. accessing going it, in a that question even labor hire competitively. and markets market.

Ariel Rosa

questions. answering Okay, for that’s helpful. my Thanks

Brad Jacobs

Ariel. you, Thank

Operator

with next Please of Bascome Our line proceed Susquehanna. the question. is your from question with Majors

Bascome Majors

to the hitting on for thanks in financing. get wanted structure updated with respect to Yes, M&A here your guys. me I capital thoughts

of last is size, going how up let a debt of know mean, all? the changed yields $XX if up coming equity just a total around you’re tax lot about changed any has at with of XX% the raised then. July. since with bit probably U.S. is Just, thinking tax you us and of with price bond shield your cost I that’s since deal financing reform. higher share in kind equity down you Can arguably lower Cost

John Hardig

that Hi, changed Bascome. much. – thoughts our haven’t around really No, we

are, the We monitoring closely. obviously, very market

needs, structure. We’re always of terms equity last capital for optimize with cap already looking opportunities raised I And the mean, we’ve year. M&A rates our in to

and market. we’re plans we without for We right any equity. billion raising any now. in But We another watching powder have dry up the sufficient constantly to don’t place acquisition, that’s think have $X additional concrete

Bascome Majors

might interest is get standpoint, From point your any scenario deductibility an the Thanks. in deduction where you analysis, EBIT is snagged limitation? there – by

John Hardig

any Based assumptions our around structure deductibility. for cap anticipate limitation interest acquisition, an don’t on on we

Bascome Majors

Excellent, the time. thank you for

Brad Jacobs

Okay. opening. it’s and for are – market. day. away market hold don’t we on the that’s one excitement XX all the to the Thank from great a talking to you Everyone, to in days. you minute from want you in We forward us, hour again the given look you’ve Have going

Operator

today’s Thank conference. This you. concludes

disconnect may lines your Thank participation. time. this for You at your you

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