XPO - Earnings call transcript Q2 2020

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Operator

Welcome to the XPO Logistics, Second Quarter 2020 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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Brad Jacobs

you, Thank everyone. morning operator. Good

portion Ravi call, Relations; our from have Matt Wyshner, Treasurer our and SVP Senior Human Fassler, Meghan our also of the Kyle Wismans, In Officer our addition remarks Investor FP&A. will of Resources we Chief of Chief our Chief to my the Officer; Officer; and Financial Henson, Headley, you Q&A Tulsyan, David Tavio Director today, Strategy hear for

by flow. was notably better severe adjusted quarter challenges did revenue, second dominated was expected and free Nevertheless, COVID-XX. than cash we The of adjusted-EPS, the deliver EBITDA

down and all company America America month quarter more operating we've per the a both revenue both April are The year-over-year trough North June. in April, but Each to sites seen In showed continue with transportation the April has year-over-year, to our in was logistics. being Europe. June, LTL XX% ground has For July. gone a day recovery improvement and and XX% XX% and down in from been for XX% Since in of in Organic just was in in for gain whole in broad-based the North regions. down North sequential our in only in as across improvement our tonnage us, a rebound in open. example, Europe American then, down we recent

priorities also want logistics going by to quarter, a business She’ll the We Europe These Officer, reporting first the that our diversity the back our pleased high at we Chief LaQuenta be who And Chief this The turbocharge and leaders are me. These blue onboard. Transformation Executive Alex France year. an at record for by business I'm tonnage from regain have came XX%. that initiatives also continue are Diversity positive appointments to the of we rare our up into XX% July. to trough June. day Operations. pallet work our in week. in executive Pelleissone in was revenue improvement our mention impressive Iberia two XX% profit month has of the half excited count European increase Jacobs. June I all companies. We're are have in of as initiatives. back them was directly is Eduardo a day new strong will both per LaQuenta Vice U.K. end extremely the us, is of trough. up champion our year-over-year made operators leading with President trends Officer the to of X% In Santoro with three to chip the LTL and talented in per from in

it organization employees safe a I’m focus moving has proud wrap There extraordinary while keeping are our supply of our our on our So is the but positioning placed pandemic, keeping with unknowns for customers. up, throughout to of lot chains still the strong. COVID,

are investing intelligent of future for our automation been by capabilities, we've of the accelerated solutions years demand For warehouses outsourcing. e-commerce have customer been These for the chains, industry in that including vision in supply high and trends our pandemic.

their team I XPO. privilege the for intense Finally, grateful that, am And dedication to to unusual I our David. how It’s David. presentation such I'll to with over say in employees times. a want again lead to turn

David Wyshner

per Thanks figures reflect good detail from of due our are quarter All quarter to all operations QX, share spent in CapEx review beginning I'd our few we like from adjusted Matt of adjusted year-over-year and everyone. liquidity cash at of million than flow outlook. the sheet COVID, expected results, a second an loss second will $XX $X.X to minutes. balance the asset in three on segment our quarter. generated We better the sales. they Brad but $X.XX. and million $XXX of $XXX received the Today $XXX we proceeds million of million and revenue billion, declines of morning and and discuss generated EBITDA In

We've pandemic to in turning our became flow disciplined more terms. exploration receivables flow positive to to This with cash we million, which year-over-year quarter. alternatives. a a our into $XX of flow our increase aggressively, million of cash $XX free positive payment even by during free our represents brings cash As the of about and having been cash. capital respect staying outflows strategic million generate year the cash $XXX generated working environment, receivables collections working to We the reduce with free million $XXX our of despite disciplined related year-to-date result managing our in COVID able to customers this

it be $XXX expenditures top as the financial our year. throttled us capital. of liquidity that any the shares to result months, estimate course our will our asset million this quarter, repurchase a We though our million have to $XXX normalized four our be capacity. as last we CapEx as trade be opportunities reopen And balance in demand our continue from issued for estimate from to to significantly continues our our around spigot million programs, estimate working regular quarter, this sales, planned markets second the gross Even an a strong didn't are have billion cash $X.X business priority of net plans. currently proceeds capital but maintaining of capital $XXX $XXX back million, will the us to to billion authorized bit quarter in committed about X.XX% This part with share that facilities receivables The is at new we June dramatically continue our rebounded. down $X.X start We organization. pre-pandemic under cash, have five expenditures of years billion at end. We but including up use borrowing $X.XX to May. capacity began liquidity combined a manage of so We available of of buyback total notes XX. the European which We XX% and million senior Securitisation $XXX year, April million at May $XXX gives in debt over

of was Xx in the Xx. adjusted our targeted is XX EBITDA, June at leverage X.Xx of range to net middle Our which

be a breakdown mid-XXXX, adjusted year-over-year, maturities COVID debt digits results, of continuing conditions, $XX related combination in first fixed COVID including EBITDA significant expect means to estimate quarter. our in third related costs we of in actions second sequential saving favorable to our $XXX $XX we're month-to-month QX. that that and expenses expect with XX% million the XXXX July. million This in of no $XX pandemic. incurred. would was our QX, million would decline benefits our of at that quarter the we you have reduction from implied a cost April million by revenue revenue single EBITDA, mix from with since is single on and to position generate quarter right of nearly been Based will the related seeing expect year-over-year Revenues results XX% second operating trend costs The to and we've line costs We because of in This is realize costs. high digit other liquidity the we to based in our fixed of XX% due positioned In variable we're these the our variable least we COVID and down that outperform until the strong. that initiatives, month in the implemented. high programs be restructuring the adjusted half and what on year-over-year We've improvement

to flow cash cash this having cash the more confident us flow deliver On millions be half, million our dollars free in flow the of to we hundreds generated $XXX free of with than ability of of first front, year. continue in

dominated dramatic clearly second quarter adjusted our in COVID-XX Revenues ever have cost in bottomed we of our April Lastly, the been customers declines employees, XXXX. and align protected the serving Throughout recovering variable since. and our kept to quarter with demand.

invested will our flow, future to and liquidity, solidified in significant continued technology. also saving cash actions quarters cost We benefit implemented that generate free positive

turn we to that, term the As leader we to and and we things stronger prospects enthusiastic longer Matt. expect a a be result, as about markets fourth much quarters our the QX over With third are than I'll in serve.

Matt Fassler

was tonnage moved second quarter costs income statement was trough prior million activity This North the the if LTL shed year, year-over-year related light segment; the declined trends American and due automotive, by our in in revenue our QX and in through by the manufacturing some industrial, segment quarter. primarily the the Thanks weak was on organic quarter primarily XX%. revenue declined transportation COVID, July. to unit. XX% day versus to and David. business momentum Adjusted review we've there XX.X% with we Starting I’ll EBITDA included as more seen of levels the $XX gained in and XX.X%. LTL down in per down

not this we consumer enough down While was the offset shut industrial well staples, in to economy. the did in vertical

year-over-year is As June. in industrial QX. impact in fuel Improvement continued April, line XX.X% of in in tonnage X.X% sectors July year-over-year. and in with in was reopened, excluding XX.X% LTL our the trends down July. XX.X% improved. May Yield Yield, by growth improved

on QX price solid, renewals Our up with X.X%, pace us LTL the increase. on which contract increases kept remain

XX.X% also LTL driver in in in of for was by impact offset compared of basis had part was ratio costs. lower These biggest were ago. the improvement points drags tonnage operating and adjusted a of million the with the year change XX.X% about quarter, $XX XXX a yield. Our negative from The COVID we

including by and haul. line key also are stock P&D, operations costs, We affected variable controlling

in nationally Our the valuable quarter by The was out second improvements we since the in mind, that driving by our XPO encouraged Bear doc compound Smart analytics early network. going in productivity Smart this LTL on environment. productivity results proving up are to We're the average forward. tools full and was expect XPO this are X.X% just rolled year-over-year.

We X.X% shipments. miles also grew load factor and than by XX%, the empty better XX% decline in by improved

quarter the management increases strongly a May but expense business, significant truck we erosion. operating quarter. year-over-year We X.X% within platform. Within volumes QX, produce capacity solid improvement strong in We headcount. year-over-year drive flat handled our Revenue revenue net rose in the dollars expect the margin and Connect Brokerage to XX% capacity significant highlight brokers procured XXX for was tightened. exceptionally in market, delivered Revenue Last progressed. second increased to down shutdown X%. continues rose more truck basis with to XPO net the Net with In volatile the trends Intermodal automotive revenue June by July troughed in in mile in QX was pricing year efficiencies much rate and Connect the of in record a a at real in to production. reflecting count in LTL year-over-year, it ratio quarter. the month and fell a the sharply, while X% improved net as increased Intermodal revenue again XX%. significantly less margin aided each XPO June our to discount strong us mile in accelerated posted trends service. revenue essentially revenue rebounded brokerage modest here better revenue began the and the have adjusted revenue quarter well, a last tools last recover in combination in by was and buying our in outlook brokerage X%, points load we in as truckload and a with market. revenue performance XX% sequential freight

we and due continues goods to specialization of strong improvement saw goods This growth heavy installations was the offset exercise Our slower benefit partially appliance in to COVID last from by and demand mile e-commerce restrictions. home for equipment.

revenue XX% our organic and as revenue FX versus business Europe, whole. the the fuel of down declined impacts QX in the to quarter which XX% year, transportation Turning for prior a by excludes was

conditions organic Importantly, became rebounded been XX% and Among down well, the of Overall, government were more locked continued first. transportation. in We transportation first several trough decline European our XX% the recovery growth We in subdued. U.K. the and The quarter have the for sharply The when for and down later year-over-year down to first-out. are countries, theme trend weeks positive market decline the recovered quarter. May first-in European our lockdown U.K. Spain industrial of in The curve revenue in June. there a Europe improve and a customers. was July in and has the throughout curtailed timing larger France tracking the chemical XX% April more as in to recovery automotive, later. locked

tools now have we're This black seeing Moving for are and the of revenue. key are contractual sites did quarter. of the with revenue with driving our QX down The still XX%, mix relationships the proprietary is bring about average tact Nearly of to our logistics by productivity LTL, and X% of revenue temporary and pandemic, our in revenue business organic vertical two-thirds year-over-year was customers. COVID we again, and business X%, shutdown in XPO Also, X.X%, our customers. XX% individual embedded In of cost solid much results E-commerce warehouses with efficiency. and and the for declined XPO distribution productivity Adjusted each XPO can revenue secular some early In technology. on in our are of requests segment the quarter including impact second declined all lower North by business. nature declined packaged closures improving year-over-year. and I’m Logistics the by by growth FX running. negative that retail, omni-channel to and EBITDA innings offset in percentage it improvement month. to utilize mitigated of is higher. retailers. X% sites In year. as value the X% sites Smart million network impacted in impact was were peak number space COVID logistics costs. American X.X as Smart declined up our logistics segment. We elimination margin goods in pleased had our consecutive Direct, $XX the shared of At growth an logistics, report of operated The this solidly of points opportunities This the driving had from consumer labor consumer of a versus omni-channel last and along e-commerce good Europe, on a of the of more the impact the our

lines. for into grow in turned either month with the logistics verticals we and bottom of related verticals how encouraged goods XX% or were positive Importantly, Consumers performing food to to to revenue, Consumer represent contract keep the the during leaned additional of and beverage. see this flowing. European our logistics June. and e-commerce we about European these pandemic business vast opportunities and the organic revenue well top We're is happy those by majority

drive in near-shoring with rolling a creates for of business year additional soft productivity in Europe opening the kicked the the Smart out trend Nestlé which We our for month, warehouse and potential us. our U.K. contract across are warehouses. had toward logistics XX We future off XPO to last labor a

logistics Our acquisition our to this + operations underlie the the in overview U.K. is Kuehne an operating of That's on Nagel track of from QX that close fall. results. trends

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

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

average million. equivalents. loss weighted diluted outstanding shares don't include quarter, Our common In share was diluted $XX a stock making count

of share quarter ago first repurchase count the the year QX our impact activity. number, basic share and down reflecting from Our was slightly from

Our metrics. structure annualized share GAAP our diluted versus reduce items reconciliation want We and in $X.XX adjusted was incurred two Europe. $X.XX particularly severance. improvement. restructuring of in million $XX million costs ago. in to of primarily EPS cost year The was costs, a overhead pre-tax us into loss earnings our diluted the QX per to our share pandemic year for approximately non-GAAP led quarter, dive $XXX in for $X.XX a take per versus of This a cost per I deeper will ago drive significantly and to $X.XX share of note our loss

to expect XXXX. run middle by rate this achieve the of We

we responded second other employee exploration of and we strategic is conditions. item this The and piece looking our booked our after quarter, with market integration retention. in sizing the and alternatives. our of associated our variable expenses by flow $XX protecting The in largest the transaction employees, liquidity cost primarily right our taking million quarter, of to cash the the summarize To care customers, to pandemic to relates

gauge downloads As truckload EBITDA return globally. than we initiatives, pricing drive technologies all now make continue platform we the costs. in our strategic attention headway We period. initiatives, into The XXX,XXX digging with LTL of terms David price logistics profile Downloads exceed now cost of carriers mentioned, was more the is in on our expanding to of our operating customers same Connect each in routing. of elasticity, within the registered optimize portion and these of focused more line-haul time, same grew and environment have more QX line LTL demand. that the with data particularly our we we’re XPO and versus the XX,XXX the we're can number directing Connect compelling. of our we particularly of QX opportunities profit adjusted variable mix critical also full QX the in of in XX% leverage are XPO fixed deeper and stable on app to the as and of of In to the In becoming use we other doubled At efforts. compliance than XPO total RFP, increasingly our months on three remain delivered we visibility, contract and the and

of advanced options of advantage. with are driver to to a the is that capabilities a Our in-house conclusion can implement. both come the the often tough who automation business robotics be explore Customers new and competitive high entry and cost solutions

first advantage us. leading to goods with companies to systems robots mover Our to outsource projects and person these collaborative is

Another that customers especially coming capacity more in need the the manage predictable. logistics in retailers to run, short In tailwind demand, buying since us are has capacity. peaks less pandemic for contract is to e-commerce internal patterns made

We're mentioning designated centers distribution mid-term XPO of were York’s regional only on needed cover I’ll the Not this on quarter. and is of the the their of that XPL was marks year Gartner, New interested partnership This term For were by the of once quarter, which drivers of course. third in additional our meet City quadrant can stepping a and in Europe. of support bring de a retailers brands the in much and their of We to stage. start close the leader the during to are supplemental providers. XX capacity and recognized all XXth again longer to race to anniversary trucks event. these for networks. by we de-risk provide will they are some the the to by we the with XXXX Services of worldwide critical highlights August sport a every Office magic proud arranging kilometer few that scheduled pandemic the celebrated changes help was needs. peak basis a other straight logistics leader us Tour Gartner. our France world in Also named proud transformational Emergency

back in ecofriendly, of With line turn at we look Paris. our your be that, to first the natural I'll competitors arrive will and powered over the the For to time gas operator two forward with trucks questions. the call the finish

Operator

with our Thank you. the line Stanley. [Operator Instructions] first Thank of and Ravi you is question coming Morgan Shankar from

Ravi Shankar

more Brad, very there. Good just than everyone. global Thanks I you chains morning out about much. probably into think supply insight else anybody have

see couple supply So especially respect world pandemic, the on from and love years. chains as last the and of changing emerge would your we running as to thoughts have we how near-shoring with quickly as you tight the

Brad Jacobs

obviously it every is news few business where better way certainly Ravi. would than but Well, pandemic. morning not been good better it previous is normal. month month little it thought and we to and trending The by is it be, than back better months a good was that has ago back than towards little was pre the The economy

there If not Europe you the lockdowns government’s States, look the The of ahead away. right geographically, it and United surprising. much is that's earlier nationwide started at COVID complete mandated

our revenue in we're and France seeing a more in year-over-year to transportation recent infections, the of but our despite little continent. it’s the surges back and almost business; U.K. up subdued July recovering, transportation In pre-COVID actually So than business is parts Spain, levels.

look it organic European at X%. you it chain, June, was was it positive was positive, supply growth in plus If in revenue the

certainly out some not but we're encouraging are yet. of woods the there signs, So

guess down were here real, even look North you over an but U.S. it's Europe. would from of XX%, stage If to and where I as earlier example business April, single shipments. not in as COVID down in grew best the though rebound improved uniform meaningfully they and digits. In our are cases going think LTL is LTL were up, versus they be shipments in that America, July where the June, I July

down big single contrast digits. July and down between So it’s XX a April

different we but mile permanent. Trends to because believe trends the only I at have that’s the are the going great, And last bulky. big in vertical. we logistics to industry different what's have by and home good and question; there's activity definitely in largest because the e-comm in there look on to because have big answer or your there you at been improvements, also goods we're at accelerated United Primarily States, think they've insight home we’re verticals, home. not a people in and e-comm equipment, because in upticks and are heavy provider exercise

they were goods. people move are still shopping increasingly out for going So We less, goods but online.

are restaurants, sports to and society consumers not more month. for goods and and if theaters purchasing it's each that’s but going what's to and positive on more that's its economy, negative to it's going not was So I but positive. great pre-pandemic, to the overall mean germane with of us, for to what it getting

say, I So it but in short is to would term and guess but sight. sum encouraged, I not full realistic, up short the sight, we're in recovery

time. So very clear. to little COVID is mega a because bull Longer I'm a the is recovery recovery still term, [ph], going take path

to present so so much post good to be the people they and months part of still which growth a advancing shared coming and Information, worldwide advancing faster don't instantaneously driving a is is get fantastic. synchronized therapeutics on, the the were and technology pre-pandemic, the who information now and that as disease to most thing global be are factors much, just of pandemic, got that's around luminous more faster. got the going few Vaccines the nearly for be a it, ago, it’s You seem and corner die the for economy. with most

fortunately and that So capitalize are is three them. seeing Does what your answer you three the – that that on things trends we're outsourcing positioned technology, to big well automation of wanted? the that all and I'm are

Ravi Shankar

to manufacturing talk the I there’s anytime a their or and hearing and path supply as about talking U.S. chains I’d changing long think schematic demand excellent supply discussion – color of Do North you some hear love do that think that a think to the time on the corporations America play to to was near-shoring more side that's the and recovery. global out? that well. takes Are bringing on and color soon even. or side you a back lot you do about you happens

Matt Fassler

take make that Matt, I’ll to points one. its Ravi, Two there.

We’re two ways. out play really seeing this in different

with up-closer consumers. of European some a long sales who of pandemic. of over There is talk our you First are phenomenon, about hearing their all, to near-shoring. just This the from our their force moving the a a it North they end was Interestingly American early this as obviously in mentioned of production now deal we're a considering means run phenomenon. great bit engage but customers not about also

So see that. we from expect opportunities emanate to business

years. e-commerce Number I ways. expected that as them because prepared by really of in are build companies in chains. that supply changes to solutions us consumers. two going deliverer benefit as one, the distribution those of ago, We're demand to We're goods transformational trends coping they of both they and and helping from working consultant our supply to commerce e- changes our them customers of to has we and online to to a unanticipated couple commercial and Secondly, pulled as discussed these these those a these out. a helping changes as structural manage a implement chains; in move demand remarks number more centers moments to their And larger surge of secondly, distribution forward really they we're close today, more centers, are they considering with helping are we're their get with

Ravi Shankar

Great! how your If work color give what interesting. to day and you appointments be will think of really sneak they more little a Brad, Kind are is? their in, Alex can going I Eduardo and results? us the I one kind on can on of what just mandate are of more

Brad Jacobs

the what? Ravi, was said the one how What last you is

Ravi Shankar

judge how What they're their going mandate results? to and work do on, what we their is

Brad Jacobs

okay. Oh,

both people commercial These operating have they had and of like year good are to that talent like year all, operators. profit of doing They people. very, are background, after improvement. find with are very, a first very They knives. talented year stars. [inaudible] records army long rock These So track Swiss hard operating after are

is If a $X cutting, you when cost. he at he standout he’s look mean of $X Heinz, accomplishment. of pretty at out Kraft took Eduardo, but cost billion good billion Eduardo cost of was I CEO

Popeye's, you he If Alex years three famous the EBITDA was of Sandwich. was Popeye's main at he Alex, architect in CEO when of and the look the doubled Chicken

very guys a of and logistics. So sharp, experience are both lot these I mean have they highly guys creative, experienced transportation in and

So corporate and with perfectly. culture it's really just perfect blend in they fit a our

working going and terms flow. in execute same the generate and they importantly do, free the they are strategy to cash that’s which along for the do way to line, same of business top going help is the more been to line bottom us, of what dollars – grow Now dollars are and

things are on particular, in profit improvement alley. to dollars $X and with years, of million the the right XG companies few to They pool help just ways next improve shortage up opportunities the of XX play the a to and very similar years, in productivity no opportunity billion are going find company. and to to possibility there's their that's over of ultimately efficiencies over multiple and that. they at levers, big done role They've going $XXX profit the So work of profit

Ravi Shankar

you. Thank Awesome!

Brad Jacobs

Thank you.

Operator

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

Allison Landry

morning. Good

terms there think think big in the from to which mix aware little a even line impact X.X, the QX. and yields, renewal looks it I of with some of QX LPL was rate of ex-deal, though per I in I the shipment just believe said bit lower. terms then Is In be is decelerated like you other rate, it

to yields could walk expect with moving growth renewal forward, in you start just rate, that? through to we converge the if So the should

Brad Jacobs

seeing is wouldn't our yields, guide of because Allison. Good business, positive renewal rate to our morning, that all X.X% business, we part not but are I of yields. contract

enough It you yields a trends points were with month. of the though overcome tonnage quarter couple tonnage in stuff. even every kinds positive XX%. X.X% all it’s decline decline of you the a positive was to helpful yield and XX% do great of of can of wasn't So yield have When –

given an fixed to of the QX LTL But going to and shows able overcome to operating nature tonnage You’re have cost be improving trend. leverage. that business the the also

down in it’s May. You had was in year-over-year XX% it and digits. April, down tonnage July XX% only was down was XX% June, year-over-year; down It here in in single

and the we're our QX in factor and bright of least eight shipments was that spots was X.X%. to why some $XXX despite up were there Stock the versus highest in QX in down million I Engine OR we And to the going LTL productivity It X.X% the reasons you at up there. than of QX. EBITDA XX% LPL to had was OR. it is and in improved for load XX%. trend was substantially better decent a poor expect fully our would there's be miles point generate we being years. Load So in guidance year-over-year quarter, one third factor

I EBITDA. on Now achieve of fully $X that feel to least at track we're billion

have that and from now We level. between out pushed XXXX see getting to that XXXX progress you'll and there, to steady

Allison Landry

matriculate. And won so quarter, thank maybe the and can I duration you we through helpful and the that's you. you should to the hopeful think guys walk of the during think the when us few revenue Okay, a contracts size starting new of nature sort about those,

Brad Jacobs

Europe of the and a here contract. these chilled e-comm most It's the year we in delivery some there big that X X. Its was United Foods. the wins dairy signed in had one automated October the of is be to this will starts States million $XXX products stores and in U.K. world. In warehouses well with In two Arla transportation there it’s and United two Okay, were a so contract States. we wells

to million is It's five X.X center square have in also another coast branded feet. have on That over square e-comm then for September. X starts It on So coast fashion in be and a west also also to global United fulfillment its to west way we new month States, on million And the e-comm site ramping a we this It's global for center largest robots. started robots. up the it's feet, highly year that retailer. a one our large up apparel company. XXX and XXX ramp contract. its fulfillment automated the It will

have commercial we So backlog some the on momentum wins. good in

Allison Landry

Okay, excellent. Thank you.

Brad Jacobs

Thank you.

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

Chris Wetherbee

Good Yes, morning thank you. guys.

sort terms see so you out downside been know think sort I a way have seeing hopefully XXXX performed Is where back story the revenue of the traditionally is there incremental detrimental the the margins, incremental growth to and know upside? the know margins. mid-teens about think margins of potential coming opportunities as that we you new how business on for in You in EBITDA probably the to of on look [inaudible] business. I this has and margins would

perspective You the know royalty as of LPL leverage operating a there new kicking the there cost as mean, you I profit performance some think a from in billion and to you at cutting the is market? an some maybe the retail year of some this about $X margin some and move potential incremental in of out. growth about locking think the of paradigm and toward of

Brad Jacobs

on Matt. its of that. A points couple Chris,

embedded you trend third off that EBITDA all, generated kind detrimental the are you and the as look call last July, we start spoke that margins XX-XX you'll looking today. you math than about revenue QX, margins better about and that and better the of generated that by are at detrimental and that the than detrimental First earlier the by the in see in guidance David at we quarter that in think implied of as mentioned margins that we

as emerge flexed you the variable obviously we cost. downturn, from have Secondly, our

probably higher a to starting down costs. would Fixed more Then structure slightly cost going fixed of a have are into year. headway We your with year. a percentage make been after it is down

very big which obvious a one potential QX, XX unusual implies the leverage part had particularly you to like the in of quarter of cycle more a will that obviously we the operating that So the when be upside, store.

the arithmetic obviously not works. going way that's XX much the yet, We’re talk but about to

down above have performance a that those the quarter average progress to year, bring likely revenue quarter XX better to our know emerging in incrementals to you and that us the beyond substantially have generate we you then you the than an are front had that. third on reiterate, opportunity and the levers better and second from So Plus than year.

Chris Wetherbee

kind the last some appreciate the or really progress start start and $X take year the does we Do it’s to $XXX maybe over Eduardo need in to in to see And market of that about in the to months. that stable course wait then million you okay, XQ of a in more next more some do XQ? later that those could disruptive market show to to lines? meaningful start in maybe know find can and or and several progress incremental know out, of we I that's something we a dig along difficult Alex the very it, cost thinking helpful. got Okay, up I to opportunities get billion, meaningful you when to impact or it’s know

Brad Jacobs

you'll quarter-after-quarter, literally pool. potential a have good and do substantial of lowest, think? weeks is hugely of for you do are think about and business seeing collectively what a profit XXXX the some quarterly that What we're – levers transform over you already days you are everyone three each operating crowd is you and that which We on think couple and likely think a XX excited do benefits continuous of ago XX achieved to XX feeling levers sourcing had and but will lever, from the the what one a the review you levers. is levers. part the see we see of This We massive part that you highest, the those about very year-after-year will is going good the each was benefits,

labor this we on not that already have productivity us in quarter, X% without we variablilize about forward. contract improves to been to looking year-over-year do our are at improved X.X% labor the manage Smart, nimbly. If Smart. has helped costs that the Smart The able by would going look in labor already you second that facilities and and logistics productivity improve

in got On handle an so that. a from of procurement. innings we are forward. of Alex, with this got quarter pricing, helped kind than of loads we've Look with number or expenses. will really, Adding so of Connect year-over-year, a We When brokerage, just benefits of non-labor can at at help but the within think important sales we're I what us quarter On lower that to early same lever. They can lot deliver. going really better So truck the be Eduardo a to experience Procurement this big you about headcount, keep Connect compounding that. Connect that's buy helpful. XX% force, get going productivity used with DAT. pricing they the $X billion X.X% and that's

excited ways and core value substantial is very, term long improvements very XX more of on due market, allocating we pricing important our than on the shareholder and LTL that the have, X.X% focus strategy, levers as are is terms strategy These part our P&D line-haul returns. This on So about and of we're best Connect. achieve is the technology And strategy. optimizing and as in automation a of well, deliver are that. we so levers. opportunity better the bought to the big you There on risk very that pricing LTL capital we to the using a adjusted process on very, spend, elasticity have for

Chris Wetherbee

I color, appreciate the for much very Thanks it. Got it.

Brad Jacobs

just you, would could questions great. that Thank and to one, your further questioners, if be you limit

please. question Next

Operator

Oglenski Thank Brandon with from The is you. Barclays. question next

Brandon Oglenski

taking question. with for one. leave thanks I’ll and Brad, my Hey just

your outsourcing the about and of e-commerce. think the I in talk see pandemic to how direction. you some can going talked organization the in know, longer you I change you opportunity mean are logistics You direction the especially this you there, and opportunities? pipeline about capture trend, know and is you accelerating shifting coming of How that or maybe those term

Brad Jacobs

quite part about didn't or something, catch shifting I the last Brandon. direction

Brandon Oglenski

market? changes side in capture help you personnel like capital shift just this are Yeah, the in direction would you making on side the any or that

Brad Jacobs

got Oh! In it. market, the

pandemic can too for think find to if than place quarter the a in making and That’s place we we’ve work we've been supply it us chain result and find a we've instance. we're them ways billion expose more done are and we on trends. sophisticated get putting reaching The investment and great know that one e-com particularly and in always for company, as big – growth achieve a we them of say the of compensation, adding the are We the is particularly for see the $X.X can more When needs. their can companies more technology positioning industry technology got of more hands on they us and is a talent. this up a you the let’s hire driver outsource talent, growth the we throughout the great main and them. chain, got outsourcing in put all future that the our advanced what, to whole supply find during the We you’ve ROI many

is on information technology So living and the and going people market. what’s what's a their other sophisticated in more of real in who our of that know for Have industry. and the have full supply through and vertical, in time data time and market do the technology this the going on the on on going info in have their bulk we in situations finger on same than what’s pulse companies same their chain

we're So think I from that. positioned well to benefit all

Brandon Oglenski

Thank you.

Brad Jacobs

you. Thank

Operator

is the line Mehrotra of question Bank. next from Our with Amit Deutsche

Amit Mehrotra

cost the more of company XX% in even when that than million than given performance of one opportunity so quarter it's peers, the business of the well. to LTL the way detrimental focus arguably margins diversified. to very the which more know had when the Can as costs, competitors. you other Brad, COVID in guys. could people peers, $XX costs explanation explain that? you expected Hi was that hard be profits double relative operator. the of I is opposite Thanks you're have COVID down you which add Tonnage business over back were weak total the and would was the

is management you that. Isn't there guys able Paris. in business is business aren't the to do business in the focus is the and Michigan, in the sitting to supply You Charlotte, LTL chain European value and tremendous team just Greenwich, were in

you story it – would that perspective. in more actually up valuable actually equity value even that it the outlined break So an January, from guys make maximization

I’d two those points, it. If just you can appreciate address

Brad Jacobs

that’s you intense an OR questions so the I focus big were sure safety. tonnage significantly being four employee getting quarter. all, compliment for down on of in on LTL, factors, much On the one First two There deteriorated sentence, fantastic. during

worked quarter tonnage to the XX% business being but very particular due the this well down which term strategy, years, it didn't. our was for So long us over

we freight down towards a we've leverage we've with bias fixed the debt, much, on; translates the selective much, with operating into and that the so share and yield strong over So OR. the making tonnage go highly costs, so had been on very with it tonnage market making take the

the OR to the Now or costs employee the than the was deterioration the pandemic the quantify month XX% million that been was network about XXX in this in $XX intensified cleaning, month our of tonnage. larger always by greatly bit from in not number and but safety has basis improvement those of in a during enough the but quarter from July. COVID Pay, but points some each that and continued numbers, one decrease good LTL, PPD, This shutdowns. visible inefficiencies target offset little priority, previous during is to the impacts yield clearly offset better from X% the are site improvement, are Appreciation news in The from

down As said April, in was XX% digits only down it tonnage July. I before, was in single

year improve a OR knowledgeable about ourselves and ago. to quarter, there trajectory QX was nice closer on going your about from because for it what's about with can't answer where levels much to So I comparing competitors I'm QX particular will fully not and the sharply a question competitors.

what to it's going I in We and what's you. are explained fully with on company knowledgeable our just

to running in respect result business; large over years. answer out company? diversified your operating we've got second of talent about, the four question quarter The a was doubled the they've being with LTL performance a last a EBITDA of Now is our no, tremendous LTL other

looking are a they This a unusual on quarter. was them longer doing very trajectory, fantastic So at a job.

know to Our here. goal was happen pandemic there, money When whole this a wasn't to didn't the bunch started quarter and going what of the quarter. make in we was

sick we and effort where there. Our was was sure get we our and in to die, goal make didn't and didn't succeeded put really that people

financial a in a was it view, quarter was of quarter. for it point From that this from a good LTL good perspective quarter. So not

Operator

from with the is question next Our line Oppenheimer. of Schneeberger Scott

Scott Schneeberger

a cash There is good the sheet. amount much. of balance on very Thanks

your is If looking where renegotiating focus update the capital. just I'm then allocating are reentered recent picture? of curious and years how an Thanks. each on off to of regard past so, Has kind M&A valuations just strategic thoughts of review? versus question playing Now with

Brad Jacobs

returns nothing acquisitions. can there. process nothing There new same greatest And allocating new it’s get We've terminated strategy months we as on about where talk not done that. focusing was of just is ago review been, is capital always that the the still strategic no on The front. on that capital we’re to and our

Operator

Morgan. line the with from of is question Ossenbeck Brian next Our J.P.

Brian Ossenbeck

just about space? e-comm Hey, talk think out in logistics. logistics question. opportunity – were as do good I One the there had for largest who want taking Thanks that you you to about related a that. you contracts and drives change lot like How more was the the I step reverse morning. feel area is returns you specific especially in capacity booked, is capabilities ramping and in feel who takes a growing How with that were likely up? have think that keep Do up and that you the it? there, capabilities BXC most to to if

Brad Jacobs

was of top part very Reverse the at and reverse the very active of was fastest dynamic. the business logistics within list. and growing is E-comm e-comm, our logistics

are so bricks active. a So are But very, because growth very, about bit. stores XX% mortar stores for counter from down, volumes and little that bricks that we unveiled reverse. had mortar very year-over-year returns in It was down and

more re-pricing, growing And a our do do a growing that reverse automation the that data to have well handle fasted the returns of in-part returns inspections, program, We very our because do We customers reverse. than describe as sales the accurately because things in what part, business. We process our appreciate historical that. predict we customers and is we valued we much we the reverse would warranty ability very, logistics. do the we did for the got control of and – controls highly quality the we management do very traditional I of we part do unmatched on our for just reprocessing, and lot of very and

Operator

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

Ari Rosa

good morning Hey, guys.

away lowest third talk you were into in the in I could the think So seen margins guys terms of in that you what contract you logistics, know essentially at we've hoping Brad, go cost even as in particular outlook, was the or quarter get they being you - level since what context about I EBITDA the sorry, of have confidence that they entered business. that those logistics the back can XXXX of us historically, kind know margins seen kind I'm been piece of where business. and give to the traditionally resilient can contract more of

Brad Jacobs

here. about think to elements two are there Ari,

all, First contributed and to margin impacted the in overall, the we likely to degradation the range to last million lower $XX company for be $XX is which contract million the $XX than million much had costs quarter David in logistics. QX, that obviously COVID business those we will expect remarks, be are as in there were but of the the There second still in COVID significant his that quarter. in some indicated direct costs prepared related

of series much the more a downs marked so QX and Secondly, that's particularly contract logistics. shut than true slowdown in

in think don't to the the true typically would in customers very circumstances none but July that I the of a contemplated shut expect commented tone quarter, was of have the logistics repeat proof, that's business improving pandemic. prior we well. They themselves. are of contract on second are that they in down as we that we for were that set resilient not to have where from and verticals We When recession circumstances are of advent us proof

in business we did. just second all for again, that viewed So too performance quarter's operational the I reasons

David Wyshner

it's e-comm, with to The open respect was well to of and contract. the October for performing synergies year a we year the about their anticipate month up the we next in growth signed Ari + significant they progressing in; the started are the drivers warehouse your over months, it'll ramp and November three existing is well, to second three XX the Kuehne biz; closing our year million UK a starting in that per food The partnership tech, beverages are future the Waitrose, on business things: up an verticals and And Nagel contract. year three been strength half, or and that earlier with now because $XX that that question two, of UK, this contract a and the revenue and and Nestlé that's that's full approvals regulatory and and for has

Operator

Jordan next coming Sachs. Alliger of The from question a with line Goldman

Jordan Alliger

given morning. are standpoint, price after and of that again your maybe share follow-up on side things Yeah, I'm tonnage. I curious, LTL the operations hi little differences just LTL going good challenging. I a of a in to the back Is LTL the just saying there wanted you LTL to sort guys, the the more across a mean guys more market? second some perhaps could say tonnage got competitively that would bit from the explains going difference?

Brad Jacobs

carriers in pricing not competition. represent of aggressive We in surprising there's capacity. LTL a see don't the pricing rational We and by of large the the just since LTL, a environment handful that that's see majority

in this for tonnage. term, yield favor over to its environment very selected worked that’s mean quarter, each very, it but got kicking and for but for we favorable well them, strategy us quarter own has see strategy term. for yield us a for we it’s work that worked company a they’ve long well So very long highly for now. the well have and worked us us third I working well and that’s Didn’t right start again, we’ll

share share We’re not and profit it; in for looking looking improvements. of for market we're

Operator

Cowen. the question Jason of Our with from is next Seidl line

Jason Seidl

operator. Hey keep here. it guys, one Thank you, just to I'll

Looking pretty you guys like good quarter. at XPO sounds are Direct, it

has on wondering worst? and of the the sort term I better long short for little that if any were you a color was you that give margins us more profitable. of to that changed target mentioned a that, either you can while as for that back, gave also the or look You margin us

Brad Jacobs

profitable the the be opportunities. on entire row the in for be quarter track. beyond majority year. e-comm down caused clearly is for continues XPO been in surge vast It’s U.S. XPO proof-of-concept direct expect bricks-and-mortar retail to shut and we The XPO network of Direct the stage. second for profitable to now it a direct the

out quite turned work that’s well. out So to

Brad Jacobs

off I those months. you see to we Thank Talk to a day! get line we look you in very a ask to X.XX forward great chance its today. question, didn’t to three you who but a much. speaking again later apologist to Have

Operator

conference. This you Thank everyone. concludes today’s

may You thank at disconnect participation. your your for lines time this we and you

XPO Logistics (XPO) 31 Jul 202020 Q2 Earnings call transcript