XPO - Earnings call transcript Q1 2020

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Operator

Welcome to the XPO Logistics First Quarter 2020 Earnings Conference Call and Webcast. My name is Michelle and I will 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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Jacobs. you may Jacobs, to begin. Mr. now will Brad call the I over turn

Brad Jacobs

the Ravi and joined Kevin. portion Wismans, morning Chief of our Headley, of our Q&A addition, by Thank you, Sterling our our Financial of to Human Senior Wyshner, this Planning Fassler, team, has Relations; Also Tulsyan, and operator. Henson, Good Officer; Treasurer; our Matt Officer. call, Chief for Kyle David Analysis; Tavio virtually I morning, SVP VP Welcome Financial joined who Resources we Officer; newest Kevin everybody. the Strategy. and Chief Strategy as am Director of the have Meghan Investor our

workers the I at workers, drivers the our to profound other by to have during warehouse industry grateful I who and across particularly appreciation who company expressing professions an pandemic. start to our am my customers. and provide our functioning want service essential in frontline dockworkers all our to society kept

hear will will quarter taken keep we drove prepared some wrap safe, in improvements the then to cover people our the then about will Q&A. have Meghan actions Matt up directly April, and provide around and to on the You David and from the remarks and we color business

solid. on delivered We total on economy another North American our we XXX% operations rock we adjusted XX safe, margin our business to that end our in We of an strong started to turned quarter, of of Turning of customers our free the month. the flow EBITDA $X.X had had It EBITDA the $XX positive and focus $X.X and disrupted Then pandemic with balance to strategic basis by that’s cash We am points. keeping terminated quarter our I million even our we our January in billion later review and process sheet February. for European sharply negative. markets. $XXX March strong pause, our employees billion. early added billion of and a our proud end expanded quickly And and in April operational, began of typically delivered $X.X the and million parts a affect in liquidity as liquidity of quarter in quarter a

of flow of of expect to year. cash We this generate hundreds dollars millions free

and middle has an Like all crises, of a beginning end. pandemic this

compassionate culture. the science us our in our of growth automation advanced proficiencies focused, core and data strengths for of end. middle including the Many on in other emerge will Logistics it it we XPO were pre-COVID. and We’re will far the than e-commerce, position side now stronger pandemic, and our of

short-term, bull investment Our for us the mega a XXXX a head I am beyond. XPO That’s in these in on I medium-term of start a the and in and give dollars am am billions why, bear in while in of recovery. I a growth bull areas the

over will With Meghan. I turn to that, the presentation

Meghan Henson

Brad. I key with after The COVID-XX: start XPO’s Thanks to in two to protocols appreciation. will implemented aspects by comprehensive safety of to the and and virus designed fact. the prevention addition emphasizing it to response we’ve exposure are dealing prevent

shift sanitizer, enough holding wipes, workstations our We shift social cable our barriers changing employees redesigning having flows defense. break at apart, meetings strongest masks. the outdoors Inside gloves, including work safeguard in to our one have traffic facilities, and employees thermometers feet distancing only includes PPE rooms. procured is per around globe, between X and installing remain schedules, and can This where chair hand

regular cleaning have schedules. sites Our proactive

our added our current paid to encourage additional home employees we when To Canada. pandemic in they are to paid U.S. the an sick, stay and of weeks X sick leave have off time

we our And telemedicine. expanded health insurance dependents. free for and their to employees U.S. and We access added COVID-XX programs have policy testing have globally all mental X to

team follow been facility overseen As case, are and deep confirmed an Employees cleaning specialists or positive, a exposed. soon we know a notify who protocol our for of people by certified tests exposed we industrial required And are close hygienist. those of one using XX as self-quarantine of who tracing for when presumptive a to we the days. may have

the critical site who of proud safety bonus. frontline the our when service home determine are our receive health for In $XXX world. shut doing their the appreciation the and one-time pay World the providing own U.S. of working am employees we people Organization, per protocols and our a work for this and will full part-time employees month, I pay Hourly will full-time government deep centers in have receive can safely are work. services, receive LTL warehouses rate. extra CDC, a we announced resume and an to Canada. follow we the recognition policies, supply employees of nearly We regular employees chain bonus colleagues a hour of Health with in cleaning, of down around we send the all XX,XXX employees $XXX guidelines the our of our on pay. on top When of contributions $X Later

We safety will well-being continue and first. to put their

I that, the turn to call over Matt. will With

Matt Fassler

declined Meghan. Thanks, to using another North our review internal are QX this our excluding day we renewals on despite the how in year-over-year at had increases contract performance while. been customers. healthy of I demand. current by profitability to remains backdrop with due Yield, impact Starting initiatives from and our business discuss trends. quite Price year-over-year. subdued has primarily Tonnage X.X%. in a optimize transportation per improvement case X.X% fuel, will then for This segment, challenging activity industrial X.X% the American softer LTL improved and our

LTL us gauge aiding yield are prospective profile. within proprietary Our our pricing elasticity bits helping for tools

about In up addition, all account in in XX% of local from XX% were quarter QX. RFPs automated, the

us driving and times more helping is turnaround business. technology Our faster win new

business past fact, our each years. in in In X over and it quarter posted LTL a new won the double-digit every as increase has

by basis adjusted improvement XX.X%. was improvement ratio OR initiatives. XX.X%, excluding profit XXX XXX points to QX the adjusted to strong by and real Our by improved sale steady result improved basis performance gains driven of our a yield operating our on of cost points estate, control This solid record of

level workforce asset we environment. optimization for Also seen and launched us both in planning empty the dock XPO factor we load a line-haul reduce since by have X% drove model. our utilization for QX, X% the helped productivity, XX%, and by Our Smart capabilities new best so tools XXXX. to improve up our This year-over-year miles win

gross brokerage, freight to X% which revenue improvement on Moving sharp was year-over-year declined a from QX. by

we – that rates stabilized. brokerage, points declined QX. in XXX as across year-over-year in at day growth revenue is, and dry a This to and food just spot by related customers others XX.X%, surge freight increased freight eased, the X% points the Like tough sector, against in net goods meeting it experienced for staples fell industry, as increased the margin home. contractual from increased retailers. consumer significantly sequentially XX was per producers and loads accelerating to across and stayed from people in truck late brokerage, basis quarter the brokerage demand comparison volume our market Within both the X%, Our but basis by

to transactions. us carrier productivity an March driven by digital traction. rep and in improve new XX% QX, that we freight brokerage Connect continues our launched for Weekly by active our allowed by high gain forecasting our automated and in hit new users algorithms XPO Our We increase XX%. saw in weekly capabilities accuracy truck to marketplace a pricing improve

year-over-year in XX% declined quarter. revenue the operation, mile last our In

electronic and X% in growth meeting which we exited last last equipment. quarter accelerated middle postal mile mile business goods we year, had in year-over-year. our demand injection, a in first increased customer All for told, last of quarter the heavy Excluding core to standout fitness the

new also online. safety and big benefited during social and trend mile from PPE in-home the drop-off distancing bulky implemented curbside protocols last buying for in installations. deliveries goods We and towards March, including We

Europe, to to tracking March France weighed to by plan transportation COVID business, into about We XXXX, were revenue QX our Spain. impact Turning FX X.X% on declined versus percentage revenue X in points. when began by and

numerous geographies to continue in across hold We leadership verticals, and positions service lines transportation Europe. our

as fell France XX.X%. status by adjusted provider Across margin LTL our to basis rose the and by provider LTL one segment, while points adjusted number our in the X%, and top reinforced EBITDA in three we transportation example, Spain For UK. EBITDA a XX

North in largest reflecting Moving packaged some segment, downsizing margin logistics vertical. our America, Consumer with business. and of revenue was X.X% lower the decision our declined strongest customer on to our business to exit our our goods

cost Our passed productivity XPO I proprietary in pleased first to it warehouses. black XPO driving and Direct are And in in tools the Smart anniversary. staffing solidly operated efficiency as report am its our that

and Our address capabilities. shippers brands XPO their Direct need. is ever. want now value and omni-channel shared supply Customers We to chain optimize with augment built who to to model flexibility direct-to-consumer resonating distribution looking more their e-commerce than that efforts

food negative of In year-over-year. points. in X.X% FX and European retail our percentage were about Europe, by declined X.X logistics logistics. E-commerce had verticals a impact strongest revenue

logistics, the a intense surge we our wins We we logistics margin customer quarter to continues interest level throughout XX seeing have have segment the to profit improvement efficiencies which core improvement reduced are and resonate. loss-makers in initiatives, Since third of Across European effort the drive Our the business drove XXXX. one as we pandemic our our is business. in highest whole, to of management. since doubled seen new

X.X% need into rose logistics year We and margin X% that to adjusted opportunities EBITDA for are rose ago. and longer EBITDA some cases a year-over-year converting Adjusted in term deals. meeting X.X% our from segment these

a Moving down $XX ago. million year expense interest statement, versus was $XX the million income

Our from XX% ago. tax rate effective GAAP to year a rose XX%

diluted ago and year the QX as from about fourth $XXX average count peak of weighted million, million compared a down share the shares in XXX same XXXX. Our XX% was quarter with our

$X.XX last diluted all EPS prior verticals. and and in versus year $X.XX stay-at-home Our business the our across major diluted was year our is by We customer on earnings versus markets. $X.XX operating our per remain share, quarter. lines with varies by mandates in demand The $X.XX pressure adjusted and up regional of influenced of

seen example, and beverage of and food pockets care. For strength we in e-commerce, have personal

overall the March, was This North late eased but been of slowdown business. has declines We from sequentially percentage improved declined per March. brokerage on rest load LTL the QX. Our in conventional margin with softer company to yield XXs and tracked net our with in not margin in is which flat for sense. LTL performance believe line performance mid surge saw revenue dollars transportation volumes basis, similar segment. revenue Truck revenue American any smaller a in from low logistics, notably the in experienced lines industry the levels from in we in have a of line market full April to in April our and our

been For many customers, it’s a shutdown.

earlier. While been France business, their our and mentioned lines have up across temporarily we Spain stores and operating some customers factories. of I closed have and

prepare the bouncing Our those transportation and early Volumes bottom UK U.S. hit along mid-April. levels the April countries the its and emerge have lowest modestly volumes in as in activity these been are recovering to our in since markets lockdown. from

improvement. see and industries geographies reopen, we to As expect

XX% backdrop, XX% this and of fixed. factors: costs our are important three consider are Against first, variable

addressing aggressively been costs. our have We

Some are of to endure reductions our environment our normalizes. power earnings when post-pandemic, expense likely the aiding eventually

are manage Our our through a XPO and structural chain basis improvements. real-time automation optimization in driving route supply are LTL and Smart us cost helping on volatility planning the investments tools

well-being Second, discussed, the as our are prioritizing people. we Meghan of

the related million expenses second better expect up efforts And hard a to to of to $XX it’s more directly investment. in We these imagine or quarter.

the people Our are of bedrock XPO.

dialed we committed back. Third, remain of way investments. number to CapEx important We a growth

two later the of opportunities ROI our line-haul, across final delivery pickup our and will warehouse For month the instance, this Nestlé, highest the stages launch we which and optimize are of in and continuing to future and prepping with of are the LTL routing we company.

be to from positioned for withstand better built is disruption pandemic, when emerge we will XPO the even we and success.

are For that leader has and logistics. to E-commerce a the after example, accelerated continue e-commerce growth globally we we in pandemic. expect

one We expect in big e-fulfillment reverse leading logistics the last number the mile goods. where we're solutions outsourced this logistics as bulky for S. benefit depths number advanced platform for this we've to at a Europe, straight automation, U. in the demand platform in platform one envision and the scale the expertise more applying We and of through leader been downturn. providing and

types customers chains. see visibility their data will more who more We supply of by all want in value transparency placed on

ongoing and our our here lies marketplace, freight in and value our Our analytics, learning enhancements. pricing intelligent digital routing machine

leaner. cost will Our be structure

focused day on disciplined risk-adjusted the out remain seeking strongest as allocation been capital we one, have since We returns. will

a are resilient organization. We

our been COVID side have we'll on with the relationships for the customers and of be them our there stronger We curve. other

like I'd our Wyshner to the over to turn CFO. Now call David

David Wyshner

of QX, of our Thanks real a $XXX quarter Matt our received including then closing program cash generated and and million share estate. million appreciated We Today flow, million $XXX liquidity, good our would CapEx selling I sheet sales our morning some of on spent operations like from from and and balance first flow in ongoing asset to everyone. remarks. $XX cash proceeds discuss

year. million result As a cash QX flow last $XX of million $XX free of positive the cash we in quarter in versus a use generated free flow

COVID turning million from As the on trade $XX clear disciplined our the became quarter. pandemic We about and programs of capital in receivables derived even year-over-year aggressively working and our managed receivables became March, into focused cash. an benefit in we collections incremental scale the more

stopped that of the was slowed We place under As earlier stock the below cost declined March it at down in We in share early March our plan back March in repurchased receivables late our quarter brought stock buying XXXX February X.X a price of naturally $XXX triggered level. balance March. our and and which trading shares put revenue in mid a dramatically. our in when fairly million million

before be expenditures and currently is We will a million that the pandemic. our also year significantly from plan back throttled more capital estimate XXXX down which gross $XXX than roughly this third CapEx our

March, in as us As top liquidity markets became strong for became volatile a increasingly maintaining priority an organization.

senior $X.X our a billion. cash issued we further credit gave March financings of April billion liquidity early just In and facility I of a liquidity in us capacity XX. we actions forma $X.X ABL added $XXX million borrowing million to cash ended end to April pro as including X.XX% million late the $X the quarter That facility and at of $XXX plus our billion. drew to strengthen addition $XXX quarter million In cash brought ABL March first year mentioned These another $XXX we of liquidity on available our five with balance of notes. of in $X.X total billion

we have we until fortified about feel XXXX so significant liquidity debt how strong great already our position. have mid maturities We no

at X.XXx which end of quarter lower leverage Xx our Xx of targeted adjusted below just net EBITDA. end range Our is was to the

ground while and companies we the and the is feet momentum business operate gives essential of us So a and operating on uncertainty all XPO, facing highly an like continuing subsides. as industries, the benefit that environment, to unusual when have

sheet that have forefront the and when be exceptionally it industry recovery an our leading the indicator, balance a We will at we strong meaning of is comes.

to its of I global provides is operationally demand and to reliable, a on that customers employees happy be be I'm March. to providing both I am part solutions XPO joined know, generate that be happy may and keeping happy a unprecedented business resilient that an a safe in to team important. of and logistics in I team without to and our part our transportation ability cash is environment. essential are in of in flinching am management you and services that As focused early part

look With questions. your forward to that, we taking

Operator

your Thank with first Our proceed Wetherbee question Citi. question. with line from the you. Please Chris Instructions] comes [Operator of

Chris Wetherbee

Maybe spike basis, not a side, necessarily basis-- LTL, sure segment, because guys earlier TL was March, you freight look like maybe how the of on rates? of about EBIT piece indicator business guys. appears looks could sort a the morning sort in but COVID-related talk that good of an of breakeven an of color Hey, be Can that’s the Can related on you little Was the on to sort at that maybe bit slightly earlier that it you having the an on to that what in how sort if transportation it EBIT XQ? European Was business? of or the starting some of tougher and sort of brokerage there? it the am as business it, you in of us ex- either think just piece give on impacts trending that of loss-making. transportation about was I going recovery

Matt Fassler

Matt. about Sure, there. Chris. It’s to Three points talk

all, felt of with of in in the impacted was the was the Chinese place COVID. which And down of First COVID the the felt slowed is the as you freight manufacturing in moderation early we the early impact know pace impact flow U.S. in really – of China, QX in as by of that only that impacted country business intermodal.

again, quarter prior a saw So, intermodal place that throughout the slower to was really the we early in we it March. – only in have U.S.

on an had impact that line. that So

continuing the rates was stabilized. the market industry think been margins was Obviously, of to to come and entire a That year-over-year. – function lower revenue second brokerage. The spot about has net item freight primarily contractual the down is experiencing within

month, look positive and are units the And a numbers our Spain a see did for segment that the April, the margin weighed transportation dynamic country, we three moved as we that on at discussed, line in reality kind saw and QX. on in business of France significant whole. improved slowing EBITDA basis business that among but We transportation each in for that’s for March the we results that we and those have basis also indicated slowing Europe showed the this earlier and being item. an by EBITDA in as of in Those QX. most we mid of in early that ex-LTL to that on third, As country did solidly items an that transportation countries were

Chris Wetherbee

Okay.

Okay, cash And sort that’s bigger impact free the free of helpful. so I perspective, you have millions bit appreciate about you cash cash can that. specificity around about you EBITDA terms hundreds flow. I question of us free relative about Brad, this generation, sort a maybe the business parameters year. XXXX, maybe that for leverage, you several would of then of to of a the Do flow free of picture through know cash flow you generation When and dollars of talked you think some little an guys? give be in current can de-lever think more initiative

Brad Jacobs

a know perspective, we’ll is out. our free know. which it’s generate that, bottomed, of We – getting don’t see pandemic bottomed We United specific we really because Europe, don’t has stabilized. on see cash know than if whether if Well, that hundreds of really lot things going more the can’t to coming fast, don’t yet. States, we will know how sharply, trajectory. flow don’t back the play of continue see even better flow. We it from that cash volumes millions though don’t be We We of dollars free we

it’s it’s get know how much better. how get going and going So, to we to don’t fast better

lot of of be So, models, cash here In imponderables there free though. know. our in we millions of don’t really are a generating dollars of all that hundreds scenarios, we flow, should still

same In the parameters. terms of leverage, we have

leverage common the leverage We a this our but company target. for have put to of will. to like to returns we lower the Maybe of the shareholders Xx always In felt Xx some us is shareholders. leverage that would there who are shoot environment, for at to right the amount risk, improve not

We will revisit that at the board.

I know the de-leverage, what think a to be, ability generate will substantial free cash firm we but don’t be the flow, handle will on so don’t the what multiple that. have of we terms exactly EBITDA In on we will

Chris Wetherbee

Okay.

still is just I a think here. Maybe the strategic circumstances mid-quarter, are about the something get it helpful. understandable about sort the how you that’s just of sense Can here, relative on I think wanted you valuation business how we talk one in a right to table that standpoint? once the stopped while given have from of alternative value one of that the you conceptually Brad, the obviously now past, business? little we just you, that bit quick Okay, you sort stands exploration is get which as Is a

Brad Jacobs

completely the is off It’s process review strategic the table. yesterday’s Well, news.

not spending it We a today. minute are on

the at of value, we the by multiple care of we EBITDA terms the flow think, do safe, significant the is think stock take company discount all discount the do parameters, year, improve multiple to we not perspective, this of maximize on the of X, will about company, intrinsic over think the what to company, question people quarter flow we and value trading everything what and of quality look value the we of can ability keep years, cash but focus at particular this and In the the and We itself free is its from course. the our particular generation due and look all long-term can revenue XX the we cash that. we at a the in next it’s from even

Chris Wetherbee

Got it. Appreciate it. time. Thanks for the

Brad Jacobs

you. Thank

Operator

you. Thank

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

Amit Mehrotra

at and terms still course history in recession recession, of the no in ‘XX kind were a recession, you but Hi, in earnings of had XPO’s Thanks, company there operator. you ‘XX of profile a trends is Brad. Hi, how everybody. building really Brad, point. that industrial

type of business. are So in the implies in that XX% of that context, the said which I you cost obviously leverage know mean, operating fixed, I

linear. way the doesn’t that real not course, it’s world, in it Of work really

can in help it? kind was hoping anybody think maybe you the or of to If maybe just scenario, XX% about think or a saw I or Matt about we that’s really So, us hypothetical decline well would translate David Any way opportunity. to as a just of company structure better revenues should of the kind the there variability color really how cost EBITDA the think be helpful? declines cost I the in given the as that non-volume

Matt Fassler

variable, So, we number two points one, our make on our as detailed based in current XX% take that fixed under are cost trends to experience, have mix to proper and seeing the we business. the on likely business, built is the will to what look that, revenue the think models you of right XX% scenarios. about earnings different way outcomes what And like will revenue

cost we course, working on cost structure. our attacking we our Of are structure, are

We happening. is obviously are to cost that take variable looking and out

things, pains be the that to a passes Obviously, top you take formula a move in costs concert business moment customers for of of that what the with move that have also we we the And looking to pandemic our taking about we that your hoping economy the in we withstanding up prism as a There of recessions that that to model We and is certainly are cost about the slowdown, that is for build function that move just this expect shutdown, the slightly hope reality is again, that have current consider industries gets certainly progress in is out of the of to expect But not historically And lead spoken a that will would that as appropriate a people past quarter. formula QX, and Consider to obviously, is fixed the have as other repeat our past would out associated their costs time. we running are are work that. that this used think That’s two this our of care XX/XX in segments does that. really not we and with and and look favor. that quickly. And and we transient expect periods are – unusual. is in we facilities and that time. shuttered business. and of On the one, for like. the test

Amit Mehrotra

Yes. was answer, profits the wanted I only that’s – EBITDA I quarter, just over down to $XX first were know clear I follow-up just on were down but only million. that, revenues And down and a very $XXX appreciate you – million

are way obviously that’s to -- all about number there years way good the the quarter, that to is some on saying think it? annual and year to that the and is like going you So be about maybe really right the think volatility this in performance is

Brad Jacobs

we're in is we rather are had we're we different I comments we obviously modeling than to the the now, I we for year, visibility a going in Obviously, mix very point leverage your despite modeling. thinking very the a Thinking of Right revenue declines appropriate about going performance is specific world out, have the but visibility are are modest made in cost different fixed/variable scenarios business as about basis to math with order did a we to good that for the that QX. of. at magnitude are that generated QX we in the the that operating and the but decline, of way our revenue to we revenues QX. place, We of have which seeing a have greatest QX, it's job good that reflective We you yes volatility different because out and we that and April the proud how against shared to-date saw end the with the work through play perspective. QX see April, discussed from you managing the

Amit Mehrotra

in for of over those market? two exposure talk specific program quickly very North Boeing and question North last impact exposure the the is and the And Okay. but aerospace got markets end which me time, in American half on exposure the for think you've about talk cut logistics? logistics about the I you obviously the getting can production just on automotive XXX American

Brad Jacobs

nothing way been or revenue Many up digits Auto they Auto up the auto and news down. in -- good if is than to they Ford The lot a be our all next talk our of to to peak, at it from better mid-single or few going is, customers go how Toyota are nothing. we something, fast they're the been tied to to where up going you have opening have has to weeks, so auto. they and on but zero. we'll of ramp see Honda, get

two valued the we military is of military of positive. In commercial. stable is things strong do the The part do customer them. do And we ours. and business terms is Boeing, Boeing really outlook and a for and We of

could On be not the way, could go down there to down way commercial little lightness, there nothing. It some way, go won't a but some bit. somewhat, certainly go down. decrease. It'll down It'll be side,

Amit Mehrotra

Okay, your appreciate time. I

Brad Jacobs

Thank you.

Operator

Thank you.

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

Scott Schneeberger

focus much of just Thanks there ecommerce recent in a end address has seeing be level up Thanks. could on pressure morning is the very to obviously kind in please environment? speak to end years really which but market some lot environment how XPO current of big strength good to that market a April in in company to built to the the the to relative you the seems total they at this of bad percent performing company the what is And a are good accelerating

Brad Jacobs

except till actually in out was if going the strong Food It but, April, frankly. board. e-com and else up vertical parts food also not for was down. performing was Well, a phenomenon, end was March logistics beverage and most much it's of you across the Scott, now, a middle business other you and to out take a It in all opinion, e-commerce phenomenon. well as if and as going the strongest from our everything be beverage, take perform April. the right us few It's because saved our of to transportation of great not little a in secular did cyclical specifics,

and the people We the X% reason of in during taking We ordering big quarter DIY pandemic homes. home exercise last expect business big online. online, that is that equipment and -- of had a behavioral home organic were ordering of the that inside are is in electronics to People garden People online lawn our growth some are post-pandemic. we standout, a that. these and from place changes were and mile their so growth and a that's beneficiary first people were revenue improvement and continue appliances ordering and

of so and if against globe, in a you Europe we're logistics, and in mean, reverse provider largest diversified here. course so omnichannel and we the the And do that’s and on. also the going at recently. trend Of management things e-commerce many look and different I returns then for around winner e-fulfillment reverse so also been services forth positive really that's that's

exposure So, is good it. the of now I think e-com not a we to right It's be business though. good have to a and, fortunately, place our majority

Scott Schneeberger

curious what the And million am I regard then a growth long that obviously Thanks. is now of $XXX thanks. billion you XXXX? environment to that could look this focus there's and so with to could an on be Okay efficiencies just in the right lot update how $X in plan initiative just term meaningful of profit cost provide

Brad Jacobs

on. very are of safety speed initiatives but prioritizing are important the for Obviously and some health full of the ahead. and health the we're pause, the levers, financial kind are levers but XX the are XX still the on still of our employees levers employees, of XX much The over others

and unnecessarily. we we all initiatives table leave of involve business the get lose shouldn’t pricing projects pricing, lose don’t that on pricing our speed get still pricing. ones all bottom So, are biggest don’t businesses the And business, we our the and optimizes we every business affect full of are it major because the right, we line, our that algorithms, and time we should money pricing ahead get in because that

growing, The is other and growing lever automation. it’s automation, is that in importance, warehouse particularly

on the of X-feet everybody? In warehouse, farther we warehouse of even be within learning, a deal spending workers on do for And still sake. LTL, we cross In that of return the on the over doubling forget are had about it, frankly. Customers you because on before be around we one for LTL, efficiency’s that, we or to run it, no in even all and money all distancing the time, automated keeping leader long-term, X-feet between money like can in safety’s in are we a automation. like spending was that. are One down dock warehouse, than the either along automation to a machine in with our – That’s facility some you focus the sake, equipment, and on on things do on that our our one feel how How distancing is of good we run way about are everybody? the focused the and medium-term, warehouse there a big going we with but leaders it’s top are something two our and that. robotics that AI

tools the other to accurately more we our out the of those majority full ahead. this been been levers, am I Smart as where to we tools, so have productivity, speed would the to the pandemic, to have It enhance never much happy management planning we so rolled would that also because Smart random. are headcount labor locations, prior manage Of workforce the have workers able did. we had

getting staffing, on the shift Smart between right getting times right and the of size and one. right blend that saved getting So, endings. the day the full-time part-time, shift the

In are full still That’s speed we that’s the that’s optimization. So, something working important. still ahead. on P&D very LTL,

– not haven’t that. on are We stopped

are of at working line-haul pricing them course, you levers, there. by We the technology. are the still on most When and, XX the optimization look of opportunities driven

tech work made and keeping of working been our on focused highly home, from always have from And highly lot very on team and important they of them home course, thing. that’s a productive tech levers. progress these is a all So, kind very, of

Scott Schneeberger

Stay Great. well. Thanks lot. a it. Appreciate

Brad Jacobs

you. Thank

Operator

you. Thank

from comes Rosa question of with America. Bank proceed the of Ari question. next Our Please with your line

Ari Rosa

guys. Hey, good morning

you Brad, are individual and contracting you costs SG&A guys meaningfully whether preserve see opportunities at if costs or to you talk looking opportunities could there about the where into, margin are cost environment? there, are some cut Obviously, So this the but maybe to to cut revenues in segment level?

Brad Jacobs

costs spend Yes, dollars Ari, of are within Those categories XX%, variable. big billions are things The of lots are two XX%, on, and purchased billions rising, that labor biggest on. that transportation. money two of the and of our we

when have has go we and labor has that up to On we have do. volume down system them for the more -- we when a that labor don’t have volume labor go

that’s month. technology So, place that is every process just self-regulating cost been for improving in the powers a control that a we while keep and that

we out On because shipments coming go third-party we count, add purchase purchased load in, business, add don’t capacity, we and drivers, have it’s our don’t don’t transportation, the fairly if have if similarly, in don’t, transportation we we where don’t trucks. self-regulating,

model quite money spend because what the So, of bit, -- self the on. corrects a we the way

Ari Rosa

to lot but Great. cash of bit hundreds a curious sense. little my second That downside hand have a in then maybe question question of are millions guys of your that still dollars a generation you flow you if take why just cash? And scenario even I'm guys cash a of silly makes targeting your for much are on and what so do intentions free hear

Brad Jacobs

do had learn efforts. protect about thought How had virus? people? had to We us. training. was social learn was, everyone, stuff. a to this about people all up people. Well, had to immediately, to protect to our learn We first large of We well, learn a a And we about when and had It learn shock our XXX,XXX the about lot quite that learn through to have do including a We took our that we from And we our the percentage quickly. mind to hygiene terrible lot was There pandemic hit. We how PPE. of distancing. went

that priority led after became organization HR our So, multi-discipline that. effort top a that and

Paying where Or, down X maturities, We're example. where still pre-funding we XXXX creating the and allocate of investing by we for think going capital of CapEx. CapEx shareholder see terms in growth. forward, debt, value can would In we about X things.

We going have logistics joint because coming with that. that's and still a in for investing businesses next future goods a We're our in still XX-year Nestlé, are storage. venture, venture there's a the from the them, up of few either wonderful came that China need people open no so have way, the We in warehouse joint contract to months. demand

and Or, customers logistic many with that. helping help. business many, into customers are reopening coming who need back contract they We are and

investing and because So, we projects. that return those very we are defined see CapEx high on and into measurable a

third terms category would look capital of we in allocation be The M&A. at

something we're of company mind right now allocation not it's are -- is over a it something think and talking and top capital the fourth watching. category buy then to about Zoom is be kind it we would While of -- repurchases. we share of difficult And about

and about the in more always I to go of mentioned. thought we hard of things $X.X will -- financial be on sense the cash. our up company the you broke billion it perspective, It's the do was our to liquidity, to a load stock as be So, wanted our employees. survival have makes put other same back that it's like the breath want buy And, of hard to All we survival of to at if that. we when from it just to three capital require I looking things three or one these the and seeing stock thing

with the got transactions billion have now over we liquidity did couple cash we we of we when and various of million bond some $X we offering $XXX $X out raised in of on quarter a and the bank, high-yield and had have went So, a we in availability billion lines. and banks

don't a is I to come financial of know another cash happen. flow duty is we've, if We So, we virus our going back. going don't so surprise, billion which could We if protect we're have $X.X and that the to the don't perspective, that. to be a liquidity know done know We company W. from there positive, feel from

I billion having and liquidity, by us gives us gives options protected protection. So, also $X.X it we're and feel and of flexibility

Ari Rosa

Sure.

environment you you repurchases repurchases? and of would a and see to to makes have what resuming just would consider if or sense this that you share with lot follow comfortable on a share get would going So, that in back quick not

Brad Jacobs

been on be will have disciplined more uncertainty Well we've authorization, because million even always than buybacks, about application stock and the repurchase $XXX there's disciplined capital on got it's of to but program the have more left risk only we and the more future. -- in not we

go buy retroactively, it's out. it not rule I for don’t highest priority announce back that not would So, shares, And to the prospectively. us but we

end we at repurchases announce did the So, ahead quarter, any not of the we would of time. share

Ari Rosa

Makes time. for sense. a Sure. lot the Thanks of

Brad Jacobs

Ari. you, Thank

Operator

you. Thank

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

Bascome Majors

said earlier the are you Yes. questions we if Brad, you hoping some was on a and about downside I XXXX operating flip XPO of in could leverage. beyond mega-bull

revenue expect come free we leverage EBITDA EBITDA? capital should reasonable see flow you further out global how what the back for to recover? organic we of back kind freight about model So and maybe returns modestly, of some to that cash should versus and of plus operating GDP the to if you to like on out EBITDA Thank might do come CapEx of that dropping longer or global and of as a if think working look economies the guys, recovery trend term growth perform what growth see expect from and And leverage you. mute

Brad Jacobs

the base this was XXXX case XXXX, thought much whew, over happened. course we another was, think base-case XXXX lost pandemic. look I for earnings in a Bascome, year crazy the to to we stay day. fight kind a out prior In protect XXXX, thing are before to of stay we to questions over thought to solid, look same well, the that it’s look we pandemic employees, And the XXXX stay as pretty this of scenario safe, think all protect like scenario all are think but be the like year a year should works it’s itself with. the go, our sheet, glad at scenario, protect we growth. going And of customers answer that our those that we we our the live year. what with at is strong, back look balance This is And relationships and and

to leverage So, we flow. transferring cash from to will EBITDA, transferring see revenue operating growth free

We will see opportunities. all the cross-selling

see in places because like of the opportunities exposure will the fast-growing get to e-commerce. more outsized all our We share, industry, market to

Connect, dollars few investment see ago our seeing, delivery and I we and will into and fruit, into so the all been freight automation, on minutes digital the of and have billions line-haul LTL pickup billions warehouse we in of as of We projects the and mentioned technology, in marketplace XPO forth. made

with I a crisis cost lower of come the we out structure. think will

partly because and because I I to how and as more cost; all have just how have think out tools industry, in it’s -- the we And our labor just rolling that’s work many they very, we many as been costs think just how companies, travelling, been the have, learned, to our of working very, out all the time Smart very this getting well. work companies differently; big sick of the to travel fatigue and leanly; reduce how reduce cost entertainment to and in office. time being not

the And crack is they focused greater as we to nut we are work in and just to figure would think everyone home working making ways out will on have I be I so if the productive they just office. think population. home from as as from a sure were going And that

from able you in home Now, are or driving you truck. if won’t be a work the if work to you warehouse

the same, look will fairly except more that will there a little automation. business So, of be the bit parts

Bascome Majors

other or ones for look Thank If at? we about maybe you. flow is more obvious cash cash that forward tend you to cash I related one thank more that items to Brad, the flow think comprehensive that, the shift taxes to answer. front on anything could expected beyond add going as we any

Matt Fassler

Bascome, income EBITDA are will if well. be cash as lower, lower taxes our and our

flow more CapEx the cash spoken coming about have think down about from broadly, our we plan. as we original So,

likely taxes original plan. lower than our cash be Our to are

is capital with very revenue Our be If year year, softer, source to cash free flow. QX. a it the likely working capital be would strong, for out of more how source the do be cash. If the pieces was for it revenue moving a a lot favorable for quarter. fourth Working in revenue turns has can to it in use think Those the are a about cash. is could biggest of is where

Bascome Majors

you. Thank

Operator

Thank you.

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

Allison Landry

Good morning. Thanks.

So and performance solid LTL, on load good touch tractor I obviously up wanted on a to yield.

sort bottom, assume modest billion year in the And made the this So your is up of does for there Is XXXX a at also Brad, some get recovery LTL year? out is EBITDA to if maybe lost some QX segment of $X still pushed a kind a kind of least ago year. is we couple next half just we on of comment, or by hopefully the of growth? minutes should of back back into that that attainable XXXX you and the

Brad Jacobs

Allison, answer is, I don't The know.

how out. the plays see We this have to all of timing

cash down. of up LTL improved up quarter. excluding of There Timing productivity and a improve real XXX We income points We its year-over-year and have its it, new basis with that we I’d basis lots load estate, steadily steadily flow -- OR. in action had points estate like steadily up really a -- was XX% a LTL many X%. record It business had were basis. without our EBITDA call won, margin on XXX will the a it very quarter. clear was points I good returns. factor dock spots. real The was it's businesses, in operating bright path We real all with estate. generation, X.X%, quarter, free generation way, improve mean, the will nail first improve its by of hard which to great a

economy is So, is The yet. for not we're open cylinders firing problem on the all X LTL. business in industrial

We more we -- So, decrease, news. has bottom. couple That's XX and to forecasts. of moved metrics. as was and biweekly We forecasts. It whole to are Week after XX%. those weekly almost where were stabilized. forecast. coded, a started we as XX%, it bottom. that yellow all to They has. we green, them months weeks good as were even towards little morning were about we There the found down every watch a have tonnage used bad last not And week, seen it's and gone the hit of have they watch than news seeing stabilizing turning do so dramatically metrics much turning is over It they’re red. pleasant the industry color very tonnage bit started The they

We LTL to forecast. tracking are forecasts the and is doing now, daily

confidence I confident that So, we the cutting I working LTL. position in like we I I $X that. It's are the management them. we'll really in in LTL. the have great following predict in year and on, it's next I'm love EBITDA confidently to do or to whether LTL, very get year. of they early have projects are edge. our billion too believe

Allison Landry

built declines related That's in enough to you contract there any the contract Europe and totally remind logistics, through Okay. global structures imagine the the and America? us specific if protections to fair. protection and between such could are are structures you differ would North demand but Contract help think that weren’t revenue pandemic mitigate you. severe and Thank could these of type I

Matt Fassler

it’s Allison, Matt.

that's the transactional. were portion to volume-dependent, speaking, into that logistics better consistent with contracts, different some from but than we not us another the is we is point. the purely verticals means The way One which point, we some on an regions in that sectors, there's impact, see We from to built, see the expect protections and QX have the piece with or designed some contract have contract have model ranging the is lots have more that built fixed/variable, your of protecting decrementals so of and pandemic, significant not, that's for to of business are of would did very designed was and other slow structures, Broadly what end contemplate company, previously contemplated, which fixed what cessation because to the incrementals cost-plus we which customers activities of for down. were will exclusively picture, working. we in intent a for the slowdown a in our kinds broader to expect global the for in or big regions but

back getting the almost head there, business to to our not contract And Our have our by the benchmark that expectation, on QX. before pretty levels, is visibility well quite yesterday, the get closer of good European that having the end logistics to we at volumes par, of European spoken end close going of year. recovery, but are with

customers long a that so fashion. or economies running and So, is resilient in up form as business, very and some are

contract European good So, news of from that that that's an inkling logistics.

Allison Landry

perfect. Okay, guys. you, Thank

Brad Jacobs

Allison. you, Thank

Operator

you. Thank

back any like closing have over the of end to the turn I’d session. reached We question-and-answer Jacobs to floor remarks. our for or further

Brad Jacobs

and upcoming operator, our you Thank be we of many conference into seeing for over turning you, conference. everyone thanks video the And calls. in will season

each to other and appropriate, We in are it’s the forward to when normal. time shake be see hands a us to, where person safe hug or looking back for to even all give and

your So, great course. and you you due safe. to support for thank talk day. in a Have Be

Operator

This conference. you. concludes Thank today’s

you You wonderful may disconnect day. time. your at Thank for lines Have participation. your this a

XPO Logistics (XPO) 5 May 202020 Q1 Earnings call transcript