XPO - Earnings call transcript Q2 2019

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Operator

Welcome to the XPO Logistics second-quarter 2019 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.

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call the I will Jacobs. you Mr. Jacobs, begin. to now turn over Brad may

Brad Jacobs

of Thanks, earnings Strategy Chief Officer; joining for call. Relations. good Greenwich Rob, quarter Matt and our Fassler, our and Director morning, our With Senior in second Investor everybody. Thanks Headley, are me today Tavio

free financial flow, revenue. you of As despite press the and we our saw from cash metrics on release, EBITDA, EPS beat key lower-than-expected

$X.XX. $XXX year-over-year. adjusted diluted a cash at in $X.XX year $XXX flow that's stronger margin the $XXX expected We EPS, ago. We GAAP million, at EBITDA reported million was Free higher basis, up adjusted a up million achieved EBITDA ago. year XX% record-high delivered also XX.X%. XX% was than an XX% a We quarter, than EPS On up from of of of

growth, LTL is of improve by managed we is XXX to the in by organic excluding which our the to quarter, margin basis highlights of this quarter. to acceleration by ratio, unit. XX.X%. customer. XPO downsizing Connect fuel, was operating in In first business an three the yield logistics, operate. where platform. our from X.X% adjusted we LTL, to growth the X.X%, XX.X% revenue times GDP points average X.X%, revenue net transportation, In continue countries the about points this up was we generated In our after the largest moved to Turning basis time freight some we from XX.X% revenue American year. XX.X%, And In of customers North last up improved brokerage, as XXX And

still transportation revenue, While small is is very still managed trajectory. component positive this a our of

European history our X.X% our transportation a We're minus be the in and into In This the total a expect agreement plus growth Yesterday, dedicated now managed between contract Gypsum a to digitally partnering growth X%. XXXX X% largest organic for updated guidance. we year X.X%, the Gypsum transportation of to we multi-year British signed business. chain single, network. supply revenue transform £XX and between their transportation be the We million year. to U.K. and revenue with British is with U.K., for

half impact and the back reflects primarily year. the update the in from of The we rates truckload expect FX lower

EBITDA our We also $XX raised the range lower by million. end of

billion, EBITDA to $X.XXX is X% target $X.XXX XX% up billion new for year-over-year. adjusted Our to

$XX raised our free addition, flow In cash XXXX million. for we range target by

million $XXX to $XXX new million. range is Our

we be taxes anticipated. favorable are at expected more our low hold to And than expect had range our of net around to end $XXX million. We the of million to previously CapEx $XXX cash

planning. substantial including improvement record more initiatives go hour, our piloted recently positive LTL we technology Our moves of all realized technology with XX into gain in to detail, net let This XPO our centers and LTL sites, second me this growth LTL highlight and now. will motor the is of two the both the includes results One LTL and we significant every in it in to in quarter. our in in our Smart our per yield We Matt had tech map, initiatives them roll out service workforce dock year. plan revenue road operating end a brokerage hand margin. XXX of ratio by but

streams to of by we're of executing range in and leg we of LTL pleased learning guided machine for productivity We're efficiency the to track improvement well margins. route management. our We're pricing, delivery, we're applying the on to growth confident adjusted our year pickup flow in deliver operations. are free work right expanding dynamic EBITDA on enhancing cash also will quarter. higher with significant optimization controlling X% that next XX%. full be and profit And cost We're the sum, yard These line-haul and In yesterday.

ask I'll that, more detail. to Matt quarter With the review in

Matt Fassler

Thanks, Brad.

while As important the free we capital strategic gaining through and I'll start invest transportation improving key focus numbers, our cash costs want technology. walk segment. to with by review lines of to and in us improving business. like you the second share numbers to and in an We're with business margins, quarter continuing discipline, flow, managing I'd our strategic unit. highlight I theme. This is

our focus American yield. with in primary Beginning terms maximizing of LTL, is North profitability

consistent from X.X% QX. accelerated yield mentioned, on prior from increases renewals X% in previous to by contract in growth X.X% the Brad quarter. to Tonnage This Price As declined in accelerated the sequentially quarter. QX X.X% X.X% was with year-over-year.

QX quarter. consecutive absorbed margin largest reduction year-over-year customer. our revenue in and in in freight improvement comparison, by lapped brokerage by freight tough In top our of in held improvement XX% rose and our the our net as we as revenue control. last a XX% ratio in But another year, for brokerage, cost reflected net spend steady increase sharply tight line our revenue well quarter second as declined operating a yield, the Our second

X% pricing XPO truck our compared sourced quarter, in In mid-single market Connect about as decline QX. the brokerage, relates digital truck below we capacity freight the in the in the brokerage, from to a improvement Also had which benchmark. digits, marketplace. in tools DAT in load deployment was year-on-year in This to an part we of

opportunities truck levels our largest digits brokerage growth customer, up We're we drive mid-teens our taking while deliver to single high technology of Excluding the capitalizing QX. in generated in deploying suite margin. mid-to-high load in share QX, by service, on to from brokerage

we wins last increased year-over-year, trends of highest revenue to in XXXX, as mile big-ticket excluding only to since delivered QX, durables. record revenue, second in margin sales QX. last flattish, XX% solid our set to mile level postal Last in business in largely injection, tracked to operation, retail Net mirroring due achieved injection the we mile revenue last Turning we’ve in expected, as our business wound down entering We declined we postal the new business quarter. mix. this

Given we the our expect in this second revenue of recent business new wins, year. mile half underlying last growth

managed earlier, strong provider of a posted QX. transportation management. mentioned value sales based freight We're in growth managed under top of on we As transportation five global

a and through customized solutions asset provides tower uses efficient with freight network transportation utilization approach that global for procurement, XPO highly Connect Our control management. customers

to quarter. slowest-growth translation and X.X% revenue Spain. the in Our grow this X gain of remains the our number Europe. market European constrained U.K. business in transportation decline and FX France had We're about percentage by in a share continuing points.

transportation in up managed up Our putting business Europe numbers, mid-teens strong is year-over-year.

constrained LTL. transportation adjusted in FX better reflecting Looking freight rose our about rose million and and profitability margin X% segment across XXX brokerage EBITDA point. by or $X by this percentage overall, EBITDA adjusted basis X points, number

revenue segment, revenue logistics health And of North vertical Europe. of X by aerospace and America, our on care. this again, customer. about reflects continuing our provider the points. in as and logistics in FX X% outsourced strength in our logistics the position was rose constrained points of European decline number beverage, from our business logistics consumer the We percentage about lost revenue X% and FX revenue In largest X food strongest goods, once in build ongoing percentage e-fulfillment to logistics. declined X%. in In Turning e-commerce packaged combined globally. to We're market-leading from largest impact growth Europe, the

margin quarter frames combined the of from downsizing of approximately in excluding EBITDA year-over-year $XX The of quarter impact and believe a small cost our growth largest first million logistics the EBITDA. decline. flat, Adjusted adjusted in that EBITDA translation rose improving FX our business. accurately for us logistics more X% and We items core the tracked customer these underlying

up is pipeline and at overall, now level, from record growing year-over-year. to a in QX. company December $X.X our It's in XX% $X.X billion billion now progressively global up the For sales

longer North America history. overall, our still chunky, of the at of amount business Because same by the with first $X.XX the new could up new won the And that down fell won quarterly X%, highest at time. business macro with The over and was totals but our magnitude, we X% sales in in dollar period year-over-year, in one of about new look high-single Europe a it be billion digits wins consistent region. that for half, rose business

expense $XX buybacks. issuance our our a earlier year reflecting the to down Moving from debt fund ago, rose income statement, share to interest million million $XX

ago. Our effective XX.X% tax XX.X% improved to a year rate from

at million share an average from purchased million XXX Our buyback quarter. shares This diluted $XXX total and million year XXX repurchase count share last million average price weighted the We our of second for declined activity reflects in a million. ago X.X of quarter to XXX primarily $XX.XX activity.

shares our Since billion. for back a price we've of of in total million program at bought cost December, XX.X $X.X $XX.XX average we launched an

QX Our year. for buyback to to for prove EPS activity continue $X.XX accretive and was should accretive adjusted nicely the

debt commitment the $X the and our completed to its and terms, company's to rates while quarter, extending profile. December facility other size premium the rate We've our in maturity of amended interest date, our the fees. We benchmarks lower extending since over financings the commitments maturity reducing and ABL our increasing lender in improve interest billion

with ago. $XX $XX booked a Cash estate, compared $XXX was remaining Net capital million sale capital elsewhere $XXX flow to with a million LTL expenditures operations year of from assets the million $XX was million of year our in year expenditures business, in million in sprinkled a million business. of the million, which $X We of $XXX real quarter to related the gain Gross $XXX ago. were ago. a $XX on compared this million decreased million, from with million $XX

ago. both of of cash Gross tracked million $XXX CapEx year from combination All in and a increased capital $XXX than expected, million reflecting timing. lower discipline and net free flow a

I speed want to technology. bring as especially our on up relate to initiatives, they you to strategic growth

we technology know, this expect you year. to $XXX invest of about many million As in

deliver that's guided process investment decision principles. a We process value a thorough for our to how by rigorous have that can determine shareholders. four It's best

pay investment First, in customers' dividends through of supply this help increasingly our more we make invest We've in efficient. technology and share productivity. to the chains form seen market

Second, transaction, the touchpoint going destination. across time origin that the modes. we're engaged the the almost of in transportation freight seeks automated of and multiple selection various we're take the to to customer over and fully from we time that the capacity a think doing world is to from And capacity every steps be it automating

using biggest dynamic efficiently. opportunity we're our of well. increase is our to spend, science labor roughly The more data Third, as to there in of other annual operate are business applications areas $X.X efficiency but billion the

service. And carriers carriers, for and satisfaction for who fourth, logistics customers, the transportation last-mile and we're allocate shippers We increases receive for continuously their customer customers the plan our and who our support improve visibility contract ability transparency and and to of these improving This increase suppliers customer supply resources. customers, contract want working by goods chains. our to for all to customer through

all XXXX. million which Looking forward, excited of represent initiatives, billion of opportunity $XXX We're potential highly on underway, that $X pricing profit we're particularly by XX focused are growth key about analytics. to

and the pricing forward. opportunities optimize and we've to seeing play in going LTL results identified leverage algorithms models proprietary out elasticity pricing more substantially automate brokerage, and We're Our mix.

improvement. in of productivity between both have workforce America, technology planning labor larger in improvements Our our Europe. our a driving are we've North X% about some in a than currently We sites, and efficiency North network. typically achieved XXX seen America rollout XPO At this We've and more tools with warehouses logistics XX% Smart X%. underway productivity in

Based systems planning LTL workforce In our out areas our in flows and on to our the addition optimization. entire route the it in in XX we've we we're leveraging sites, like data pricing, rolling warehouses in success our are network. through that and to achieved LTL, dynamic pilot daily

in LTL which optimizing is drive we driven. trailer our improve increases efficiency This utilization of linehaul can just and we're And but as where the service and pickup levels. reduces to delivery, improvement routes importantly cost, miles

climbing XPO XX,XXX and generating downloads growth number the which on in than number that QX. XX,XXX is was with platform, double in our app of more than QX, the XPO We're than saw We we Connect, downloads Drive had rapid-fire more from fast. more carriers of

Optimizer we're forward. And our buying and XPO better engine increases capacity more sharp with than expect market productivity Freight behind going Connect, the in

tech-related initiative with visibility model, XPO XPO along offers final The speed The marketplace distribution shared values, analytics. flexibility. customer distribution Direct, our is real-time and increasingly Direct. precisely that predictive and

a billion includes and network XXXX. it customers. We prospective business hubs. The it omni-channel $X by key in and customers. traction and on rate with component remain run in dialogue wins a warehouses our e-commerce getting recent new strategy. We as track reach we're We're last revenue with of mile existing see active on-boarding We're and engaging to investing

have revenue One profit In two for and is cross-selling. opportunities growth. we Europe, notable

and Given potential market cross-sell economic of share, in we to vast the addressable relatively large our in Europe, see conditions. our services low regardless Europe

We're adding Europe, we customers setting up the getting Pan-European expand margins. have at strategies importing margins and to installing our an teams implementation targeting to We're Six proven to about opportunity deliver in levels new to sales America. managers in Also, logistics improve North pilot best managers. professionals our XXX strategic level, Sigma practices closer the concepts and we account and U.S. Pan-European from

opportunities we purchased We in also opportunity see example, back-office additional procurement, see labor, and optimization. for waste in management. And further transportation temporary in

esteemed from customers, GM, Ford, Magic to leader May, for second a the XPO was Raytheon. third for of including consecutive a service year. receive In number in Quadrant continued in we and named as And the recognition our Gartner the quarter,

partnered served to official of the transport Finally, the race. over the has consecutive Tour de stages XXth France. proud have been XPO XX all is partner we past support few that year the weeks, have This as to of the

operator, turn to I'll back take questions. your it that, With we'll the and

Operator

first Thank question-and-answer questions. Seidl your question [Operator Jason from session. a you. line Our Instructions] At comes Please Company. this conducting of with & Cowen time, we’ll the be today with proceed

Jason Seidl

very much. and you morning. Brad Thank Hey, team, good

Brad Jacobs

Good morning.

Jason Seidl

a we're many missing that is core to guys really on while a your declines LTL, characterize you're little something marketplace. doing? moved the going this Is you to as else that it's pricing touch up basically pricing what pricing difficult Wanted have interesting there bit tonnage would in your Or analytics attributed haven't the in that here?

Brad Jacobs

the we to credit like we can than that, most Right, more in I I way and -- can, been a see across for It's much I for general raising honestly negative pretty properly characterized, you are event. in not would think because our cases, board you think but are. is, that tonnage raising that's while. -- take in don't also full competitors volumes price environment LTL have What the new sluggish price, and a

pricing discipline. concentrated very a rationality, have there's pricing you so But, carrier base, there's

pricing So, demand there's that weak and tight there's to leads so but supply gains.

recent, seeing we've been of forward. algorithms benefit lot the of huge will beginnings pricing seeing We're rolling time, so But that that out benefit not we from a over of that see the from yet. going deployment we're Now, that. is fairly

Jason Seidl

assuming confident you in the of I'm pricing remain direction the And LTL marketplace? guys

Brad Jacobs

are. Pricing successfully all We We XPLs. large of customers, customers: of and across LTL. customers, firm definitely It's the raised of in our categories is three small prices types board. in

the quarter. versus of raising a progression last the rates You in saw this quarter

contract the that up pop were X.X% We watching, in fourth also to X.X%, been down decelerated we've up still on first first renewals, quarter, it It we was back it the which rates here quarter, the because increased. had from X.X%. and we quarter, had and we're renewals contract up seen is in but had on something

to is maybe going a firm. on and what's I is tonnage think I stay economy, little softer So, industrial the depending soft, on get even going to going with stay price think

Jason Seidl

acquisition. Okay. shared acquisition deploy come there the sidelines And all? buyback seen to looking how you on obviously of And to as that your quick in guys we've been follow-up coming have Brad publicly went aggressive at changed have of as on on capital a companies in very they're sort noted you sort the and your out But mind multiples several multiples again.

Brad Jacobs

also We inexpensive. pay said as of someone alternative the is staggeringly attention pay attention our to also that. multiple But to we which

we So, have about about we took back in We basically of so million prepayment we flow. the cash that debt half free had that cash. penalties, I second didn't to $XXX quarter, and and net net bought took just reduced half of increased the because of say debt. want stock,

So, more excess strategy value we quarter look four the shareholder our decide will on at to more our second have shares we regularly. the It out. may high Board puts M&A was of one with side falls create alternatives of on that and of takes in And or buying err the and just to the in cash reducing returning choices debt all CapEx. increasing or or ROI how depends the back to each those

Jason Seidl

the Really always. Okay. as color Thank you. appreciate

Brad Jacobs

sir. Thank you,

Operator

line of question. Our Chris next your from question Citi. proceed the Wetherbee with with is Please

Chris Wetherbee

Hey quarter? thanks. can the here form sense here idea how LTL minute. Good stick pacing trends can of of morning. renewals guess give and And us on us for I third a Wanted of contract was sort July of how a you quarter? through maybe of were the in beginning you're tonnage to the like what the kind seeing give third you maybe an

Brad Jacobs

new. band strong time Yes. been strong. very a period. that so still the That's couple seen is for a a been But softness strong of the the very is are hasn't less little It something long and in Contract LTL, it's last of while. well, not going in that's Pricing well. Pricing is renewals we've strong. Tonnage for not within strong months.

what not It quarter record real we're points a quarter had positive some in and a for company in We predecessor OR, ever LTL, nice was record speaking just any company about so up we bought. year-over-year, doing. the XXX but for basis Generally feel improvement. was very we this our there

Even between and want points. X% and opinions if out respect and who basis XXX% for the of we was people XXX real you estate, somewhere real to about that give sales credit take estate

OR points cash giving been to from zero basis got we estate. real So, even on have would credit the up you XXX with

we what from results the we're the So, are about activities good feel all taking.

is X.X% factor This $XX load of down up second factor a year-over-year was as the It year X% every is was you And first Load know, X% of quarter. the in great. million quarter. EBITDA. in

tools LTL rolled in The workforce planning out that we've extremely are exciting.

of That You'll recall effort to we group thought, last the we XXX for tech it. thought that past. in and things many been just And billion hey, it's warehouses and it really of it outliers labor initiatives, warehouses. can to want on job improved We of at of XX% we in And eye-opening us. doing had now pioneered our we a we XXX quarter was and that our workforce lot $X.X X% the rolled found we in we than found was of And a but about more have some we good planning tools. to between had algorithms productivity list found from on globally better wasn't managing improve, Well, out. it do out there we X%. about was that labor had real our costs our We of did a put we it. tech applying who top we than

GUIs warehouse, smart of piloted had very roll XXX very results. in change tools bit said and LTL there. see adapt more the is this to to We it good sites improvements out sites; now and going it we've cross I'm the dock XX The we our a plan we're optimistic little did. LTL we a for about which all let's preliminary the to year. labor So,

Chris, that visibility Now into year, we're the we year. the halfway through have

improvement You the can fourth expect more in than third quarters. of of XXX basis OR points and each

basis over of year-over-year improvement So, -- $XXX points or million XXX out about full for that will the come to year.

Chris Wetherbee

it. Got

we they're longer-term the back when the Is had think just LTL? have half. you XXXX? of so far helpful. labor the a basis And and way within terms about Is initiatives think you in progress more we that's that some when given going, it tools change think sort to benefit about of here Should giving obviously, the the about XXX this still or we've you we year? opportunity OR less the in productivity points it XXX Okay, of

Brad Jacobs

us caught then ORs of if and haven't And of operating there's them the next you whole LTLs, to for catching a to OD then role ratios. Well, there's at them the gap group public there's the look yet. model leading big a of pack fantastic us. they're And group up the up and there's but

to continue to ratio. our improve going operating we're So

the goal. XX% our of won't, We able that's to to crack of and return amount we're maybe our to haven't income the on capital the amount LTL two to in and actual result for pay ratios year-over-year is been and among we will, the best operating operating that, EBITDA And a of that. yet. believe we increase actual putting all group. basis we And getting on the goal be we're maybe OR business capital our the a still But but of attention amount will as into

Chris Wetherbee

if tough enough. one allow competition It's then last And Fair you question me. certainly.

we about year should the half what's gains of guidance estate when embedded and we the think EBITDA we the they be whether understand How real year? in think included other the the gains rest of the so back Just or about guidance. in for

Matt Fassler

Matt. it's Sure,

year, than of the We quarter combined. million this registered the that half we first $XX would from for less and real in third of gains The estate. sale expect fourth

cash flow property we has all that, of embedded earnings And in our and an have underutilized to guidance in year. process addition we're office which that guidance selling. in been our the of generate sale most million the million flow to of at half $X that excess and point on $XX gain some in $XX should cash million second a That likely year. the in In

Chris Wetherbee

for Thanks it. the time. That's Okay. helpful. All right. Appreciate very

Brad Jacobs

Thank you.

Operator

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

Ravi Shanker

biggest quarters actually drove of that kind you there business follow-up you of ago time Can you're mean, in recover what us done very pipeline Brad, of kind of really a but departure to some that guys good So post customer couple a job new your you announced rebuild said that just have will when you of a it the the take on or kind I that of any of particular incremental Have are to targeting? up give to that? that recruiting a end bumping pipeline. your you customers? tough driving little detail a approach environment And new more just markets? changed what's opportunity as

Brad Jacobs

Good a morning, of like cliché that's And says there's pipeline, what at mind. high. to an it's all-time you concentrate, the did. When look you Ravi. you $XXX that the at there's concentrate when end the last record a Well, we lose the get hanging you business focused, at nothing and organization like of million year, did

As it's comments, in to Matt prepared $X.X up his billion. mentioned

other up is it's thing it. the It's billion. And is number, that only XX% time it of year-over-year. about So the guess, the the apart actual impressive from it's I second trend over $X

was the QX, up in X% saw year-over-year. You pipeline

then in on And basis XX%. places and accelerated in And QX, it up was QX, zoomed it's in and Europe. then up here a XX% year-over-year in up, both the pipeline

proud order about and and very feel that service lot So I do sales get customers group to cross-selling, to has done organization what a good in front services our the customers I feel the to want about operations have of in buy. a of

Ravi Shanker

of that an billion just of that you related opportunity give targeting you Can a of maybe slide that put us sense XXXX. to by incremental profit of out million you're And say $XXX it. to just you a kind $X I Got of – conversion about kind new rate business to going go conversion you're as opportunity of rate there that? talked percentage you that targeted well? a what how about of of your mean, Kind Kind a pipeline. profit opportunity? of that is

Brad Jacobs

you're investor Yeah, deck? talking the about

Ravi Shanker

about talking deck investor I'm yes. the Yes.

Brad Jacobs

Yeah.

Okay, great. Yeah.

are that on initiatives our working which to-do XX we're deck on. of investor there page yes, things So is XX which list, are

executive we're we on investment that them between and pushing big and and community. So those opportunity And, every represent holding the senior we're people stop-lighting we're every pool billion. spending initiatives improvement the And levers green time and shared profit in red of we're just a These accountable. that million with of $XXX yellow XX XX $X aggregate, month. are week

Now, half a that. that. to those of initiatives. not half than like them are dollars get them less hundreds are little a than millions of Life of work of little going and $X get billion we're And doesn't from But cost going we're revenue-driven. to more from

the revenue-driven cost productivity world-class. So world And was We're before. are things $X.X to ones getting tool the we workforce that like attacking and spend up that around the labor just mentioning billion have I the we're XPO ones are a things like gone the time those and Direct, And have of and with and like great of work thought lot streams things has AI-based pricing. a pursuing into them lot energy vigor.

Ravi Shanker

brokerage Brad, pretty I did you didn't good your quarter. the higher count. some you loads? just headcount kind clarify in stats business in Got it. to on hear the gave the on what or head just lastly Matt anything us Can And response of

Brad Jacobs

down X% was It year-over-year.

ones millions was time to were dollars, to out Bill a back So the Greene, get spending there was first start in the updating on brokerage. XXXX. as the you know and optimizer technology the of of at tens -- of well, the rolled freight us we we Bill out in covering days lot, which And freight where

a you -- loads more done then been person. it on result done path as profit since more getting can -- and steady per that, we've of of And, year-by-year plot a

continuous constant brokerage. productivity in a truck there's of So, improvement

customers business, to heads and profitable more generate with service able process. more business automate and fewer we're So more better the more of

Ravi Shanker

Brad. Thanks,

transportation honorary a Greene conference always I calls. member will think Bill of be

Brad Jacobs

Absolutely.

Operator

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

Amit Mehrotra

Thanks.

of profit EBITDA on in Just is. the the billion I a to $XXX billion, relative this just XXXX. to in Are basically fleshed over $X.X want billion you quick guiding understand million how to $X.X improvement $X little that expected XXXX out a billion follow-up guess year? to $X.X I

Brad Jacobs

glad we're I'm make to to because not $X.X EBITDA we're guiding the implication you asked question, billion No. XXXX. that that trying in

yet we're the guidance you of levers XXXX. of going level company out productivity. sharing to on. of What put to we're have for We we next These what not how with working efficiency, are take is of profitability, the the are

they've You been fleshed out. It's well very, asked fleshed how very well out.

global things time the can level are things the people what are profitability strategically more improvement with whether on there's automation Direct. of top tools, to saying amount it's pricing improve Smart XPO LTL, do, Connect, the analytics, with spend back time it's most advanced in we the office XPO the process operating more use of more in can collective our workforce important company? the whether These organization, we productivity contract we XPO procurement, optimization the it's Whether it's of it's whether enormous more on whether whether an logistics,

that are main in over these significantly next that's years, the we're the order our grow several profitability mission. because swimming in So to lanes

by just create But bag. page the They're that. And we'll that these in them. company. portion Our shareholder to mission pursuing but of not not is all bag. all value a to XX investor substantial in That's the the the it's work, we're how we're improving that way saying the in deck efficiency is of are going not get

Amit Mehrotra

clarification. appreciate I Okay the

free it before a because on you budgeting could last I not guys to are cash and XXXX. is think anomaly, you know of last which your if did it just XX flow guiding for I we how bit year year. follow-up through about months you're another in yet, the Just think five-year an little I framework

and to like two, just embedding EBITDA that is conversion relative year So conversion how growth cash the that; of year? the be puts XX% new Or the XX%, cash Is one, takes like flow and appreciated. any would the guidance. think this about we there should EBITDA free next just talk about to free

Brad Jacobs

cash spend another working to to this develop. want don't to, macro We We guidance the of to or year's want year, getting next like to free through exciting want see today, on then flow. how guide how develops. projects We we're lot and these quarter see a put companies. want We two we'll most out that

And reasons the $XXX what simple. We expected. for of on What quarter's cash had really which had expecting. free we that cash were interest We here we and is million than double in the than this is taxes. lower talk cash we were about CapEx. can we But better more flow, were disciplined now

So those million. $XX about to things all added up

the range $XXX $XXX the from So the the end million we high low range million to $XXX to raised of $XXX and end from of million. million

we're how with our the free for at cash now you guidance, that's budgeting to and we're we flow ready we'll that's we're when free you give how year the and do confidence give cash So guidance. flow looking for this And looking year. next at

Amit Mehrotra

That's fair. Okay.

Europe macro. but macro since particularly. last Just of lot there, in one business is the developments quick it's up generally, the of not Brexit, business. me been one the recent I don't recently brought XX% a for great. There's indicators you just have some you know Germany

the Europe Just talk is cash year, guidance lot and sensitized parts moving half for about of flow how to there. back various just the a scenarios EBITDA the around of because the there's

Brad Jacobs

we We don't. of we Well, wish you're right. did, a in but Germany – we have sadly, don't Germany. business lot

Amit Mehrotra

European It's a activity. for good for -- general barometer through

Brad Jacobs

there was It is, but There they're kind with Germany was on. senior insights on had he me of going is from explaining -- banker -- on who and a stuck. recently a what's to going good politically have what's they I

specific being EU know rest part are don't So a and in us their the whether I have the moot But for what EU. little to may Germany. it's a the end of of case, a We of don't lot business bit any really point because. not applicable circumstances up in of

UK, weak be pounds the in business the foreign to our about versus same been of stronger. And of weak, continues dollar's exchange And been What's level and, QX. on hasn't weakness. preponderance more and extent, of the better. QX in to euros about but It's countries the has France weak those gotten in gotten certainly have GDP hasn't weaker It The euro's Spain. in is lesser and sort as weaker flat worse. and the that's do It in pound's a the translation We the to gotten it from the FX. gotten gotten dollars.

a we the of not But resources largest all the -- we're Europe. in to you business e-commerce XX% grew parts on and And we places business in and and like but energy and all that have the of everywhere, are the basis. year-over-year put strong zag, countries second I people capital a the in that's our can growing and close Europe, operate our and including quarter is if in downsize mean, including to e-fulfillment and in working. broad that Europe, and zig on find anything working platform enough you do, not in that's XPL places

there team environment. at feel doing So is with very job dealing soft a I a the

Amit Mehrotra

And weakened. Okay. Great. good. the Thanks, Congrats on sounds good you. Thank traction. That everybody. have

Brad Jacobs

Thank you, sir.

Operator

with of Our Brandon your the question Please proceed line with Oglenski questions. next from is Barclays.

Brandon Oglenski

questions. Hey, good for thanks taking and my everyone,

Brad Jacobs

Good morning.

Brandon Oglenski

about And don't long. it Brad, I odd find companies today we in where vacancy us search? heard it little have you could that because don't a this of think are the think I public I but most a just mentioned update I size would CFO

delay? as thinking like So we like this it? about is should not Or just be is important the as what

Brad Jacobs

from hire for let is haven't have working we and heads very the first-class three Well, right of as hires hired when actually But, is and hires services, and well. excellent ongoing you person, now, CFO. search shared of estate you a we we tax, of see them the the permanent in the organization new hired And the results finance accounting we'll quarter. continues. corporate we'll away. And know find those And of while the here search right CFO, real a

Brandon Oglenski

be reading we shouldn't this but into front right? negative Okay, anything

Brad Jacobs

large And interim we across her to head we'll that well-organized finance him. That us with great of has have read not. job a developed comes the hire very basis. I'd mature, We accounting something very it. CFO. hire doing at strong, globally. professionals CFO. it and hire to don't a want a into Absolutely, systems team when is finance or feel to well, leading that working great the And gun in wrong we an are And company our on positive accounting Sarah's it's the right CFO

Brandon Oglenskis

I how space am context to selling is free office become impacting would a have I in excess capital Matt, growth rate And cash this flow I a million year. when on broader that this $XX appreciate But that. flow guess cash Okay, you're walk think, we going you mentioned from that lower flow revenue year? capital working cash least the Because we that working expect wrong free thinking at way? with to to this EBITDA or maybe neutral about you're from

Matt Fassler

in year and we growth half the in overall of half in revenue of do Well, year than we the revenue organic year second the stronger first the half the of in the the growth expect registered than the stronger first half second of year.

have cash. that and very we're capital we working So operational focused an to day. every Obviously, strive we'll modest as our model on a perspective in of than use better that do from

Brandon Oglenski

took your North Can lastly, down then business initiatives of And might leaving. that replace I large that could potentially pipeline long and it a there talk American does logistics size think the have take? Okay. of about and associated you the have your step customer like and to how some look been you business with that

Matt Fassler

customer. QX growth of deceleration in of business Sure. I'll that to some start the downsizing register most our QX, revenue in largest from on that. from We did related

very chain the In terms is strong. pipeline, North supply in the of pipeline American replenishing

new focused are remain American been in New business closing we and business very that we strong the in as on North have supply chain wins segment.

Brandon Oglenski

Okay. you. Thank

Matt Fassler

Thank you.

Operator

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

Kevin Sterling

Matt morning, Good Brad, and Tavio.

Brad Jacobs

Good morning.

Matt Fassler

Good morning.

Kevin Sterling

guys maybe year you as you all at operations with we've office technology you gains and mentioned property. point the an You initiatives? is of far estate touched where terminals? guys, that the function less Essentially, are selling real seen so Matt, unprofitable your of more a streamlining I you on off know of you to can But what function selling a a Brad start do

Brad Jacobs

out in $X market The credit Street And of until that's about the have make And own. combined. we've to it. two going go got continuously mentioned real and to underutilized find fully shareholders figure estate an improving together. long our that value Maybe real that can inefficiencies facilities money them inefficiencies. billion for cash. and we're make goal. waste nice profit we're utilized, Well, the real to general our for we of to aren't we if so what a be will almost to it, we've find us building. but no the give in estate It have part what's since underutilized, sell no we of we'll that's building And it keep program that Where take what's ways we're looking that at in we our sense is just of including it our And always trying The got a waste utilized, company we we maybe sold won't, portfolio. organization way to office embedded empty Matt have put half doesn't to

Kevin Sterling

about… Okay. you Great. Thank you. Brad And talked

Brad Jacobs

you. Thank

Kevin Sterling

deteriorate? that conditions? talked billion get things market some these billion to by upon from to EBITDA Is deteriorate that in If $X talked market You in about number XXXX levers if current about, still conditions here you getting further, for you've pulling of can LTL. $X based were to

Brad Jacobs

went had we for the work. last up can math on this get with be average, get we three with no, P&D there. the we kind we EBITDA between the able by billion and fewer less recession, We yes, and projects, We the there. $X get recession, XXXX. We get sluggish and would less on on doesn't we've quarters, or If to tools. can there then into so get on deep freight labor. technology can there like absolutely now a trucks working labor optimization was can If environment of not particularly if The to long it a have and more through picking

exact building and use linehaul new build with tonnage linehaul We elasticity get detail a there to and pricing discovery and of the amount the the load is the understanding spend we're to can runs greater take versus through can We and out to pure the $X.X miles. get more through computer-based price year pricing we the in empty trade-off. of Goldilocks where factors attacking and technologies that modeling billion increase there

LTL EBITDA by month in than So projection. billion about those of technologies, should quarter, to that XXXX. $X business every and the and just get feel month We with previous together very running the us every better good better and quarter

Kevin Sterling

dig And you're hard. obviously you're technology if Mario Great. Okay. if initiatives could on little you've working you deeper don't All and last your then it this into that pretty but implementing, some, a mind. touched question bit I

you organic You seemed new then to it to organic the your growth? it's market cost these is benefits road, should some organic on your Is about is Obviously, get Is like, realized you growth? it pipeline. immediate we it gains? benefits share down about after capitalize business? objective How win maybe think cost it growth but talked both? Or

Brad Jacobs

so trying technology out serve customers. waste our accomplish organization to the in take can is So we to we're that in what

to more move our goods chain their supply mission efficiently, customers more is cost-effectively. their to through Our

to injuries distribution reduce tech labor how productivity? we order fewer How can and we fewer we our can stocking So increase return can the can increase we safety logistics use and accuracy? shorten we How fewer can business one How which efficient, more How parts of technology can fulfillment and accuracy the cycles fatalities? enhance we speeds? make fastest so is increase of costs? accidents have? How we most that inventory have and

and goes tech, if in, wow with better robotics. customer we're with in us it channels look use automation, our you And from what to the doing the run trying capabilities the picture, at to competition. are it technology in to big from it differentiate that So that business

AI-based big all better so arms. data, we labor can utilization. forecast and in which are customer the It and goes demand pricing network cobots or robotic predict So algorithms, the improve

he's Those real-time and customer X,XXX having professionals. a that trace. it the and rescheduling real Mario the transacting doing which projects digital And freight working we scheduling we're the on, And goes now of job. automatically track and great tech for are in experience pickups online to and and time getting his customized and automated and of whole marketplace, kinds deliveries enriching pioneered,

Kevin Sterling

quarter. Congrats this the morning. Really great. your on Thanks No, solid that. appreciate for time

Brad Jacobs

Kevin. Thank you,

Operator

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

Allison Landry

Good morning. you earlier me penalties. for think prepayment I mentioned something the about call squeezing Thanks on in. Brad,

over total curious the how that we next think does gross to? leverage year how ability of your just should reduce debt your And So about much apply to or two?

Brad Jacobs

Okay.

from at at XX. X.X the we to were EBITDA at improved end. X.X adjusted times That net quarter debt March On leverage, slightly

base. base We EBITDA generate case without for about And expect that as mostly our cash majority tendering from flow It's as the fixed paying move and X.X pre-pay to by leverage of to more The times a can't something we in grow back for debt year-end high-yield. nature. just you in we scenario is operations, it it.

term the have loan, our yield. do and is debt the But down. majority always which move the And without We we ABL, of up we always do high can have which we penalty. vast pre-pay

X.XX%, I'm because yield it our we're about was yielding being now It's happy before. great. partly that not markets high to And debt is so we're partly due high the as executing, performing.

So that's complex. the debt structure of our

Allison Landry

last to that for just operations, are up an the guys you recent companies is there? their Okay. share shutting light of That's there opportunity in helpful. announcements pick And really down then, some some mile

more maybe last you. Thank broadly on, just you comment, landscape mile? And if competitive the in could

Brad Jacobs

where We're ever quarter, doing record the wins second we that mile. That business first wins. we the new last mile. And quarter mile million had second-best there well won quarter the was of last And too. $XX in in follows for in new last

injection are the million. first our up looking It's customer up business though We good. largest year-over-year. XXX-some-odd business. of postal percent still is this building recuperating almost from half So, is in $XXX The pipeline the loss

yet. up great, We great haven't made We're replacing progress it. making that

mile. We're in also effectively last managing cost

improvement of quarter. XX of basis revenue points. improvement year-over-year. see And basis was It's about XX% was points And an improvement little the that an net of a was sequentially. You that the over of that an margin XXX

was net since we of any quarter, entered revenue margin ago. It last best six our years mile

speak So assuming are competitors how competitors very well. can't to doing doing. some I'm are I

competitors And well. doing We're I'm aren't. to some say. happy very

Allison Landry

you, Okay. guys. Thank

Brad Jacobs

Allison. you, Thank

Operator

of your line next Scott The with Please question the is proceed Oppenheimer. question. from Schneeberger with

Scott Schneeberger

Hello. Thanks. Good morning.

margin on top some quarters? line Matt, trending, over in little view logistics just curious earlier Brad you on question, a guys an You and perspective or if you addressed provide logistics coming could segment thoughts how contract

Matt Fassler

Sure.

stronger of and EBITDA the back FX. you added I impact logistics largest our said, margins our downsizing early contract impact customer in remarks, As would the if of have translation been

rest QX the through last in of year margin, would House year-ago But Fraser that better margins mind that numbers guidance. embedded keep impeded with logistics half than you EBITDA year, of QX the yea, of the As contract in our we in the or in expect our second line move year. had we last in

Scott Schneeberger

on feel particularly How back mix versus that. free Great. cadence that A focused question you then categories low-end, range out the CapEx, how driving the versus with guidance of the pacing Thanks regard XQ. of sussses half Thanks. of and CapEx. cash similar-type high-end the XQ in for flow just you're the to and

Matt Fassler

Sure.

QX the quarter think se. you bigger the cash won't about cash year, provide or per dollars. free of if than through of different. guidance stronger flow QX, don't terms QX we quarters likely the be by So, free in that than flow rest But total

my believe, substantially And then, remarks, in of in about as timing reasons earlier we CapEx. flow think I one higher CapEx, said I cash as QX related to of was the free

QX will or you higher QX was a in QX either likely CapEx in So in than most QX see than year it ago. gross or

gross for So that CapEx bridge help total the to the number year. you should

Brad Jacobs

Okay.

is we now. stock opening important market, not. So market more the than the And think while we're we're stock

three like months. again we'd for thank And So the to hour. you look to in forward everybody, talking to

day. Have a great

Operator

This concludes today's conference.

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

XPO Logistics (XPO) 2 Aug 192019 Q2 Earnings call transcript