UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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| Item 7.01. | Regulation FD Disclosure. |
On February 10, 2021, XPO Logistics, Inc. (the “Company”) released a slide presentation expected to be used by the Company in connection with certain future investor presentations, together with a corresponding script. Copies of the script and slide presentation are attached as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K.
The slide presentation and script should be read together and with the Company’s filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal quarter and year ended December 31, 2020.
The information furnished in this Item 7.01, including Exhibit 99.1 and Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and shall not be deemed to be incorporated by reference into any filing of the Company under the Exchange Act or the Securities Act of 1933, as amended, except to the extent that the registrant specifically incorporates any such information by reference.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits
| Exhibit No. | Exhibit Description | |
| 99.1 | Investor Presentation Script, dated February 10, 2021 | |
| 99.2 | Investor Presentation, dated February 10, 2021 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: February 10, 2021 | XPO LOGISTICS, INC. | ||
| By: | /s/ Karlis P. Kirsis | ||
| Karlis P. Kirsis | |||
| Corporate Secretary | |||
Exhibit 99.1
February 10, 2021
Presentation Script and Slides
The following script should be read in conjunction with the accompanying slide presentation, which contains, among other information, source data for certain information set forth in the script.
Thank you for joining us. We’ll start with an overview of XPO Logistics today, and our strategy for driving growth, competitive differentiation and financial returns. We’ll also bring you up to date on some recent developments, including the spin-off plan we announced in December. And we’ll give you an overview of our strong fourth quarter 2020 financial performance, which reflected our dramatic rebound from the impacts of COVID-19.
XPO is one of the largest providers of supply chain services in the world, with over $16 billion in 2020 revenue and an integrated network of people, technology and physical assets in 30 countries. We use our network to help over 50,000 customers operate their supply chains most efficiently.
Our company has two reporting segments: transportation and logistics, each with leadership positions and growth prospects. In our transportation segment, we’re a top three less-than-truckload (LTL) provider in North America and the second largest freight brokerage provider globally. In our logistics segment, we’re the second largest contract logistics provider worldwide. Approximately 62% of our 2020 revenue came from our transportation segment, and the remaining 38% came from our logistics segment. Within each segment, we’re positioned to capitalize on fast-growing areas of demand.
Our markets are highly diversified. The customers we serve span every major industry and touch every part of the economy. Our revenue comes from a mix of key verticals, such as retail and e-commerce, food and beverage, consumer packaged goods, technology and industrial.
In 2020, about 58% of our revenue was derived from the US, 13% from the UK and 11% from France. Of the balance, Spain was the next largest at 6% of revenue. In total, we had 1,523 locations and over 100,000 employees at year-end 2020; our January 2021 acquisition of the majority of Kuehne + Nagel’s contract logistics operations in the UK and Ireland increased our location count to 1,629. We welcomed approximately 6,000 new employees in the acquisition, as well as many blue-chip customers in three strategic verticals: tech and e-commerce, food service and beverages.
In December, we made an exciting announcement that we plan to pursue a spin-off of our logistics segment as a separate publicly traded company. If the transaction is completed as planned, it will create two, pure-play industry leaders: the spun-off company will be the second largest contract logistics provider in the world, and the remaining company will be a global provider of less-than-truckload and truck brokerage transportation services. The transaction is subject to various conditions, and it may or may not occur, or its terms or timing may be different than originally planned.
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Investor Highlights
These are the key factors driving our growth and returns companywide:
| · | We’re a global leader in logistics and truck brokerage, and a North American leader in less-than-truckload (LTL) transportation, with outsized exposure in verticals that have a history of enduring demand. |
| · | We have numerous opportunities for top-line growth, including organic growth through innovation and share gains through M&A. |
| · | We’re strongly positioned to benefit from the industry’s
predominant tailwinds — e-commerce and omnichannel retail, the shift toward supply chain outsourcing and fast-growing customer demand for digital capabilities — due to our scale, density, expertise and technology. |
| · | Our rapid pace of innovation differentiates our services and makes the most of the talent and assets within our organization. |
| · | Our scale gives us significant operating leverage, purchasing power, the capacity to innovate and the ability to serve large customers. |
| · | We’re nimble allocators of capital, with a disciplined focus on returns and an enviable record of creating substantial shareholder value. |
| · | We serve customers in different verticals with diverse economic cycles, and the majority of our revenue is generated under long-term contracts, making our performance more resilient in economic cycles. |
| · | Our business model is optimized for free cash flow generation in all parts of the cycle; about 70% of our revenue is asset-light, with low maintenance capex. |
| · | Our secret sauce has always been the world-class people we attract to XPO — not just our 35 most senior executives, but also the 2,500 professionals at the next level with blue-chip industry experience. |
| · | We’re executing on 10 profit initiatives that are all self-driven and largely independent of the macro. In total, these initiatives represent a potential $700 million to $1 billion profit improvement run rate in 2023. |
We’re pleased with the progress we made on our profit improvement initiatives in 2020. For example, our technology helped increase the profitability of our truck brokerage business and improved the key pricing and productivity measures in our LTL business. In our logistics warehouses, our productivity analytics are helping us offset the higher cost of labor by making optimal use of workforce hours.
Technology Overview
One of the ways in which we strengthen our relationships with customers is by empowering our employees to deliver superior service through our technology. Our industry is evolving, and customers want to de-risk their supply chains through robust visibility and digitization. We’re already well-positioned to provide this value to customers, because we prioritized visibility, control and automation early in our technological development.
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We’ve built a highly scalable platform on the cloud that speeds the deployment of new ways to increase efficiency, control costs and leverage our footprint. We can deploy innovations across multiple geographies in a relatively short time, and also take an innovation developed for one of our services and apply it to other services to differentiate the value we offer. This agility gives our larger accounts an added incentive to use us for multiple solutions.
We believe that our investment in technology is among the highest in our industry at an annual average of about $500 million. In 2020, we renewed our partnership with the Massachusetts Institute of Technology’s Industrial Liaison Program — XPO is the first global logistics company to collaborate on industry innovation with the top minds and research facilities at MIT.
The supply chain industry is wide open for disruptive thinking, and we’re committed to driving positive change. The most significant impacts of our technology to date are in these areas:
XPO Smart™
XPO Smart™ is our proprietary suite of intelligent tools and analytics that self-adjusts site by site to drive productivity across our operations. It incorporates dynamic data science, predictive analytics and machine learning to aid our managers in decision-making. We use XPO Smart™ to improve our labor and inventory management in a safe, disciplined and cost-effective manner.
Our XPO Smart™ tools were implemented in all of our LTL dock operations, 85% of our North American logistics sites and 50% of our European logistics sites as of year-end 2020, with further roll-outs underway. We expect to see a significant increase in productivity from these implementations as we fully utilize XPO Smart™ in our operations.
Intelligent warehouse automation
Intelligent warehouse automation is a priority for our logistics segment. This includes autonomous robots and collaborative robots (cobots), automated sortation systems, automated guided vehicles, goods-to-person systems and wearable smart devices. We integrate these technologies into our operations and control them in-house with our proprietary warehouse management system.
Advanced automation, robotics and autonomous goods-to-person systems are particularly effective in delivering critical improvements in speed, accuracy and productivity. Importantly, automation also enhances safety and the overall quality of employment.
In mid-2020, we opened a fully automated Digital Distribution Warehouse of the Future in the UK, which we co-developed with Nestlé, the world’s largest food and beverage company. This distribution center has the capacity to process more than a million pallets per year — the highest throughput of any facility in Nestlé’s global network. Our European innovation lab is based on the premises, where it functions as both a think tank and a launch pad, with the ability to test new technologies under real-life operating conditions.
XPO Connect™
XPO Connect™ is our proprietary digital freight marketplace; it encompasses our core Freight Optimizer system, shipper interface, pricing engine, carrier interface and our carrier mobile app, called Drive XPO™. This fully automated, self-learning digital platform gives us a scalable framework to continually improve our service, capture share and reduce costs.
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XPO Connect™ connects shippers with freight carriers, both virtually and through our transportation operations. We give shippers access to our transportation network and market data, while carriers transact to secure loads through the mobile app. We have more than 75,000 truck carriers registered on XPO Connect™ and over 300,000 driver downloads of the app.
LTL optimization
In LTL, our technology focuses on optimizing the main components of the service we provide: linehaul, pickup-and-delivery and pricing. Our North American LTL linehaul network moves freight approximately 2.3 million miles a day on average, with approximately 15% of that volume traveling direct.
With intelligent route-building, we can reduce empty miles in our linehaul network, improve load factor and mitigate cargo damage. Our proprietary bypass models assimilate massive amounts of data to arrive at recommendations based on volume and density, taking freight dimensions into account to identify gaps in trailer utilization.
Other areas of LTL that are ripe for optimization include routing for pickups and deliveries, pricing management, trailer utilization, exception management and dock productivity.
Company Overview
We created XPO in 2011 to provide exceptional value for our customers while generating meaningful returns for our shareholders. The supply chain industry has strong fundamentals for value creation: it’s vast, growing, fragmented and ripe for innovation, with underpenetrated sectors.
Supply chains are unique by nature. Each one is a network spanning every step a company must take to move its goods from the origin to the end-user. Our customers typically have supply chains that include vendors, manufacturers, labor, assets, technologies, data and other resources. There are secular industry trends in our favor, including the acceleration of e-commerce. Certain services, like truck brokerage, are getting an added tailwind from automation, and outsourcing overall got a boost from the heightened attention on de-risking supply chains spurred by the pandemic.
Our service offering is asset-light overall, with assets accounting for less than a third of revenue. In 2020, our net capex was 2% of revenue — a notably lower percentage than asset-intensive competitor groups in our industry, such as less-than-truckload, truckload, parcel and rail carriers. The assets we do own or lease are critical components of the customer services we provide, such as 890 logistics facilities, 552 cross-docks and approximately 15,000 tractors and 39,000 trailers.
We market our service offerings using a two-pronged sales strategy: earn a greater share of wallet with our existing customer base and further penetrate high-growth verticals where our expertise and track record give us an advantage.
Over the past three years, we deepened our bench strength of senior-level sales talent in transportation and logistics in both North America and Europe and beefed up our North American LTL sales organization, including sales support personnel. We also invested in new training and analytics.
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The distinct nature of our segments gives us entry to many different types of customers. Where commonalities exist, we share knowledge across our service range with an emphasis on best practices in customer service, safety, training, operational excellence and human resources.
Overview of Logistics Operations
XPO is at the forefront of a $130 billion logistics industry in North America and Europe combined. Our footprint stands at approximately 212 million square feet (20 million square meters) of warehouse space — this makes us attractive to multinational customers, as does our vertical expertise, technology and sophisticated engineering capabilities.
Within our global logistics segment, which we sometimes refer to as supply chain, we’ve identified six key drivers of value creation. They are:
| · | Our strong positioning with blue-chip customers who require bespoke solutions; |
| · | Significant advantages of scale in serving e-commerce and omnichannel retail demand, including the largest outsourced e-fulfillment platform in Europe and expansive capabilities for e-fulfillment and returns management in North America; |
| · | Our proprietary technology, such as XPO Smart™ and our warehouse management platform, which facilitates agility, visibility, speed, accuracy and control; |
| · | Our XPO Direct™ network — a unique, shared-space distribution solution that gives customers a fluid way to position inventory close to target populations, reducing fixed costs and transit times; |
| · | A large opportunity to grow share in established specializations where we have a longstanding presence and prominent customers; and |
| · | Significant levers for profitable growth and strong free cash flow, with a long runway for margin expansion. |
Our logistics segment provides order fulfillment and other distribution services differentiated by our ability to deliver technology-enabled, customized solutions. Our logistics customers include many preeminent companies with long-tenured relationships with XPO, and they frequently expand the scope and scale of the services we provide to them.
Our logistics customers primarily operate in industries with high-growth outsourcing opportunities, including e-commerce and retail, food and beverage, consumer packaged goods, technology, aerospace, telecommunications, industrial and manufacturing, chemicals, agribusiness, life sciences and healthcare. These are all verticals where we have significant expertise and we understand the specific requirements, such as special handling, complex stock-keeping, time-assured deliveries and surge management.
The e-commerce sector, in particular, continues to show strong, secular growth. Many of our e-commerce facilities also manage merchandise returns, known as reverse logistics. Before COVID-19, e-commerce was already growing globally at a double-digit rate, and that growth has accelerated as more consumers opt to purchase goods online. This level of growth makes it difficult for many companies to handle fulfillment and returns in-house while providing high levels of service. We provide solutions for pure-play e-commerce companies, omnichannel retailers and manufacturers with aftermarket distribution channels, including the merchandise returns that have become a significant byproduct of order fulfillment.
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One of the most highly valued services across multiple customer verticals is reverse logistics. Depending on the merchandise being returned, this fast-growing area of logistics can include inspection, testing, repackaging, refurbishment, resale or product disposal, as well as refunding and warranty management. Reverse logistics services have become mission-critical for companies with consumer end-markets, as shoppers increasingly “test-drive” the merchandise they buy online.
Logistics processes are ripe for transformation through technology. Order fulfillment times are compressing, most notably in the direct-to-consumer space. The most cost-effective way to meet the majority of customer expectations is through advanced automation and intelligent machines — robots and cobots, automated sortation systems, automated guided vehicles and goods-to-person systems, which bring inventory to workers for order fulfillment. In 2019, we integrated collaborative robotics and goods-to-person systems in a number of our warehouses to support our employees and improve efficiency; this substantially increased throughput in 2020.
We’ve found that autonomous goods-to-person systems can improve productivity by 4-6x. Cobots, which assist workers with the inventory picking process, have a 2x benefit to productivity on average. Stationary robot arms can repeat demanding tasks with precision 3x faster than would be possible manually. Robotics are particularly valuable in tight labor markets where wage inflation and labor shortages can erode customer margins.
We’ve also developed analytics that predict future surges in demand based on data histories and forecasted customer spend. About 15% to 35% of consumer goods bought online are returned, based on the product category, and this creates reverse peaks at certain times of year. We’ve been able to shave several days off the reverse process through automation, which accelerates a customer’s ability to return goods to retail for sale.
In addition to our investments in automation and analytics, we’ve differentiated XPO from other logistics providers through our ability to create a synchronized warehouse environment across automation solutions. Our proprietary warehouse management platform integrates robotics and other advanced automation into our operations with rigorous control, even when complex, third-party software is involved.
Our XPO Smart™ labor management tools help us offset the higher cost of labor in our facilities by making the optimal use of workforce hours. As logistics volumes pick up, our site managers are able make rapid adjustments to labor levels in real time. XPO Smart™ self-adjusts site by site to drive productivity across our logistics network.
XPO Direct™
XPO Direct™ is our shared-space distribution network for B2C and B2B customers in North America. This unique solution gives retailers, e-tailers and manufacturers a way to manage fulfillment using our scale, capacity and innovation without the need to add high-fixed-cost distribution centers. The model capitalizes on the strengths of our transportation and logistics segments in combination. Our technology links our facilities, which serve as strategically located stockholding sites and cross-docks that can be utilized by multiple customers at the same time. Transportation needs are supported by our brokered, contracted and owned capacity.
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XPO Direct™ gives customers the flexibility to reposition inventory within one-day and two-day ground delivery range of approximately 99% of the U.S. population as demand patterns change, and in close proximity to retail stores for inventory replenishment. This responds directly to increasing demand for shorter fulfillment times, and the service agility enhances brands. In addition, our customers have the advantage of cutting-edge technology for ease of doing business at both ends of distribution, and predictive analytics that help plan inventory flows.
Overview of Transportation Operations
Our other segment — transportation — derives the vast majority of its revenue and profit from less-than-truckload transportation, our largest transportation service line, and truck brokerage.
The company-specific drivers of growth and margin in our LTL business are:
| · | Critical capacity and national lane density as the #3 LTL provider in North America, with a leading LTL network in Western Europe; |
| · | Opportunities to further improve profitability beyond the significant gains already made, by using our intelligent technology to optimize linehaul, pickup-and-delivery, pricing and variable labor spend; and |
| · | Over 30 years’ experience and deep relationships with customers and domestic, cross-border and international network partners. |
The company-specific drivers of growth and margin in our truck brokerage business are:
| · | Critical scale and capacity as the #3 brokerage provider globally, the #2 broker in North America, and the largest transportation company across the UK, France, Spain, Portugal and Morocco; |
| · | Opportunities to unlock incremental revenue and profit well beyond current levels through our XPO Connect™ digital marketplace, and capture high-margin opportunities with our pricing technology; and |
| · | The ability to deepen our long-tenured relationships with Tier 1 customers to grow wallet share, and leverage our track records in key verticals. |
Less-Than-Truckload (LTL)
Our LTL operations in North America are asset-based. We provide customers with geographic density and day-definite regional, inter-regional and transcontinental LTL freight services with one of the industry’s largest fleets of tractors and trailers, professional drivers and national network of terminals. This includes cross-border US service to and from Mexico and Canada, as well as intra-Canada service. In 2020, our LTL operations in North America offered more than 75,000 next-day and two-day lanes.
We doubled EBITDA in North American LTL within four years of acquiring this business, and we’ve brought the operation a long way forward. In the fourth quarter, our operating ratio was 84.9% and the adjusted operating ratio was 83.0%. Excluding gains from sales of real estate, our LTL adjusted operating ratio improved 130 basis points year-over-year to 84.5% — the sixth straight year we’ve improved our fourth quarter adjusted operating ratio. We have a well-defined opportunity to grow our LTL EBITDA to at least $1 billion in 2022.
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Our LTL team is laser-focused on on-time, damage-free performance. Using one of the industry’s most modern fleets, we deliver approximately 12.4 million shipments per year. We have over 20,000 LTL customers in North America alone, primarily local accounts, and we’re diversifying our base by selling LTL across more verticals.
Our linehaul network is how we move LTL freight across the country. We use intelligent route-building to increase linehaul fleet utilization, optimize load factor and limit cargo damage. To improve pickup-and-delivery performance, we developed routing and visualization tools that help our dispatchers leverage route density and reduce cost per stop. To optimize pricing, we use elasticity models to adjust for current lane conditions. And we use our XPO Smart™ labor management tools in our yard and dock operations to enhance productivity.
While each application of our technology delivers its own benefits, we also expect a strong synergistic effect on our LTL business as a whole. For example, when we optimize truck routes, this benefits asset utilization, driver utilization, customer service and yield, and should reduce our carbon footprint.
In Europe, our LTL offering utilizes a blend of operations that includes asset-based (XPO fleet) and asset-light (contracted carriers), supported by a network of terminals. We provide LTL services domestically in France, the UK, Spain and Portugal, and we offer multinational LTL distribution throughout Europe. This offering appeals to large customers with pan-European markets.
Truck Brokerage
Our truck brokerage operations are non-asset-based — we place shippers’ freight with qualified carriers, primarily trucking companies. Truck brokers have steadily penetrated the broader for-hire trucking industry over time, in part because of the reliable access to capacity brokers can provide and, more recently, digital access to truck capacity. We have a track record of generating revenue growth that outperforms US brokerage industry growth: from 2013 to 2019, our 16.3% revenue CAGR was about 770 basis points better than the industry.
Truck brokerage services are priced on either a spot market or contract basis for shippers. Customers offer loads to us via electronic data interchange, email, telephone and our XPO Connect™ platform on a daily basis; we collect payments from our customers and pay carriers for transporting the loads. We report the results of our truck brokerage operations as part of our freight brokerage services, which include ancillary, asset-light services for expedite, intermodal and drayage.
Our truck brokerage capabilities are differentiated by scale, expertise and the critical advantages of our technology. As of December 31, 2020, we had approximately 75,000 independent carriers in our global brokerage network, giving us access to more than a million trucks. Our operating model allows us to reduce our costs when demand is soft and flex our resources to find trucks as demand returns.
XPO Connect™ is continually improving our brokerage service through automation, making us more productive and differentiating our service to customers. Our digital platform has become one of the most rapidly adopted technologies in the brokerage industry, and the tremendous potential of future applications establishes XPO Connect™ as a powerful growth level.
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Our transportation segment also includes an asset-light last mile logistics service for the home delivery of heavy goods — a sector that benefits from the rapid growth of e-commerce and omnichannel retail. XPO is the largest provider of last mile logistics for heavy goods in North America, with a growing last mile presence in Europe.
Additionally, we may assist customers with other supply chain needs, such as urgent shipping or intermodal freight movements, or customers may outsource the management of their freight transportation to us. As of December 31, 2020, we had approximately 10,000 independent contractors under contract to provide ancillary services to our customers.
A Culture with Purpose
In conveying our strengths, we believe that equal weight should be given to the human face of XPO. Our company employs over 100,000 extraordinary individuals who have great insights about our customers and our business. Our foremost priority — to keep our people safe — took on new dimensions in the COVID-19 pandemic. We acted quickly and implemented numerous measures to ensure the physical, mental and financial well-being of our employees.
Our culture is about being respectful, entrepreneurial, innovative and inclusive. It's about having compassion, being honest and respecting diverse points of view, while operating as a team. We also foster emotional safety at work, with robust ethical guidelines that clearly define prohibited behavior, such as harassment, dishonesty, discrimination, workplace violence, bullying, conflicts of interest, insider trading and human trafficking.
In 2020, we created the role of chief diversity officer, and we routinely reinforce the importance of diversity in our culture through open-door management, the XPO University training curriculum, our Workplace virtual community and equal opportunity hiring policies. We also support diverse causes important to our employees, such as Soles4Souls, Girls With Impact, Workfit programs for differently-abled people and the Susan G. Komen Foundation’s fight against breast cancer. We’re proud to be the official transportation partner for the 2021 Susan G. Komen 3-Day Walks®.
Our Pregnancy Care Policy is a gold standard not just for our industry, but for any industry. Any employee of XPO, female or male, who becomes a new parent through birth or adoption can qualify for six weeks of 100% paid leave as the infant's primary caregiver, or two weeks paid leave as the secondary caregiver. In addition, a woman receives up to 20 days of 100% paid prenatal leave for health and wellness and other preparations for her child's arrival.
Our female employees can request pregnancy accommodations without fear of discrimination. This includes "automatic yes" accommodations, such as changes to work schedules and the timing or frequency of breaks, or assistance with certain tasks. More extensive accommodations are easily determined with input from a doctor. Furthermore, we guarantee that a woman will continue to be paid her regular base wage rate while her pregnancy accommodations are in effect, even if her duties need to be adjusted, and she will remain eligible for wage increases while receiving alternate work arrangements.
We’ve also partnered with a leading healthcare network for women and families to offer supplemental health services from over 1,400 practitioners in 20 specialties via a virtual clinic. In total, more than 30 quality benefits are available to XPO women and families in the US. These include fertility services, prenatal and postpartum care, paid family bonding and a return-to-work program.
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Environmental Sustainability
Environmental sustainability is a significant priority for us. In the US, XPO has been named a Top 75 Green Supply Chain Partner by Inbound Logistics for five consecutive years. In France, we’ve renewed our commitment to the CO2 Charter for another three years. In Spain, all of our sites meet LEED energy certification standards for 100% consumption of renewable energy.
In our logistics segment, a number of our warehouse facilities are ISO 14001-certified, which ensures environmental and other regulatory compliances. The groundbreaking logistics site we created with Nestlé is operating with environmentally friendly ammonia refrigeration systems, energy-saving lighting, air-source heat pumps for administration areas and rainwater harvesting.
We monitor fuel emissions from forklifts, with protocols in place to take immediate corrective action if needed. Our packaging engineers ensure that the optimal carton size is used for each product slated for distribution, and when feasible, we purchase recycled packaging. As a byproduct of managing returned merchandise, we recycle millions of electronic components and batteries each year.
In our transportation segment, we’ve made substantial investments in fuel-efficient Freightliner Cascadia tractors in North America; these use EPA 2013-compliant and Greenhouse Gas 2014-compliant selective catalytic reduction (SCR) technology. Our North American LTL locations have energy-saving policies in place and are implementing a phased upgrade to LED lighting.
Our modern road fleet in Europe is 98% compliant with Euro V, EEV and Euro VI standards. We also own a large fleet of natural gas trucks operating in France, the UK, Spain and Portugal, and in 2020 we invested in 80 new tractors that use liquified natural gas (LNG). This increased our alternative-fuel road fleet in France to more than 250 LNG vehicles. In Spain, we own government-approved mega-trucks to transport freight with fewer trips, and our last mile operations in Europe use electric vehicles for deliveries in certain urban areas, reducing those emissions to zero.
The development of our culture will continue to be a steady march forward, as it has since our founding in 2011. Our Sustainability Report provides details of our global progress in key areas, including safety, employee engagement, diversity and inclusion, ethics and compliance, environmental protection and governance. The latest report can be downloaded from https://sustainability.xpo.com.
Fourth Quarter 2020 Financial Highlights1
In the fourth quarter, our revenue, earnings and free cash flow were all much better than expected. The investments we made in our people and technology in 2020 helped us accelerate our top line, and we generated the highest revenue of any quarter in our history.
The rapid growth of e-commerce continued to be a major driver of our logistics revenue in both North America and Europe. In our transportation segment, we reported our best fourth quarter adjusted operating ratio yet. Within transportation, we delivered an outstanding performance in truck brokerage, with notable improvements in volumes, productivity and profitability.
1 Reconciliations of non-GAAP financial measures used in this document are provided in the accompanying slide presentation
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Financial highlights for the quarter are:
| · | $4.67 billion of revenue |
| · | $228 million of operating income |
| · | $93 million of net income2 |
| · | $0.91 diluted earnings per share |
| · | $121 million of adjusted net income2 |
| · | $1.19 adjusted diluted earnings per share3 |
| · | $449 million of adjusted EBITDA |
| · | $193 million of cash flow from operations |
| · | $91 million of free cash flow |
2021 Guidance
The company issued the following full-year 2021 targets:
| · | Adjusted EBITDA of $1.725 billion to $1.8 billion, an increase of 24% to 29% year-over-year; |
| · | Depreciation and amortization of $780 million to $800 million; |
| · | Interest expense of $275 million to $285 million; |
| · | Effective tax rate of 24% to 26%; and |
| · | *Adjusted diluted EPS of $5.10 to $5.854. |
With respect to 2021 cash flows, the company issued the following targets:
| · | Gross capital expenditures of $625 million to $675 million; |
| · | Net capital expenditures of $475 million to $525 million; and |
| · | Free cash flow of $600 million to $700 million. |
* We will present adjusted net income and adjusted diluted EPS excluding the amortization of acquisition-related intangible assets, starting with 2021 reporting.
2021 guidance excludes impacts associated with our planned spin-off of the logistics segment; and assumes 113 million diluted shares outstanding.
In January 2021, we redeemed $1.2 billion of Senior Notes due 2022, using available cash, at a price of 100% of the principal amount plus accrued and unpaid interest.
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2 Net income attributable to common shareholders
3 Includes acquisition-related intangible asset amortization of $0.25 per diluted share
4 Excludes amortization of acquisition-related intangible assets estimated to be $145 million in 2021
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Liquidity Position
On December 31, 2020, we had access to approximately $3.1 billion of total liquidity, including $2.1 billion of cash and cash equivalents and $1.0 billion of available borrowing capacity. The company has no significant debt maturing until mid-2023.
Strong Momentum Going Forward
We’re continuing to execute our growth strategy by running the business efficiently and profitably, while remaining responsive to changes in our operating environment. This disciplined focus is a major reason why nearly 70% of Fortune 100 companies rely on our services.
When we receive awards for excellence from world-class companies, such as Boeing, Corteva, Diebold, Dow, Ford, GM, Nissan, Nordstrom, Owens Corning, Raytheon, The Home Depot and Whirlpool, we know we’re doing our job.
Our contract with the Tour de France as its official transportation partner has been extended through 2024. Last year was the 40th consecutive year we partnered with the Tour, and we took great pride in supporting the competitors on the world stage — particularly given the intense COVID-19 precautions that allowed the event to go forward safely.
In 2016, we made the Fortune 500 list for the first time, and one year later, XPO was named the fastest-growing transportation company on the list. In 2018, Fortune named us to their Fortune Future 50 list, and in 2019, the Financial Times honored us as a European Diversity Leader. Gartner has ranked us as a Magic Quadrant 3PL leader for four consecutive years. We were named a Winning “W” Company by 2020 Women on Boards for the gender diversity of our board of directors.
In Italy, we were awarded Logistics Company of the Year for innovation three years in a row. Logistics Manager named us 3PL of the Year. And in the UK, we were voted one of Glassdoor’s top three Best Places to Work. Forbes ranked us as the top-performing US company on the Global 2000 and one of the best employers in the US and Spain. We thank our employees for creating the culture that has led to these recognitions.
This month, Fortune named XPO one of the World's Most Admired Companies for the fourth straight year. Two other recognitions that speak to our culture are our ranking by Newsweek in the top 100 of America's Most Responsible Companies, and by Statista as one of the most socially responsible companies in France. Both the Netherlands and France ranked XPO in the top three 3PLs in their respective countries.
Now we have the industry’s biggest tailwinds at our back in 2021. Our full-year guidance this year is for $1.725 to $1.8 billion of adjusted EBITDA, which represents 24% to 29% growth year-over-year. We expect to achieve a similar level of growth in each of our segments of transportation and logistics.
We’re making good progress on the planned spin-off of our logistics segment. We’ve named a world-class top management team from our own ranks and we’re excited about the additional talent we’re recruiting. We’re targeting an investment grade rating.
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We remain confident that the spin-off, if completed as planned, will enhance the growth prospects of both companies. Each will have greater flexibility to tailor strategic decision-making and capital allocations to their end-markets, with the benefit of strong positioning as customer-focused innovators. We believe that the planned spin-off is an effective way to unlock significant value for our customers, employees and shareholders.
There are a lot of reasons to feel bullish about 2021, and we’re off to a strong start.
Thank you for your interest!
Non-GAAP Financial Measures
As required by the rules of the Securities and Exchange Commission ("SEC"), we provide reconciliations of the non-GAAP financial measures contained in this document to the most directly comparable measure under GAAP, which are set forth in the financial tables attached to the accompanying slide presentation.
XPO’s non-GAAP financial measures used in this document include: earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA and adjusted EBITDA margin for the three and twelve-month periods ended December 31, 2020 and 2019 on a consolidated basis; EBITDA, adjusted EBITDA and adjusted EBITDA excluding truckload and adjusted EBITDA for our North American less-than-truckload business for the twelve-month periods ended December 31, 2020, 2019, 2018, 2017, 2016 and 2015; free cash flow for the three and twelve-month periods ended December 31, 2020 and 2019, and the twelve-month periods ended December 31, 2020, 2019, 2018, 2017, 2016 and 2015; adjusted net income attributable to common shareholders and adjusted earnings per share (basic and diluted) (“adjusted EPS”) for the three and twelve-month periods ended December 31, 2020 and 2019; adjusted operating income and adjusted operating ratio for our North American less-than-truckload business for the three and twelve-month periods ended December 31, 2020, 2019, 2018, 2017, 2016 and 2015.
We believe that the above adjusted financial measures facilitate analysis of our ongoing business operations because they exclude items that may not be reflective of, or are unrelated to, XPO and its business segments' core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses. Other companies may calculate these non-GAAP financial measures differently, and therefore our measures may not be comparable to similarly titled measures of other companies. These non-GAAP financial measures should only be used as supplemental measures of our operating performance.
Adjusted EBITDA, adjusted net income attributable to common shareholders and adjusted EPS include adjustments for transaction and integration, as well as restructuring costs and other adjustments as set forth in the attached tables. Transaction and integration adjustments are generally incremental costs that result from an actual or planned acquisition, divestiture or spin-off and may include transaction costs, consulting fees, retention awards, and internal salaries and wages (to the extent the individuals are assigned full-time to integration and transformation activities) and certain costs related to integrating and converging IT systems. Restructuring costs primarily relate to severance costs associated with business optimization initiatives. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and evaluating XPO's and each business segment's ongoing performance.
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We believe that free cash flow is an important measure of our ability to repay maturing debt or fund other uses of capital that we believe will enhance stockholder value. We calculate free cash flow as adjusted net cash provided by operating activities, less payment for purchases of property and equipment plus proceeds from sale of property and equipment, with adjusted net cash provided by operating activities defined as net cash provided by operating activities plus cash collected on deferred purchase price receivables. We believe that EBITDA, adjusted EBITDA, adjusted EBITDA margin and adjusted EBITDA excluding truckload improve comparability from period to period by removing the impact of our capital structure (interest and financing expenses), asset base (depreciation and amortization), tax impacts and other adjustments as set out in the attached tables that management has determined are not reflective of core operating activities and thereby assist investors with assessing trends in our underlying businesses. We believe that adjusted net income attributable to common shareholders and adjusted EPS improve the comparability of our operating results from period to period by removing the impact of certain costs and gains that management has determined are not reflective of our core operating activities. We believe that adjusted operating income and adjusted operating ratio for our North American less-than-truckload business improves the comparability of our operating results from period to period by (i) removing the impact of certain transaction and integration and restructuring costs, as well as amortization expenses and (ii) including the impact of pension income incurred in the reporting period as set out in the attached tables.
With respect to our full year 2021 financial targets for adjusted EBITDA, adjusted diluted EPS and free cash flow, a reconciliation of these non-GAAP measures to the corresponding GAAP measures is not available without unreasonable effort due to the variability and complexity of the reconciling items described above that we exclude from these non-GAAP target measures. The variability of these items may have a significant impact on our future GAAP financial results and, as a result, we are unable to prepare the forward-looking statement of income and statement of cash flows prepared in accordance with GAAP that would be required to produce such a reconciliation.
Forward-looking Statements
This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including our future growth prospects for EBITDA in our North American less-than-truckload business, our company's potential profit growth opportunity, our company’s full year 2021 financial targets for adjusted EBITDA, depreciation and amortization, interest expense, effective tax rate, adjusted diluted EPS, gross capital expenditures, net capital expenditures and free cash flow, as well as our company’s planned spin-off of its logistics segment and its plan to pursue an investment-grade credit rating. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "should," "will," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target," "trajectory" or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances.
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These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include the risks discussed in our filings with the SEC and the following: economic conditions generally; the severity, magnitude, duration and aftereffects of the COVID-19 pandemic and government responses to the COVID-19 pandemic; our ability to align our investments in capital assets, including equipment, service centers and warehouses, to our customers' demands; our ability to implement our cost and revenue initiatives; our ability to successfully integrate and realize anticipated synergies, cost savings and profit improvement opportunities with respect to acquired companies; matters related to our intellectual property rights; fluctuations in currency exchange rates; fuel price and fuel surcharge changes; natural disasters, terrorist attacks or similar incidents; risks and uncertainties regarding the potential timing and expected benefits of the proposed spin-off of our logistics segment, including final approval for the proposed spin-off and the risk that the spin-off may not be completed on the terms or timeline currently contemplated, if at all; the impact of the proposed spin-off on the size and business diversity of our company; the ability of the proposed spin-off to qualify for tax-free treatment for U.S. federal income tax purposes; our ability to develop and implement suitable information technology systems and prevent failures in or breaches of such systems; our substantial indebtedness; our ability to raise debt and equity capital; fluctuations in fixed and floating interest rates; our ability to maintain positive relationships with our network of third-party transportation providers; our ability to attract and retain qualified drivers; labor matters, including our ability to manage our subcontractors, and risks associated with labor disputes at our customers and efforts by labor organizations to organize our employees; litigation, including litigation related to alleged misclassification of independent contractors and securities class actions; risks associated with our self-insured claims; risks associated with defined benefit plans for our current and former employees; and governmental regulation, including trade compliance laws, as well as changes in international trade policies and tax regimes; governmental or political actions, including the United Kingdom's exit from the European Union; and competition and pricing pressures.
All forward-looking statements set forth in this document are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Forward-looking statements set forth in this document speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law.
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INVESTOR PRESENTATION FEBRUARY 2021 v FEBRUARY 2021 Investor Presentation Exhibit 99.2
INVESTOR PRESENTATION FEBRUARY 2021 Disclaimers 2 NON - GAAP FINANCIAL MEASURES As required by the rules of the Securities and Exchange Commission ("SEC"), we provide reconciliations of the non - GAAP financial measures contained in this presentation to the most directly comparable measure under GAAP, which are set forth in the financial tables attached to this document . This document contains the following non - GAAP financial measures : earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA and adjusted EBITDA margin for the three and twelve - month periods ended December 31 , 2020 and 2019 on a consolidated basis ; EBITDA, adjusted EBITDA, adjusted EBITDA excluding truckload and adjusted EBITDA for our North American less - than - truckload business for the twelve - month periods ended December 31 , 2020 , 2019 , 2018 , 2017 , 2016 and 2015 ; free cash flow for the three period ended December 31 , 2020 and 2019 , and the twelve - month periods ended December 31 , 2020 , 2019 , 2018 , 2017 , 2016 and 2015 ; adjusted net income attributable to common shareholders and adjusted earnings per share (basic and diluted) (“adjusted EPS”) for the three and twelve - month periods ended December 31 , 2020 and 2019 ; adjusted operating income and adjusted operating ratio for our North American less - than - truckload business for the three and twelve - month periods ended December 31 , 2020 , 2019 , 2018 , 2017 , 2016 and 2015 ; and net debt and net leverage as of December 31 , 2020 . We believe that the above adjusted financial measures facilitate analysis of our ongoing business operations because they exclude items that may not be reflective of, or are unrelated to, XPO and its business segments' core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses . Other companies may calculate these non - GAAP financial measures differently, and therefore our measures may not be comparable to similarly titled measures of other companies . These non - GAAP financial measures should only be used as supplemental measures of our operating performance . Adjusted EBITDA, adjusted net income attributable to common shareholders and adjusted EPS include adjustments for transaction and integration, as well as restructuring costs and other adjustments as set forth in the attached tables . Transaction and integration adjustments are generally incremental costs that result from an actual or planned acquisition, divestiture or spin - off and may include transaction costs, consulting fees, retention awards, and internal salaries and wages (to the extent the individuals are assigned full - time to integration and transformation activities) and certain costs related to integrating and converging IT systems . Restructuring costs primarily relate to severance costs associated with business optimization initiatives . Management uses these non - GAAP financial measures in making financial, operating and planning decisions and evaluating XPO's and each business segment's ongoing performance . We believe that free cash flow is an important measure of our ability to repay maturing debt or fund other uses of capital that we believe will enhance stockholder value . We calculate free cash flow as adjusted net cash provided by operating activities, less payment for purchases of property and equipment plus proceeds from sale of property and equipment, with adjusted net cash provided by operating activities defined as net cash provided by operating activities plus cash collected on deferred purchase price receivables . We believe that EBITDA, adjusted EBITDA, adjusted EBITDA margin and adjusted EBITDA excluding truckload improve comparability from period to period by removing the impact of our capital structure (interest and financing expenses), asset base (depreciation and amortization), tax impacts and other adjustments as set out in the attached tables that management has determined are not reflective of core operating activities and thereby assist investors with assessing trends in our underlying businesses . We believe that adjusted net income attributable to common shareholders and adjusted EPS improve the comparability of our operating results from period to period by removing the impact of certain costs and gains that management has determined are not reflective of our core operating activities . We believe that adjusted operating income and adjusted operating ratio for our North American less - than - truckload business improve the comparability of our operating results from period to period by ( i ) removing the impact of certain transaction, integration and restructuring costs, amortization expenses as well as real estate gains and (ii) including the impact of pension income incurred in the reporting period as set out in the attached tables . We believe that net debt and net leverage is an important measure of our overall liquidity position and is calculated by removing cash and cash equivalents from our reported total debt and reporting net debt as a ratio of our last twelve - month reported adjusted EBITDA . With respect to our full year 2021 financial targets for adjusted EBITDA, adjusted diluted EPS and free cash flow, a reconciliation of these non - GAAP measures to the corresponding GAAP measures is not available without unreasonable effort due to the variability and complexity of the reconciling items described above that we exclude from these non - GAAP target measures . The variability of these items may have a significant impact on our future GAAP financial results and, as a result, we are unable to prepare the forward - looking statement of income and statement of cash flows prepared in accordance with GAAP that would be required to produce such a reconciliation . FORWARD - LOOKING STATEMENTS This document includes forward - looking statements within the meaning of Section 27 A of the Securities Act of 1933 , as amended, and Section 21 E of the Securities Exchange Act of 1934 , as amended, including our future growth prospects for EBITDA in our North American less - than - truckload business, our company's potential profit growth opportunity, our company’s full year 2021 financial targets for adjusted EBITDA, depreciation and amortization, interest expense, effective tax rate, adjusted diluted EPS, gross capital expenditures, net capital expenditures and free cash flow, as well as our company’s planned spin - off of its logistics segment and its plan to pursue an investment - grade credit rating . All statements other than statements of historical fact are, or may be deemed to be, forward - looking statements . In some cases, forward - looking statements can be identified by the use of forward - looking terms such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "should," "will," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target," "trajectory" or the negative of these terms or other comparable terms . However, the absence of these words does not mean that the statements are not forward - looking . These forward - looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances . These forward - looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward - looking statements . Factors that might cause or contribute to a material difference include the risks discussed in our filings with the SEC and the following : economic conditions generally ; the severity, magnitude, duration and aftereffects of the COVID - 19 pandemic and government responses to the COVID - 19 pandemic ; our ability to align our investments in capital assets, including equipment, service centers and warehouses, to our customers' demands ; our ability to implement our cost and revenue initiatives ; our ability to successfully integrate and realize anticipated synergies, cost savings and profit improvement opportunities with respect to acquired companies ; matters related to our intellectual property rights ; fluctuations in currency exchange rates ; fuel price and fuel surcharge changes ; natural disasters, terrorist attacks or similar incidents ; risks and uncertainties regarding the potential timing and expected benefits of the proposed spin - off of our logistics segment, including final approval for the proposed spin - off and the risk that the spin - off may not be completed on the terms or timeline currently contemplated, if at all ; the impact of the proposed spin - off on the size and business diversity of our company ; the ability of the proposed spin - off to qualify for tax - free treatment for U . S . federal income tax purposes ; our ability to develop and implement suitable information technology systems and prevent failures in or breaches of such systems ; our substantial indebtedness ; our ability to raise debt and equity capital ; fluctuations in fixed and floating interest rates ; our ability to maintain positive relationships with our network of third - party transportation providers ; our ability to attract and retain qualified drivers ; labor matters, including our ability to manage our subcontractors, and risks associated with labor disputes at our customers and efforts by labor organizations to organize our employees ; litigation, including litigation related to alleged misclassification of independent contractors and securities class actions ; risks associated with our self - insured claims ; risks associated with defined benefit plans for our current and former employees ; and governmental regulation, including trade compliance laws, as well as changes in international trade policies and tax regimes ; governmental or political actions, including the United Kingdom's exit from the European Union ; and competition and pricing pressures . All forward - looking statements set forth in this deck are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations . Forward - looking statements set forth in this deck speak only as of the date hereof, and we do not undertake any obligation to update forward - looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law .
INVESTOR PRESENTATION FEBRUARY 2021 Table of contents 3 INVESTOR HIGHLIGHTS 4 BUSINESS OVERVIEW 5 FINANCIAL HIGHLIGHTS AND KEY METRICS 11 LOGISTICS 19 LESS - THAN - TRUCKLOAD 27 TRUCK BROKERAGE 35 SUPPLEMENTAL MATERIALS 44
INVESTOR PRESENTATION FEBRUARY 2021 Investor highlights: Key factors driving growth and returns 4 Leading positions in fast - growing sectors A leader in logistics, less - than - truckload (LTL) transportation and truck brokerage Numerous opportunities for top - line growth Proven ability to capture organic share through price and volume, and expand through accretive M&A Strong presence in e - commerce and omnichannel retail Largest outsourced e - commerce logistics platform in Europe, with expansive capabilities in North America Fast pace of technological innovation Proprietary technology for warehouse automation, LTL optimization and digital brokerage services Substantial advantages of scale Mission - critical ability to serve large customers; operating leverage; data leverage; purchasing power Nimble capital allocation focused on returns Strong track record of creating substantial shareholder value; disciplined, ROI - based capital allocation ~$700 million to $1 billion of potential incremental profit opportunity XPO - specific cost and revenue initiatives underway, with the majority driven by proprietary technology Ability to outperform the macro Proven resilience due to durable demand in key verticals, flexible business models and low concentration risk Significant cash generation through cycles Low maintenance capex; working capital becomes a source of cash in downturns Wide moat of results - oriented innovators 35 most senior executives and ~2,500 professionals at the next level with blue - chip industry experience
INVESTOR PRESENTATION FEBRUARY 2021 Business overview
INVESTOR PRESENTATION FEBRUARY 2021 Serving over 50,000 customers in 30 countries 6 1 C ompany segment revenue data, excluding intersegment eliminations 2 Locations and employees adjusted to reflect the Kuehne + Nagel acquisition January 2021 XPO is the second largest contract logistics provider globally, with a leading e - commerce platform XPO is a leading global provider of truck brokerage services and less - than - truckload (LTL) transportation 1 LOGISTICS SEGMENT 38% OF 2020 REVENUE 1 TRANSPORTATION SEGMENT 62% OF 2020 REVENUE 1 Revenue $6.2 billion Locations 2 890 Countries of operation 27 Employees 2 ~67,000 Revenue $10.2 billion Locations 730 Countries of operation 18 Employees ~39,000
INVESTOR PRESENTATION FEBRUARY 2021 Key 2020 financial metrics 7 Refer to the “Non - GAAP Financial Measures” section on page 2 and the “Financial Highlights” section for related information FREE CASH FLOW 1 $554 million Asset - Based 29% Asset - Light 71% US 58% France 11% UK 13% Spain 6% Other 12% REVENUE BY GEOGRAPHY REVENUE BY MIX REVENUE $16.3 billion ADJUSTED EBITDA 1 $1.4 billion
INVESTOR PRESENTATION FEBRUARY 2021 ~$ 500 million average annual investment in innovative supply chain technology 8 LOGISTICS ▪ Proprietary warehouse management system manages all distribution processes and warehouse operations ▪ Provides in - house control of robotics and other advanced automation ▪ Integrates transportation and logistics services for retail, e - commerce, omnichannel and manufacturing customers using XPO Direct Œ ▪ Improves productivity in warehouse operations by rightsizing labor resources with XPO Smart Œ analytics LESS - THAN - TRUCKLOAD ▪ Network optimization tools improve LTL linehaul, pickup - and - delivery, and routing ▪ Proprietary algorithms with machine learning assimilate constant inflows of data ▪ Visibility facilitates selling LTL across additional verticals ▪ Improves the efficiency of cross - dock operations with XPO Smart Œ analytics TRUCK BROKERAGE ▪ Proprietary XPO Connect Œ marketplace with machine learning drives end - to - end efficiency in brokered freight transactions ▪ Fully automated platform integrates Freight Optimizer capacity management engine ▪ Automates carrier matching to optimal loads ▪ Lowers environmental impact by reducing empty truck miles ▪ Gives carriers access to XPO Connect Œ from their trucks with Drive XPO Œ app KEY TECHNOLOGY BY SERVICE LINE ~1,600 technology professionals focus on continuously improving results
INVESTOR PRESENTATION FEBRUARY 2021 XPO Connect Œ is a powerful, digital ecosystem for freight management INTELLIGENT BROKERAGE AUTOMATION CREATES VALUE IN REAL TIME ▪ Optimizes freight - matching by sourcing the best carriers for each load profile ▪ Expands revenue and margins with automated load - tendering, pricing, bidding, buying and tracking ▪ Improves freight management by providing deep visibility into available capacity ▪ Establishes the architecture for continuous innovation ▪ Creates operational synergies 9 CARRIERS FREIGHT OPTIMIZER API CUSTOMERS Carriers can: ▪ Search the platform’s load board to find freight for trucks and book it digitally ▪ Choose to accept the posted rate or bid and negotiate, using the automated counteroffer feature ▪ Drivers use the Drive XPO Œ app from the road to find loads and backhauls, avoid delays and file e - documents Shippers can: ▪ Post loads, receive quotes from carriers, create orders digitally, and track shipments in real time ▪ Select the optimal capacity based on load profile, preferences, price and market conditions ▪ Customize analytics and reports to gain insights into the impact of decisions
INVESTOR PRESENTATION FEBRUARY 2021 XPO Smart Œ improves productivity of warehouse and cross - dock operations BECOMES CONTINUOUSLY SMARTER AT SITE - SPECIFIC OPTIMIZATION ▪ Labor management and planning ▪ Attendance tracking ▪ Productivity tracking ▪ Access on cloud applications, large - format displays, mobile devices and handhelds ▪ Production management of inbound and outbound flows ▪ Enhanced SKU velocity ▪ Granular - level detail in a few clicks MACHINE LEARNING MODELING ANALYTICS FORECASTING IOT DATA TRANSACTIONAL DATA TIME AND ATTENDANCE 10
INVESTOR PRESENTATION FEBRUARY 2021 Financial highlights and key metrics
INVESTOR PRESENTATION FEBRUARY 2021 Industry - leading growth in revenue and adjusted EBITDA 12 REVENUE ADJUSTED EBITDA Note: Both charts exclude the impact of the North American truckload unit divested in October 2016 Refer to the “Non - GAAP Financial Measures” section on page 2 of this document 7,533 14,188 15,381 17,279 16,648 16,252 0 4,000 8,000 12,000 16,000 20,000 2015 2016 2017 2018 2019 2020 474 1,168 1,367 1,562 1,668 1,393 0 250 500 750 1,000 1,250 1,500 1,750 2,000 2015 2016 2017 2018 2019 2020 2021F 1,725 – 1,800 $ in millions $ in millions
INVESTOR PRESENTATION FEBRUARY 2021 Strong free cash flow generation 13 FREE CASH FLOW Note: 2016 and 2017 data have been recast to reflect the impact of Accounting Standards Update 2016 - 2018 Refer to the “Non - GAAP Financial Measures” section on page 2 of this document $ in millions (98) 207 399 694 628 554 600 – 700 -125 0 125 250 375 500 625 750 2015 2016 2017 2018 2019 2020 2021F - 125
INVESTOR PRESENTATION FEBRUARY 2021 Balance sheet and liquidity as of December 31, 2020 14 NET DEBT 1 $4.7 billion CASH AND CASH EQUIVALENTS $2.1 billion NET LEVERAGE 2 3.3x TOTAL LIQUIDITY $3.1 billion Recent activities ▪ The company redeemed $1.2 billion of Senior Notes due 2022 in January 2021 ▪ No significant debt maturities until mid - 2023 ▪ Substantially all convertible preferred stock converted into common stock in December 2020 1 Calculated as total debt of $6.7 billion less cash and cash equivalents of $2.1 billion 2 Calculated as net debt of $4.7 billion divided by LTM adjusted EBITDA of $1.4 billion Refer to the “Non - GAAP Financial Measures” section on page 2 of this document
INVESTOR PRESENTATION FEBRUARY 2021 Fourth quarter 2020 results 15 REVENUE $4.67 billion NET INCOME 1 $93 million DILUTED EARNINGS PER SHARE $0.91 ADJUSTED NET INCOME 1 $121 million ADJUSTED DILUTED EARNINGS PER SHARE 2 ADJUSTED EBITDA $449 million CASH FLOW FROM OPERATIONS $193 million FREE CASH FLOW $91 million $1.19 Commentary ▪ The company reported record fourth quarter revenue and adjusted EBITDA ▪ Revenue increased 13% year - over - year, as demand continued to rebound from COVID - impacted second quarter lows ▪ The increases in operating income and adjusted EBITDA were related primarily to higher profitability in truck brokerage and in LTL, with gains from LTL real estate sales excluded ▪ In North American LTL, fourth quarter adjusted operating ratio, excluding real estate gains, strengthened for the sixth consecutive year Three months ended December 31, 2020 1 Net income attributable to common shareholders 2 Includes amortization of acquisition - related intangible assets of $0.25 per diluted share Refer to the “Non - GAAP Financial Measures” section on page 2 of this document
INVESTOR PRESENTATION FEBRUARY 2021 Full - year 2020 results 16 REVENUE $16.25 billion NET INCOME 1 $79 million DILUTED EPS $0.78 ADJUSTED NET INCOME 1 $205 million ADJUSTED DILUTED EPS 2 ADJUSTED EBITDA $1.39 billion CASH FLOW FROM OPERATIONS $885 million FREE CASH FLOW $554 million $2.01 1 Net income attributable to common shareholders 2 Includes amortization of acquisition - related intangible assets of $0.96 per diluted share Refer to the “Non - GAAP Financial Measures” section on page 2 of this document Rebounded dramatically from COVID and ended 2020 with the highest adjusted EBITDA of any fourth quarter in the company’s history
INVESTOR PRESENTATION FEBRUARY 2021 Full - year 2021 guidance 17 1 Excluding amortization of acquisition - related intangible assets 2 Excludes amortization of acquisition - related intangible assets estimated to be $145 million in 2021 Refer to the “Non - GAAP Financial Measures” section on page 2 of this document * The company will present adjusted net income and adjusted diluted EPS excluding the amortization of acquisition - related intang ible assets, starting with 2021 reporting. The company’s 2021 guidance excludes impacts associated with the planned spin - off of the logistics segment previously announced; and assumes 113 million diluted shares outstanding. ADJUSTED EBITDA $1.725 – 1.8 billion DEPRECIATION AND AMORITIZATION 1 $780 – 800 million INTEREST EXPENSE $275 – 285 million EFFECTIVE TAX RATE 24% – 26% GROSS CAPITAL EXPENDITURES $625 – 675 million NET CAPITAL EXPENDITURES $475 – 525 million *ADJUSTED DILUTED EPS 2 $5.10 – 5.85 FREE CASH FLOW $600 – 700 million Related to 2021 cash flows:
INVESTOR PRESENTATION FEBRUARY 2021 Potential profit growth opportunity of ~$700 million to $1 billion 18 Pricing benefits 20% New business initiatives 20% Cost initiatives 60% Revenue initiatives POOL OF COST OPPORTUNITIES ▪ XPO Smart Ρ optimization of ~$5 billion of variable labor cost ▪ Greater efficiencies in LTL linehaul and pickup - and - delivery spend ▪ Continued logistics automation ▪ European logistics margin expansion ▪ Global procurement savings ▪ Further back - office optimization POOL OF REVENUE OPPORTUNITIES ▪ Advanced pricing analytics and revenue tools ▪ XPO Connect Ρ digital freight marketplace ▪ XPO Direct Ρ shared distribution network ▪ Focused selling to European strategic accounts INITIATIVES AS % OF TOTAL XPO - SPECIFIC OPPORTUNITY XPO will continue to analyze these and other opportunities to ensure that resources are focused on endeavors that potentially can return the most value. XPO is executing on 10 profit initiatives that are all self - driven and largely independent of the macro. In total, these initiatives represent a potential $700 million to $1 billion profit improvement run rate in 2023. XPO made progress with these initiatives in 2020, in large part due to the company - specific benefits of its technology, despite a choppy operating environment in the early months of the pandemic. The profit improvement opportunity range provided above is expected to apply to current operations as follows: ~50% benefit to global logistics; ~30% benefit to North American LTL; and ~20% benefit to all other transportation lines.
INVESTOR PRESENTATION FEBRUARY 2021 Logistics
INVESTOR PRESENTATION FEBRUARY 2021 XPO is the second largest contract logistics provider globally 20 1 Source: Third - party industry research; refers to contract logistics 2 Full - year 2020 revenue; all other metrics as of December 31, 2020, locations and employees adjusted to reflect the Kuehne + Nagel acquisition January 2021 Logistics is an asset - light business characterized by long - term contractual relationships with high renewal rates and low cyclicality. It includes the management and distribution of goods, order fulfillment, reverse logistics, and other services. Industry size, North America and Europe: ~ $130 billion 1 . Revenue $6.2 billion Countries of operation 27 Locations 890 Employees ~67,000 Average contract length ~5 years Total warehouse space ~ 212 million sq. ft. (20 million sq. m.) – Capacity in Europe ~ 103 million sq. ft. – Capacity in North America ~ 101 million sq. ft. – Capacity in Asia ~ 8 million sq. ft. XPO KEY METRICS 2
INVESTOR PRESENTATION FEBRUARY 2021 XPO has decades of vertical expertise and prominent customers 21 TOP VERTICALS % 2020 REVENUE DEEP EXPERTISE E - commerce / retail ▪ Comprehensive B2C services, including warehousing, distribution, advanced automation, labor, inventory management, peak management and forecasting Food and beverage ▪ Frozen, refrigerated and dry storage; fulfillment for retail, hospitality and direct - to - consumer supply chains with stringent regulatory compliance, and recalls management Consumer packaged goods ▪ Replicable solutions for consistent results across national and multinational consumer markets, including e - commerce, reverse logistics and omnichannel fulfillment Consumer technology ▪ Direct - to - consumer and retail fulfillment and returns management of consumer electronics and other devices for manufacturers 11% 13% 13% 39% In 2020, XPO’s top four verticals accounted for 76% of global logistics revenue, and the vast majority of logistics revenue was derived from the US, UK, France and Spain
INVESTOR PRESENTATION FEBRUARY 2021 Known as a global leader in innovation, expertise and quality of performance 22 Strongly positioned with blue - chip customers requiring bespoke solutions ▪ XPO’s reputation for reliable outcomes resonates with customers seeking to de - risk supply chains ▪ Expansive capacity and scale, with best - in - class ability to manage tight labor markets Proprietary technology excels at agility, visibility, speed, accuracy and control ▪ Strong focus on cost management, rightsizing labor, solving loss - makers and peak management ▪ Proprietary XPO Smart Œ tools leverage machine learning to improve productivity Major provider of e - commerce and omnichannel logistics ▪ Largest outsourced e - fulfilment platform in Europe, with expansive capabilities in North America ▪ Rigorous returns management is highly valued by retailers and e - tailers XPO Direct Œ utilizes existing North American network for shared distribution ▪ Customers use XPO’s AI to flex inventory while avoiding large fixed costs and capital investments ▪ Sites positioned to serve 99% of US population through one - day and two - day ground delivery Large opportunity to grow share in established specializations ▪ Proven track records in consumer technology, omnichannel retail, aerospace and defense, consumer packaged goods, apparel, cosmetics, food retail, cold - chain and industrial, with a growing presence in healthcare Significant levers for profitable growth and strong free cash flow ▪ Sales strategy is geared toward consumer sector: customer wallet share and new accounts ▪ Long runway for margin expansion via XPO Smart Œ , advanced automation and robotics
INVESTOR PRESENTATION FEBRUARY 2021 23 Sophisticated capabilities are mission - critical for customers 23 ▪ Technology - enabled fulfillment and returns, continuously improved by AI and machine learning ▪ Significant increases in unit throughput ▪ Enhanced safety and workplace environment ▪ Ongoing robotics implementations planned in North America and Europe ▪ Burgeoning demand for reverse logistics, valued by e - commerce companies and retailers with high consumer expectations ▪ Full lifecycle management of returned merchandise, including return - to - retail, recycling or disposal ▪ Consistently reliable aftermarket distribution with rigorous inventory management ▪ Personalization during order fulfillment ▪ Channel - specific boxing and labeling ▪ Co - packing of similar goods for distribution cost efficiency ▪ Compliance monitoring of regulated goods ▪ Manufacturing support ▪ Carrier management ▪ Engineered packaging ▪ Cross - functional forecasting platform ▪ Customer collaboration for speed - to - market and omnichannel strategies ▪ Ability to shift between short and long - term warehousing for cost flexibility ▪ Optimization of outbound and inbound logistics flows ▪ Automated replenishment of materials and parts ADVANCED AUTOMATION AND ROBOTICS REVERSE LOGISTICS AND AFTERMARKET SUPPORT SUPPLY CHAIN OPTIMIZATION VALUE - ADD SERVICES AND CUSTOMIZATIONS
INVESTOR PRESENTATION FEBRUARY 2021 ▪ First - mover advantage with advanced automation strongly differentiates XPO as a logistics partner of choice ▪ Automation increases speed and accuracy by tying in multiple technologies to perform several steps of a process ▪ Robotics work cooperatively with humans or as standalone solutions ▪ Collaborative robots and autonomous goods - to - person systems overcome space and labor constraints, can move between projects and sites Intelligent warehouse automation generates measurable improvements 24 4 - 6x productivity improvement with employees supported by goods - to - person systems 2x productivity improvement with employees who work alongside cobots ROBOTICS GOODS - TO - PERSON SYSTEMS ADVANCED SORTATION SYSTEMS VISION TECHNOLOGY
INVESTOR PRESENTATION FEBRUARY 2021 XPO Smart Œ is delivering average logistics productivity improvement of 5% to 7% 25 Proprietary suite of productivity tools optimizes ~$5 billion variable labor cost, which is primarily in logistics ▪ Analytics provide deep visibility into warehouse labor activity in real time, as well as pre - scheduled labor for future periods ▪ Machine learning drives productivity and operational effectiveness through actionable business intelligence ▪ Manages major productivity levers simultaneously, including: full - time labor, part - time labor, length of work shift, scheduling and overtime hours ▪ Site - specific modeling helps managers understand the future impacts of operational decisions ▪ Takes turnover and training time into account Implemented in 85% of warehouses in North America and 50% of warehouses in Europe, with large upside going forward
INVESTOR PRESENTATION FEBRUARY 2021 XPO Direct Œ flexible distribution network in North America 26 ADVANTAGES FOR CUSTOMERS ADVANTAGES FOR XPO ▪ Retailers, e - tailers and manufacturers have access to logistics scale, expertise and technology without adding high - fixed - cost distribution centers ▪ Shortens time from consumer order to delivery, and reduces response time for retail stocking and store replenishment ▪ Cutting - edge technology in place for ease of doing business at both ends; predictive analytics help plan inventory flows ▪ Customers can reposition inventory within one and two - day ground delivery range of ~ 99% of the US population as demand patterns change ▪ Service agility enhances brands XPO Direct Œ is achieving profitability in second full year of operations ▪ Strongly differentiates XPO from other logistics providers in the marketplace ▪ Increases utilization of existing warehouses and other resources ▪ Leverages XPO’s transportation and logistics solutions in combination: – Facilities serve as strategically located stockholding sites and cross - docks that can be utilized by multiple customers at the same time – Transportation needs are supported by the company’s brokered, contracted and owned capacity XPO Direct Œ is a national distribution solution that gives customers fluid fulfillment with more flexibility than traditional distribution models, and at lower cost: ▪ Reduces fixed costs and large capital investments by sharing warehouses, logistics processes, labor and technology with other XPO customers; ▪ Reduces goods - in - transit time by repositioning inventory close to target populations as demand patterns change.
INVESTOR PRESENTATION FEBRUARY 2021 Less - than - truckload
INVESTOR PRESENTATION FEBRUARY 2021 XPO is a top three provider of less - than - truckload (LTL) service in North America 28 LTL is the transportation of a quantity of freight that is larger than a parcel but too small to require an entire truck, often shipped on pallets. Freight for different customers are consolidated in the same trailer. North American industry size: ~ $43 billion 1 . Revenue $3.5 billion Employees ~20,000 Terminals 290 Number of tractors / trailers ~7,800 / 25,000 Shipments per year ~12.4 million Average length of haul 826 miles Average tractor fleet age 4.8 years XPO KEY METRICS 2 XPO IMAGE THAT ILLUSTRATES LTL SERVICE 1 Source: Third - party research 2 Full - year 2020 revenue and shipments per year; other metrics as of December 31, 2020
INVESTOR PRESENTATION FEBRUARY 2021 290 LTL terminals provide critical coverage and lane density 29 Many large customers prefer a single LTL partner for national service
INVESTOR PRESENTATION FEBRUARY 2021 30 Fundamentals favorable for long - term industry expansion ▪ Industry characterized by rational pricing dynamics ▪ Rapid growth of e - commerce driving retail shipments to LTL carriers National providers have a strong advantage ▪ XPO is one of few US providers with coast - to - coast scale and visibility ▪ Covers every US state, including Alaska and Hawaii, and ~ 99% of all US postal codes Further profit improvement potential via tech in place ▪ Technology optimizes linehaul load - building, pickup - and - delivery and routing ▪ XPO Smart Œ tools drive process improvements, cost savings and labor productivity Data - driven pricing reduces cost and improves utilization ▪ Technology automates pricing for small to mid - sized accounts ▪ Elasticity models help inform pricing decisions for larger accounts Substantial improvement every year since acquisition, with more upside ▪ Second best adjusted operating ratio in the LTL industry ▪ Resilient cash flow generation through diligent working capital and capex management North American LTL has a well - defined opportunity to grow EBITDA to at least $1 billion in 2022 In 2020, XPO improved Q4 LTL adjusted operating ratio, excluding real estate gains, for the sixth straight year
INVESTOR PRESENTATION FEBRUARY 2021 Critical capacity, density and scale 1 ▪ One of the largest, most modern and safety - equipped fleets in industry ▪ ~ 12,000 professional drivers ▪ All types of commodities accepted ▪ Over 75,000 next - day and two - day lanes Intelligent technology ▪ Data - driven capabilities with machine learning, proprietary to XPO ▪ Driving up productivity beyond the significant gains already made ▪ XPO analytics tailor business intelligence for customers Strong relationships ▪ Over 30 years’ experience in LTL ▪ Single source for customers with delivery needs in multiple markets ▪ Longstanding relationships for shipments to and from Mexico, Puerto Rico, Canada ▪ Responsive operators committed to superior outcomes Compelling value proposition differentiated by scale and technology 31 1 As of December 31, 2020 2 2019 revenue data includes fuel surcharge; source: SJ Consulting Group 1,242 1,718 1,787 2,094 2,679 2,818 3,049 3,841 4,055 7,454 Southeastern Freight Lines FedEx Freight Old Dominion Freight Line YRC Freight Estes Express Lines UPS Freight ABF Freight System SAIA LTL Freight R + L Carriers $ in millions NORTH AMERICAN LTL PROVIDERS 2
INVESTOR PRESENTATION FEBRUARY 2021 XPO’s technology uses machine learning to become continually smarter at improving operations LTL network optimization technology prioritizes three key areas 32 ROUTING LOAD - BUILDING PRICING Dynamic routing and real - time digital visibility ▪ Increases pickup - and - delivery pounds per person - hour, stops per hour and weight per trip ▪ Reduces pickup - and - delivery miles per stop and cost per stop ▪ Improves service levels by sequencing routes for better control of delivery times and exception management Automated load - building and higher trailer utilization ▪ Continually optimizes linehaul network ▪ Improves trailer utilization with real - time compliance monitoring ▪ Reduces multiple stops for trucks dedicated to direct movements Data - driven pricing for network balancing ▪ Provides real - time cost visibility at the shipment level ▪ Reduces costs, improves utilization and decreases empty miles ▪ Speeds onboarding of more profitable small to mid - sized local accounts
INVESTOR PRESENTATION FEBRUARY 2021 XPO Smart Œ delivers significant labor and service efficiencies on cross - docks 33 Rightsizes all components of LTL labor mix ▪ Real - time visibility drives more motor moves per hour on cross - docks, with high engagement of dock workers and drivers ▪ Manages major productivity levers simultaneously, including: full - time labor, part - time labor, length of work shift, scheduling and overtime hours ▪ Analytics provide deep visibility into cross - dock labor activity in real time, as well as pre - scheduled labor for future periods ▪ Site - specific modeling helps managers understand the future impacts of operational decisions ▪ Takes turnover and training time into account Implemented in 100% of North American LTL network, with significant productivity enhancements expected when fully utilized XPO IMAGE – IINSIDE OF LTL TRAILER
INVESTOR PRESENTATION FEBRUARY 2021 A leading LTL provider in the UK, France, Spain and Portugal 34 XPO international hub Partner international hub XPO platform Partner platform ▪ Over 100 LTL locations serving countries across Europe ▪ Optimal operating model used for each national market: contracted capacity, owned capacity or blended capacity ▪ Ability to transport freight from a single pallet to full truckload ▪ ~60,000 pallets delivered daily over domestic networks ▪ ~9,800 pallets delivered daily over international networks Pan - European LTL solutions are valued by multinational customers
INVESTOR PRESENTATION FEBRUARY 2021 Truck brokerage
INVESTOR PRESENTATION FEBRUARY 2021 XPO is the third largest truck brokerage provider in North America 36 Truck brokerage is a non - asset business that facilitates the movement of a quantity of freight requiring a full truckload, typically from a single shipper. A broker purchases truck capacity from independent carriers. North American industry size: ~ $360 billion 1 . Revenue $1.66 billion Locations 16 Employees ~1,000 Independent carriers ~58,000 North America ~75,000 globally Core carriers ~3,200 Accessible trucks Over 1,000,000 XPO KEY METRICS 2 1 Source: Third - party research; total truckload industry size, including brokerage component 2 Full - year 2020 revenue; other metrics as of December 31, 2020
INVESTOR PRESENTATION FEBRUARY 2021 2020 REVENUE BY CUSTOMERS 2020 REVENUE BY END - MARKET Brokerage revenue diversified across resilient verticals, low concentration risk Strategic focus on expanding share of e - commerce and consumer goods 37 Food and beverage 21% Retail and E - commerce 23% Industrial and Manufacturing 19% Logistics and Transportation 12% Automotive 5% Consumer Goods 5% Agriculture and Chemicals 4% Other 11% Customer 1 9% Customers 2 - 5 10% Customers 6 - 10 8% Customers 11 - 20 11% Others 62%
INVESTOR PRESENTATION FEBRUARY 2021 XPO’s 16.3% revenue CAGR from 2013 – 2019 was ~770 bps better than industry’s 6% 7% 7% 7% 8% 9% 10% 10% 10% 11% 11% 12% 12% 13% 14% 14% 16% 17% 19% 20% 21% 2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017A 2018A 2019A 2020E TRUCK BROKERS HAVE A LONG HISTORY OF PENETRATING THE FREIGHT INDUSTRY Source: Third - party industry research XPO’s brokerage growth continues to outpace the industry US truck brokerage penetration 38
INVESTOR PRESENTATION FEBRUARY 2021 Compelling value proposition underpins long track record of outperformance 39 Critical scale and capacity ▪ #3 broker in North America and #2 worldwide ▪ A transportation leader across UK, France, Spain, Portugal and Morocco Secular industry tailwinds ▪ Acceleration of outsourcing to brokers; robust demand from consumer verticals ▪ Growth of industry - leading last mile offering driven heavy goods e - commerce Nimble business model ▪ Agile, non - asset business model generates strong return on investment ▪ Strong operating leverage and modest capex requirements Durable commercial edge ▪ Long - tenured base of Tier 1 customer relationships, with low concentration ▪ Blue - chip brands are highly referenceable in key verticals Proprietary digital advantage ▪ XPO Connect Œ excels at efficiency through automation; rapid ongoing adoption ▪ Investments in digitization and visibility have created clear differentiation Double - digit EBITDA growth ▪ Driven by pricing optimization, digital productivity, disciplined sales/margin growth ▪ Outsized free cash flow conversion to EBITDA XPO is continuing to grow share of a vast addressable opportunity
INVESTOR PRESENTATION FEBRUARY 2021 TECHNOLOGY - DRIVEN MULTIPLE PROFIT INITIATIVES UNDERWAY Expand XPO Connect Œ ▪ Significant opportunity to unlock incremental revenue and profit well beyond current levels ▪ Value of XPO Connect Œ will compound in response to rapid adoption Pricing optimization ▪ Utilize XPO’s market pricing and contract utilization tools to capture higher - margin opportunities ▪ Tailor sales strategies for Tier 1, 2 and 3 customers Operational excellence ▪ Build on productivity gains already achieved to realize further sustainable uplifts to margin ▪ Continuously improve efficiency and drive down labor costs through automation Large potential runway for margin expansion 40
INVESTOR PRESENTATION FEBRUARY 2021 DIGITAL BROKERAGE PLATFORM IS FLEXIBLE AND CUSTOMIZABLE CUSTOMER FUNCTIONALITY CARRIER FUNCTIONALITY PERSONALIZED FREIGHT MANAGEMENT TAILORED CAPACITY MANAGEMENT ▪ Quote and buy different kinds of truck capacity online through a single point of access ▪ Leverage analytics for decision - making, planning and peak management ▪ Gain real - time visibility of shipments in transit ▪ Post available capacity based on preferences for freight type and other parameters ▪ Book loads on the web or via the Drive XPO Œ mobile app ▪ Optimize equipment utilization and driver’s use of time ▪ Customize personal dashboard and self - service analytics to manage freight ▪ Enhance productivity of spend with direct access to data histories and KPIs ▪ Tailor screen displays to match business needs ▪ Analyze trends in spot rates, driving conditions and other factors that impact bids on loads ▪ Locate opportunities based on location, equipment specs, freight type and timing of loads XPO Connect Œ generates efficiencies for all stakeholders 41
INVESTOR PRESENTATION FEBRUARY 2021 ▪ Proprietary mobile app gives drivers access to the XPO Connect Œ platform from the road ▪ Fully automated transactions, tracking solution and intuitive tools for bidding, booking loads and more ▪ Enhances access to truckload capacity for XPO customers regardless of market conditions FREIGHT MANAGEMENT CARRIER SCORE AND REWARDS CAPACITY POSTING LOAD BOOKING Truck drivers have downloaded the Drive XPO Œ app over 300,000 times 42
INVESTOR PRESENTATION FEBRUARY 2021 Total Drive XPO app downloads Total registered carrier users Total registered customer users CARRIERS Total digital brokerage orders Note: All data is cumulative CUSTOMERS 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 0 1,000 2,000 3,000 4,000 5,000 6,000 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 XPO Connect Πis widely adopted and growing fast 43
INVESTOR PRESENTATION FEBRUARY 2021 Supplemental materials
INVESTOR PRESENTATION FEBRUARY 2021 45 Planned spin - off of the logistics segment In December 2020, XPO announced its plan to pursue a spin - off of its logistics segment as a separate, publicly traded company. The intended transaction would be generally tax - free for US federal income tax purposes to XPO shareholders, and would result in XPO shareholders owning stock in both companies. Additionally, the company plans to achieve an investment - grade rating. If completed as planned, the spin - off will create two pure - play industry powerhouses with clearly delineated service offerings: ▪ The spun - off company will be the second largest contract logistics provider in the world; and ▪ The remaining company will be a global provider of less - than - truckload (LTL) and truck brokerage services. The transaction is currently expected to be completed in the second half of 2021, subject to various conditions, including the effectiveness of a Form 10 registration statement, receipt of a tax opinion from counsel, the refinancing of XPO’s debt on terms satisfactory to the XPO board of directors, and final approval by the XPO board of directors. There can be no assurance that a separation transaction will occur or, if one does occur, of its terms or timing. The company’s 2021 guidance excludes impacts associated with the planned spin - off of the logistics segment.
INVESTOR PRESENTATION FEBRUARY 2021 46 COVID - 19 pandemic response XPO is continuing to use a combination of rigorous protective measures, technology and virtual communications to keep its employees safe. These are some of the many actions the company has taken as part of its COVID - 19 response: ▪ For employees who need to work on site, XPO follows the guidance of the World Health Organization, the US Centers for Disease Control, local regulators and the company’s own health and safety protocols. ▪ Personal protective equipment is provided to employees in all company workplaces, and social distancing is in effect. ▪ Our facilities engage in ongoing cleaning of high - touch areas, as well as deep cleaning of facilities likely to have been exposed to COVID - 19. ▪ The company added two weeks of 100% paid pandemic sick leave for US and Canadian employees, in addition to existing paid time off. ▪ Employees are guaranteed up to three additional paid days if their facility closes temporarily for deep cleaning. ▪ We instituted a contactless delivery policy to ensure that our drivers can maintain a safe distance from customers when delivering freight. ▪ We expanded access to mental health counseling services. For its customers and carriers, XPO added an electronic COVID - 19 dashboard to its XPO Connect Œ digital freight platform. The dashboard serves as an access point for alerts in North America and Europe issued by states, provinces, countries and major infrastructure sources, such as municipalities and airports.
INVESTOR PRESENTATION FEBRUARY 2021 Highly skilled management team 47 Brad Jacobs Chief Executive Officer United Rentals, United Waste Aroon Amarnani Vice President, Strategy TIAA, Barclays Capital Josephine Berisha Chief Human Resources Officer Morgan Stanley Tony Brooks President, Less - Than - Truckload – North America Sysco, PepsiCo, Roadway Erik Caldwell President, Last Mile Logistics Hudson's Bay, Luxottica Richard Cawston Managing Director, Supply Chain – Europe Norbert Dentressangle , Asda Ashfaque Chowdhury President, Supply Chain – Americas and Asia Pacific New Breed Troy Cooper President United Rentals, United Waste Matthew Fassler Chief Strategy Officer Goldman Sachs Luis - Angel Gómez Izaguirre Managing Director, Transport – Europe Norbert Dentressangle Maryclaire Hammond Senior Vice President, Human Resources BP, Honeywell Mario Harik Chief Information Officer Oakleaf Waste Management Tavio Headley Vice President, Investor Relations Jefferies, American Trucking Associations Note: Partial list in alphabetical order LEADERSHIP PRIOR EXPERIENCE
INVESTOR PRESENTATION FEBRUARY 2021 Highly skilled management team (cont.) 48 LaQuenta Jacobs Chief Diversity Officer Delta Air Lines, Home Depot, Turner Broadcasting Katrina Liddell President, Global Forwarding and Expedite Johnson Controls International Eduardo Pelleissone Chief Transformation Officer Kraft Heinz, America Latina Logistica Heidi Ratti Senior Vice President, Human Resources Pacer International Alex Santoro Chief Commercial Officer and Executive Vice President, Operations Anheuser - Bush InBev, America Latina Logistica, Popeyes Sandeep Sakharkar Senior Vice President, Supply Chain Foot Locker, Johnson & Johnson Kevin Sterling Vice President, Strategy Seaport Global Securities, BB&T Ravi Tulsyan Senior Vice President and Treasurer ADT, Tyco, PepsiCo Drew Wilkerson President, Transportation – North America C.H. Robinson Malcolm Wilson Chief Executive Officer, XPO Logistics Europe Norbert Dentressangle , NYK Logistics Kyle Wismans Senior Vice President, Financial Planning and Analysis Baker Hughes, General Electric Stacey Woods Senior Vice President, Human Resources Operations Time Warner Cable, Wells Fargo David Wyshner Chief Financial Officer Wyndham, Avis, Merrill Lynch LEADERSHIP PRIOR EXPERIENCE Note: Partial list in alphabetical order
INVESTOR PRESENTATION FEBRUARY 2021 Business glossary 49 XPO SERVICES ▪ Less - than - truckload (LTL): LTL is the transportation of a quantity of freight that is larger than a parcel but too small to require an entire truck, and is often shipped on a pallet. LTL shipments are priced according to the weight of the freight, its commodity c lass (generally determined by cube/weight ratio and type of product), and mileage within designated lanes. An LTL carrier typicall y o perates a hub - and - spoke network that allows for the consolidation of multiple shipments for different customers in single trucks. XPO is the third largest LTL provider in North America, with 290 terminals and over 75,000 next - day and two - day lanes. This network provide s customers with geographic density and day - definite regional, inter - regional and transcontinental LTL freight services, including cross - border US service to and from Mexico and Canada, and intra - Canada service. The company also has one of the largest LTL networks in Western Europe, using a blended model of owned and contracted capacity to provide customers with domestic and pan - European solutions, ▪ Logistics: Logistics is an asset - light business characterized by long - term contractual relationships with high renewal rates and low cyclicality. Contracts are typically structured as either fixed - variable, cost - plus or gain - share. XPO is the second largest con tract logistics provider in the world, with long - tenured customer relationships in diverse verticals, and customized solutions with hi gh - value - add components, such as advanced automation, that minimize commoditization. The company’s services include e - commerce fulfillment, reverse logistics, value - added warehousing and distribution, order personalization, cold - chain logistics, packaging and labeling, aftermarket support, inventory management and supply chain optimization for customers in aerospace, manufacturing, ret ail, life sciences, chemicals, food and beverage and cold - chain. Reverse logistics, also known as returns management, is a fast - growing area of logistics that refers to managing the flow of ret urned goods back through logistics facilities ⏤ typically unwanted or defective merchandise. The demand for returns management has increased dramatically along with e - commerce sales, as consumers often “test drive” products they buy online. Reverse logistics services can include cleaning, testing, inspection, refurbishment, restocking, warranty processing and refunding. ▪ Truck brokerage: Truck brokerage is a variable - cost business that facilitates the trucking of freight by procuring carriers through the use of proprietary technology, typically referred to as a TMS (transportation management system). Brokerage net revenue is th e spread between the price to the shipper and the cost of purchased transportation. The vast majority of truck brokerage shipme nts are full truckload: cargo is provided by a single shipper in an amount that requires the full limit of the trailer, either by dim ens ion or weight. XPO is the second largest freight broker globally and the third largest in North America. The company matches shippers’ loads wi th third - party carrier capacity ⏤ primarily provided by independent contractors with the ability to interact directly on the company’s proprietary XPO Connect Œ digital platform (see next page). Truck brokers have steadily increased their share of the for - hire trucking market throughout cycles, and shippers increasingly value automation, making digital truck brokerage one of the strongest tre nds in the transportation industry.
INVESTOR PRESENTATION FEBRUARY 2021 Business glossary (cont.) 50 XPO TECHNOLOGY ▪ XPO Connect Œ : XPO’s proprietary, fully automated, self - learning digital freight marketplace connects shippers and carriers directly, as well as through company operations. XPO Connect Œ gives shippers comprehensive visibility into current market conditions, including fluctuations in capacity, spot rates by geography and digital negotiating through an automated counteroffer feature . C arriers can post available truck capacity and bid on loads, and shippers can tender loads and track their freight in real time. Drive rs use the Drive XPO Œ app for mobile access to XPO Connect Œ from the road. The app also serves as a geo - locator and supports voice - to - text communications. The cloud - based XPO Connect Œ platform is deployed in North America and Europe. ▪ XPO Direct Œ : XPO’s national, shared - space distribution network gives retail, e - commerce, omnichannel and manufacturing customers new ways to distribute their goods. XPO Direct Œ warehouses serve as stockholding sites and cross - docks that can be utilized by multiple customers at the same time. B2C and B2B customers “rent” XPO’s logistics capacity, labor, technology, transportation and storage to reposition inventories fluidly across markets as demand fluctuates without the capital investme nt of adding distribution centers. The XPO Direct Œ network uses XPO’s existing assets and supplier relationships as growth levers, capturing incremental business by positioning customer inventories within one or two - day ground delivery of approximately 99% of the US population. ▪ XPO Smart Œ : XPO’s proprietary, intelligent optimization tools improve labor productivity, warehouse management and demand forecasting in the company’s logistics and transportation operations. In the company’s logistics business, XPO Smart Œ interfaces with the XPO’s proprietary warehouse management platform to forecast optimal labor levels day - by - day and shift - by - shift, showing the future impact of current decisions. In the transportation business, XPO Smart Œ is utilized in the company’s less - than - truckload operations to improve cross - dock productivity at LTL network terminals.
INVESTOR PRESENTATION FEBRUARY 2021 ▪ XPO is the largest last mile provider for heavy goods ▪ Customers include omnichannel retail, e - commerce and direct - to - consumer manufacturers ▪ Asset - light platform positioned within 125 miles of 90% of the US population; independent contractor network ▪ Consistently high satisfaction levels supported by digital consumer engagement via XPO technology ▪ XPO Connect Œ tools balance route efficiency with consumer at - home availability Additional service: Last mile logistics for heavy goods 51 Revenue $908 million Hub locations 85 Employees ~1,800 Carriers / trucks ~1,800 / ~3,900 Deliveries and installations per year Over 10 million 1 Source: Third - party research 2 Full - year 2020 revenue and deliveries and installations; other metrics as of December 31, 2020 INDUSTRY LEADER IN NORTH AMERICA XPO KEY METRICS 2 135 138 161 190 220 250 287 328 377 435 493 567 707 818 957 1,104 1,249 2008A 2009A 2010A 2011A 2012A 2013A 2014A 2015A 2016A 2017A 2018A 2019A 2020E 2021E 2022E 2023E 2024E Accelerating growth of e - commerce includes trend toward more big and bulky goods bought online US e - commerce, $ in billions Last mile logistics is the facilitation of deliveries to consumer homes, often with white - glove service. XPO specializes in last mile logistics for heavy goods, such as appliances, furniture and large electronics. North American industry size: ~ $13 billion 1 .
INVESTOR PRESENTATION FEBRUARY 2021 XPO is widely recognized for performance and culture 52 ▪ Named one of the World’s Most Admired Companies by Fortune, 2018, 2019, 2020, 2021 ▪ Ranked #1 in the Fortune 500 category of Transportation and Logistics, 2017, 2018, 2019, 2020 ▪ Awarded silver CSR rating in Europe by EcoVadis for transportation and logistics, 2019, 2020 ▪ Named one of Spain’s Best Companies to Work For by Forbes, 2019, 2020 ▪ Awarded Apprenticeship of the Year in the UK by Motor Transport, 2020 ▪ Ranked #3 of Top 125 3PLs in France by Supply Chain Magazine, 2020 ▪ Received Innovation Award for partnership with Wavin Manufacturing at Supply Chain Excellence Awards, 2020 ▪ Ranked #3 of Top 100 Logistics Providers in the Netherlands by Logistiek , 2020 ▪ Recognized as one of the Most Socially Responsible Companies in France by Statista, 2020 ▪ Recognized by Whirlpool Corporation with Intermodal Carrier of the Year Award and Maytag Dependability Award for reverse logi sti cs, 2020 ▪ CEO Brad Jacobs named one of the Top 10 Logistics Leaders by Supply Chain Digital, 2020 ▪ Ranked Logistics Solution Provider of the Year by Urban Transport News in India, 2020 ▪ Received Torres & Earth Award in Spain for making positive contributions to combat climate change, 2020 ▪ Ranked #7 of the Top 20 UK Companies for Quality of Workplace Culture by the Chartered Management Institute, 2020 ▪ Ranked in top three of the Top 100 Transport Companies in France by l’Officiel des Transporteurs , 2019, 2020 ▪ Recognized by Ford Motor Company with World Excellence Awards, 2019 silver - level, 2020 gold - level ▪ Recognized by Owens Corning as Supplier of the Year Award, 2020 ▪ Named a European Diversity Leader by the Financial Times, 2019 ▪ Named a Leader in the Magic Quadrant for 3PL Providers by Gartner, 2018, 2019, 2020 (worldwide) ▪ Recognized by General Motors with Supplier of the Year Award for aftermarket distribution 2019, managed transportation 2020 ▪ XPO Connect Œ received SDCE 100 Award for Innovation from Supply & Demand Chain Executive, 2020 ▪ Partnering with MIT as the first global logistics company to join the Industrial Liaison Program, 2019, 2020 ▪ Ranked in top 100 of America's Most Responsible Companies by Newsweek, 2019 ▪ Named a Winning “W” Company by 2020 Women on Boards for gender diversity of the board of directors, 2019 Continued on next page
INVESTOR PRESENTATION FEBRUARY 2021 XPO is widely recognized for performance and culture (cont.) 53 ▪ Named a Great Supply Chain Partner by Supply Chain Brain, 2020 ▪ Awarded Trucks & Roads Award in Russia for operational excellence, 2018, 2019, 2020 ▪ Named a Disruptive Technology Leader on the Freight.Tech 25 by FreightWaves , 2019 ▪ Recognized by Dow Chemical Company with Gold Safety Excellence Award for drayage, 2019 ▪ Recognized by Raytheon Company with EPIC Supplier Excellence Award for on - time delivery, 2019 ▪ Recognized by Nissan Manufacturing UK for excellence at Operational Logistics Awards, 2014, 2015, 2016, 2017, 2018, 2019 ▪ Recognized by Boeing Company with Performance Excellence Award, 2018 ▪ Ranked #1 on Transport Topics Top 50 Logistics list, 2017, 2018, 2019, 2020 ▪ Named a Top 100 3PL by Inbound Logistics, 2014, 2015, 2016, 2017, 2018, 2019, 2020 ▪ Recognized by Supply Chain Magazine with an Innovation Award at Kings of the Supply Chain in France, 2020 ▪ Ranked #3 of the Glassdoor Top 20 UK companies with the best leadership and culture, 2018, 2019 ▪ Named to the Fortune Future 50 list of US companies best positioned for breakout growth, 2018 ▪ Awarded Best Employer Practice Award for partnership with DS Workfit by British Association for Supported Employment, 2019 ▪ Awarded a Trucks and Roads Award in Russia, 2018, 2019 ▪ CEO Jacobs ranked #10 on Barron's readers list of World's Best CEOs, 2018 ▪ Awarded Company of the Year for innovation by Assologistica (Italy), 2017, 2018, 2019
INVESTOR PRESENTATION FEBRUARY 2021 Select highlights of XPO’s people - first culture 54 ▪ XPO’s US warehouse safety record for OSHA reportable incidents is more than four times better than industry average ▪ Appointed a Chief Diversity Officer and launched a Diversity and Inclusion Council in 2020 ▪ Launched a Sustainability Steering Committee and a Diversity and Inclusion Steering Committee in Europe in 2020 ▪ Named 2021 transportation partner of 3 - Day Walks ® for Susan G. Komen Foundation in its fight against breast cancer ▪ Partnered with Hispanic Association of Colleges and Universities to provide financial support for HACU’s objectives ▪ Donated global logistics services to Soles4Souls, a non - profit committed to disrupting the cycle of poverty ▪ Partnered with a leading virtual clinic for women and families to provide supplemental health services for employees ▪ Tuition benefit reimburses employees up to $5,250 annually for pursuing continuing education ▪ Robust recruitment initiatives emphasize diversity hiring; awarded Viqtory’s bronze - level Military - Friendly Employer ® ▪ Celebrates Black History, Women’s History, Hispanic Heritage, Pride and Military Appreciation months ▪ 300 young people hired to date by XPO Logistics in Europe through the XPO Graduate Program Progressive Pregnancy Care and Family Bonding benefits ▪ Any XPO employee, male or female, receives up to six weeks of 100% paid postnatal leave as primary caregiver ▪ Women receive up to 20 days of 100% paid prenatal leave for health and wellness ▪ “Automatic yes" pregnancy accommodations granted on request; more extensive accommodations easily arranged ▪ XPO guarantees that a woman will continue to be paid her regular base wage rate, and will remain eligible for wage increases, wh ile her pregnancy accommodations are in effect XPO’s latest Sustainability Report is available online at sustainability.xpo.com
INVESTOR PRESENTATION FEBRUARY 2021 Strongly committed to sustainability in transportation and logistics 55 TRANSPORTATION ▪ Named a Top 75 Green Supply Chain Partner by Inbound Logistics for 2016, 2017, 2018, 2019, 2020 ▪ Awarded Trophées EVE 2020 for implementing an “urban river” solution to reduce CO 2 emissions during inner - city deliveries in Paris, in cooperation with the Ports of Paris, City of Paris, Île - de - France region and Voies Navigables de France ▪ Renewed three - year commitment to the CO 2 Charter in France, extending 10 - year commitment to sustainability ▪ Expanded fleet with 80 liquified natural gas (LNG) trucks in Europe in 2020, following investments in fuel - efficient Freightliner Cascadia tractors in North America (EPA - compliant and GHG14 - compliant technology), and Stralis Natural Power Euro VI tractors in Europe ▪ European fleet has reduced fuel consumption by 10% since 2015 ▪ Mega - trucks in Spain can reduce CO 2 emissions by up to 20%; tested duo - trailer for Ministry of Transport ▪ XPO drivers train in responsible eco - driving and fuel usage reduction techniques ▪ North American LTL locations implementing phased upgrades to LED lighting ▪ Experimenting in Europe with diesel - electric hybrids and zero - emission electric vans for last mile service CarbonNET , our proprietary, cloud - based calculator, helps our operations document emission sources, activity data and CO 2 calculations
INVESTOR PRESENTATION FEBRUARY 2021 Strongly committed to sustainability in transportation and logistics (cont.) 56 LOGISTICS ▪ XPO’s Digital Distribution Warehouse of the Future for Nestlé in the UK is an environmentally advanced facility, with ammonia refrigeration, LED lighting, air - source heat pumps and a rainwater harvesting system ▪ Numerous XPO facilities are ISO14001 - certified to high standards for environmental management ▪ Nearly 75% of XPO’s total space in Europe are expected to operate LED lighting systems by year - end 2021 ▪ Polystyrene recycling initiative launched in France in partnership with Envie , an organization that gets vulnerable people back to work; recognized with the Sustainable Industry Award by L'Usine Nouvelle ▪ Contributing to EPA’s Energy Star Warehouse Leadership Group; long - time partnership with EPA SmartWay ® logistics in North America ▪ Obtained Ecocert Organic Certification for temperature - controlled logistics warehouses in France, 2019 ▪ Defined greenhouse gas and landfill reduction targets for North American logistics and drafted procedures to address sustainable procurement, greenhouse gas emissions, landfill diversion, natural resource conservation and energy efficiency ▪ Utilizing electronic waybills and documentation in global operations to reduce paper and other waste ▪ Energy efficiency evaluations performed prior to selecting warehouses to lease ▪ Vast majority of material handling devices used in logistics sites operate on battery power instead of fuel ▪ Millions of electronic components and batteries recycled annually as a byproduct of managing reverse logistics ▪ Packaging engineers ensure that optimal carton size is used for each product slated for distribution ▪ Reusable kitting tools manufactured by XPO utilized for installation of parts in customer operations
INVESTOR PRESENTATION FEBRUARY 2021 Share repurchase program 57 For the full year 2020, the company executed the following share repurchases: XPO has approximately $503 million remaining on the current $2.5 billion share repurchase authorization. The company is not obligated to repurchase any specific number of shares and can suspend or discontinue the program at any time. SHARES PURCHASED 1.7 million shares of XPO common stock 1 PRICE $66.58 average price per share TOTAL COST $114 million approximate total cost of repurchases 1 All 2020 stock repurchases were executed in the first quarter
INVESTOR PRESENTATION FEBRUARY 2021 Financial reconciliations 58 1 The sum of quarterly net income attributable to common shareholders and distributed and undistributed net income may not equa l year - to - date amounts because losses are not allocated to the Series A Preferred Stock 2 Relates to the conversion of 69,445 shares of the company's Series A Preferred Stock 3 Relates to the Series A Preferred Stock and is comprised of actual preferred stock dividends and the non - cash allocation of und istributed earnings 4 Adjusted EBITDA includes North American Less - Than - Truckload real estate gains of $14 million and $32 million for the three mont hs ended December 31, 2020 and 2019, respectively. 5 Adjusted EBITDA margin is calculated as adjusted EBITDA divided by revenue Note: Adjusted EBITDA was prepared assuming 100% ownership of XPO Logistics Europe Refer to the “Non - GAAP Financial Measures” section on page 2 of this document The following table reconciles XPO’s net income attributable to common shareholders for the periods ended December 31, 2020 and 2019 to adjusted EBITDA for the same periods. (In millions) XPO Logistics, Inc. Reconciliation of Net Income to Adjusted EBITDA (Unaudited) Change % Change % Net income attributable to common shareholders (1) $ 93 $ 96 -3.1% $ 79 $ 379 -79.2% Preferred stock conversion charge (2) 22 - 22 - Distributed and undistributed net income (1) (3) 10 11 9 40 Net income attributable to noncontrolling interests 3 - 7 21 Net income 128 107 19.6% 117 440 -73.4% Debt extinguishment loss - - - 5 Interest expense 85 74 325 292 Income tax provision 33 30 31 129 Depreciation and amortization expense 194 193 766 739 Unrealized (gain) loss on foreign currency option and forward contracts (1) 4 (2) 9 Transaction and integration costs 7 3 100 5 Restructuring costs 3 21 56 49 Adjusted EBITDA (4) $ 449 $ 432 3.9% $ 1,393 $ 1,668 -16.5% Revenue $ 4,665 $ 4,136 12.8% $ 16,252 $ 16,648 -2.4% Adjusted EBITDA margin (5) 9.6% 10.4% 8.6% 10.0% 2020 2019 2020 2019 Three Months Ended December 31, Years Ended December 31,
INVESTOR PRESENTATION FEBRUARY 2021 Financial reconciliations (cont.) 59 1 Relates to the conversion of 69,445 shares of the company's Series A Preferred Stock 2 The income tax rate applied to reconciling items is based on the GAAP annual effective tax rate, excluding discrete items and c ontribution - based and margin - based taxes 3 Adjusted EPS includes amortization of acquisition - related intangible assets of $0.25 and $0.96 per diluted share for the fourth quarter and full year 2020, respectively. Adjusted EPS includes amortization of acquisition - related intangible assets of $0.26 and $0.95 per diluted share for the fourth quarter and full yea r 2019, respectively. Refer to the “Non - GAAP Financial Measures” section on page 2 of this document The following table reconciles XPO’s net income attributable to common shareholders for the periods ended December 31, 2020 and 2019 to adjusted net income attributable to common shareholders for the same periods. XPO Logistics, Inc. Reconciliation of GAAP Net Income and Net Income Per Share to Adjusted Net Income and Adjusted Net Income Per Share (Unaudited) (In millions, except per share data) GAAP net income attributable to common shareholders $ 93 $ 96 $ 79 $ 379 Preferred stock conversion charge (1) 22 - 22 - Debt extinguishment loss - - - 5 Unrealized (gain) loss on foreign currency option and forward contracts (1) 4 (2) 9 Impairment of customer relationship intangibles - - - 6 Transaction and integration costs 7 3 100 5 Restructuring costs 3 21 56 49 Income tax associated with the adjustments above (2) 1 (6) (35) (18) Impact of noncontrolling interests on above adjustments - (1) (1) (2) Allocation of undistributed earnings (4) (2) (14) (5) Adjusted net income attributable to common shareholders $ 121 $ 115 $ 205 $ 428 Adjusted basic earnings per share $ 1.32 $ 1.25 $ 2.24 $ 4.46 Adjusted diluted earnings per share (3) $ 1.19 $ 1.12 $ 2.01 $ 4.03 Weighted-average common shares outstanding Basic weighted-average common shares outstanding 92 92 92 96 Diluted weighted-average common shares outstanding 102 103 102 106 2020 2019 2020 2019 December 31, December 31, Three Months Ended Years Ended
INVESTOR PRESENTATION FEBRUARY 2021 Financial reconciliations (cont.) 60 Net cash provided by operating activities $ 193 $ 349 $ 885 $ 791 $ 1,102 $ 785 $ 622 $ 91 Cash collected on deferred purchase price receivable - - - 186 - - - - Adjusted net cash provided by operating activities 193 349 885 977 1,102 785 622 91 Payment for purchases of property and equipment (149) (188) (526) (601) (551) (504) (483) (249) Proceeds from sales of property and equipment 47 60 195 252 143 118 69 60 Free Cash Flow $ 91 $ 221 $ 554 $ 628 $ 694 $ 399 $ 208 $ (98) 2015 Three Months Ended December 31, Years Ended December 31, 2019 2019 2016 2020 2018 2017 2020 XPO Logistics, Inc. Reconciliation of Cash Flows From Operating Activities to Free Cash Flow (Unaudited) (In millions) The following table reconciles XPO’s net cash provided by operating activities for the quarters ended December 31, 2020 and 2019, and the years ended December 31, 2020, 2019, 2018, 2017, 2016 and 2015 to free cash flow for the same periods. Note: 2016 and 2017 data have been recast to reflect the impact of Accounting Standards Update 2016 - 18 Refer to the “Non - GAAP Financial Measures” section on page 2 of this document
INVESTOR PRESENTATION FEBRUARY 2021 Financial reconciliations (cont.) 61 The following table reconciles XPO’s operating income attributable to its North American less - than - truckload business for the years ended December 31, 2020, 2019, 2018, 2017, 2016 and 2015 to adjusted operating income, adjusted operating ratio and adjusted EBITDA for the same periods. Reconciliation of Non-GAAP Measures Adjusted Operating Ratio and Adjusted EBITDA (Unaudited) (In millions) XPO Logistics North American Less-Than-Truckload Revenue (excluding fuel surcharge revenue) $ 3,106 $ 3,259 $ 3,230 $ 3,140 $ 3,035 $ 3,081 Fuel surcharge revenue 433 532 552 455 370 448 Revenue 3,539 3,791 3,782 3,595 3,405 3,529 Salaries, wages and employee benefits 1,748 1,786 1,754 1,697 1,676 1,741 Purchased transportation 334 397 400 438 438 508 Fuel and fuel-related taxes 186 264 293 234 191 230 Other operating expenses 495 471 590 574 538 511 Depreciation and amortization 224 227 243 233 203 164 Rents and leases 65 49 44 42 41 49 Operating income 487 597 458 377 318 202 Operating ratio (1) 86.2% 84.3% 87.9% 89.5% 90.7% 94.3% Transaction, integration and rebranding costs 5 - - 19 24 21 Restructuring costs 4 3 3 - - - Amortization expense 34 34 33 34 34 10 Other income (2) 43 22 29 12 - - Depreciation adjustment from updated purchase price allocation of acquired assets - - - - (2) - Adjusted operating income (3) $ 573 $ 656 $ 523 $ 442 $ 374 $ 233 Adjusted operating ratio (4) 83.8% 82.7% 86.2% 87.7% 89.0% 93.4% Depreciation expense 190 193 210 199 169 154 Other 1 2 - 6 4 (6) Adjusted EBITDA (3) $ 764 $ 851 $ 733 $ 647 $ 547 $ 381 2015 Years Ended December 31, 20162020 2019 2018 2017 1 Operating ratio is calculated as (1 – (operating income divided by revenue)) 2 Other income primarily consists of pension income 3 Adjusted operating income and adjusted EBITDA are reconciled to operating income in the Consolidated Statements of Income 4 Adjusted operating ratio is calculated as (1 – (adjusted operating income divided by revenue)) Refer to the “Non - GAAP Financial Measures” section on page 2 of this document
INVESTOR PRESENTATION FEBRUARY 2021 Financial reconciliations (cont.) 62 1 Operating income and adjusted operating income include real estate gains of $14 million, $32 million and $5 million for the t hr ee months ended December 31, 2020, 2019 and 2017, respectively 2 Operating ratio is calculated as (1 - – (operating income divided by revenue)) 3 Other income primarily consists of pension income 4 Adjusted operating income is reconciled to operating income in the Consolidated Statements of Income 5 Adjusted operating ratio is calculated as (1 – (adjusted operating income divided by Revenue)) Refer to the “Non - GAAP Financial Measures” section on page 2 of this document The following table reconciles XPO’s operating income attributable to its North American less - than - truckload business for the fourth quarters ended December 31, 2020, 2019, 2018, 2017, 2016 and 2015 to adjusted operating income and adjusted operating ratio for the same periods. Reconciliation of Non-GAAP Measures XPO Logistics North American Less-Than-Truckload Adjusted Operating Ratio (Unaudited) (In millions) Revenue (excluding fuel surcharge revenue) $ 806 $ 777 $ 791 $ 755 $ 749 $ 753 Fuel surcharge revenue 110 128 138 121 96 98 Revenue 916 905 929 876 845 851 Salaries, wages and employee benefits 452 436 442 422 427 450 Purchased transportation 88 92 100 108 106 119 Fuel and fuel-related taxes 48 59 75 64 52 47 Other operating expenses 117 101 141 139 142 145 Depreciation and amortization 55 58 60 56 55 53 Rents and leases 18 13 11 11 10 11 Operating income (1) 138 146 100 76 53 26 Operating ratio (2) 84.9% 83.9% 89.2% 91.3% 93.7% 96.9% Transaction, integration and rebranding costs - - - 1 15 20 Restructuring costs (1) - 3 - - - Amortization expense 9 9 8 9 11 10 Other income (3) 10 5 7 3 2 1 Adjusted operating income (1) (4) $ 156 $ 160 $ 118 $ 89 $ 80 $ 57 Adjusted operating ratio (5) 83.0% 82.3% 87.3% 89.9% 90.5% 93.3% Fourth Quarters Ended December 31, 2020 2019 2018 2017 2016 2015
INVESTOR PRESENTATION FEBRUARY 2021 Financial reconciliations (cont.) 63 The following table reconciles XPO’s net income attributable to common shareholders for the years ended December 31, 2020, 2019, 2018, 2017, 2016 and 2015 to adjusted EBITDA, and adjusted EBITDA excluding the North American truckload business divested in 2016. 1 Relates to the conversion of 69,445 shares of the Company's Series A Preferred Stock Note: Adjusted EBITDA was prepared assuming 100% ownership of XPO Logistics Europe Refer to the “Non - GAAP Financial Measures” section on page 2 of this document XPO Logistics, Inc. Reconciliation of Net Income to Adjusted EBITDA excluding Truckload (Unaudited) (In millions) Net income attributable to common shareholders $ 79 $ 379 $ 390 $ 312 $ 63 $ (246) Preferred stock beneficial conversion charge (1) 22 - - - - 52 Distributed and undistributed net income 9 40 32 28 6 3 Net income attributable to noncontrolling interests 7 21 22 20 16 (1) Net income 117 440 444 360 85 (192) Debt extinguishment loss - 5 27 36 70 - Other interest expense 325 292 217 284 361 187 Loss on conversion of convertible senior notes - - - 1 - 10 Income tax provision (benefit) 31 129 122 (99) 22 (91) Depreciation and amortization expense 766 739 716 658 643 363 Unrealized (gain) loss on foreign currency option and forward contracts (2) 9 (20) 49 (36) 3 Transaction, integration and rebranding costs 100 5 33 78 103 201 Restructuring costs 56 49 21 - - - Litigation costs - - 26 - - - Gain on sale of equity investment - - (24) - - - Adjusted EBITDA $ 1,393 $ 1,668 $ 1,562 $ 1,367 $ 1,248 $ 493 Adjusted EBITDA divested NA Truckload business - - - - 80 19 Adjusted EBITDA excluding Truckload $ 1,393 $ 1,668 $ 1,562 $ 1,367 $ 1,168 $ 474 20152018 20162020 Years Ended December 31, 20172019