Fireside Chat with Brad Jacobs, Malcolm Wilson and Matt Fassler of XPO Logistics

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Oppenheimer & Co. 16th Annual Industrial Growth Conference

Fireside Chat with Brad Jacobs, Malcolm Wilson and Matt Fassler of XPO Logistics

Conducted by Scott Schneeberger, Senior Transportation Services Analyst, Oppenheimer May 5, 2021

1. Scott Schneeberger, Oppenheimer: Good afternoon, everyone. Thank you all for joining us today. We’re excited to have XPO Logistics here to share their story, which includes the pending spin-off of GXO Logistics, the company’s current logistics segment. To that note, not only are we honored to have Brad Jacobs, the founder and CEO of XPO, here today, but also Malcolm Wilson, CEO of XPO Europe, who will become the CEO of GXO upon its spin, as well as XPO’s Chief Strategy Officer, Matt Fassler.

In addition to the anticipated spin-off of GXO in the second half of this year, XPO offers global transportation services for less-than-truckload and truck brokerage, as well as last mile. These will remain part of XPO. The pending spin, on top of XPO’s strong rebound from the pandemic, makes a dynamic story. To discuss it in this session, we’re using a “fireside chat” format, where I’ll ask management some high-level questions up front, for an overview of the business. Then, later in the session, I’ll pivot to questions submitted by you in the audience via Zoom. Gentlemen, thanks for being here and congratulations on your strong first quarter results released earlier this week.

If you could please start out by providing us with an overview of the quarter, that would be great.

2. Brad Jacobs, XPO: I’ll take the overview. That’s the easy question. It was a great quarter. Revenue was up 24%. Net income was a record. Adjusted EBITDA was up 33%. It was the fourth quarter in a row that we beat on adjusted EBITDA and the third consecutive quarter of record adjusted EBITDA. We expanded our adjusted EBITDA margin by 70 basis points, and we raised full-year guidance by more than the quarter’s beat.

3. Scott Schneeberger, Oppenheimer: Since acquiring Con-way in 2015, XPO has doubled the adjusted EBITDA of its North American less-than-truckload business and improved the operating ratio by a thousand basis points. Please discuss internal efficiency initiatives you’re currently pursuing in less-than-truckload.

4. Brad Jacobs, XPO: When we bought Con-way in 2015, its LTL business was doing about $380 million of adjusted EBITDA. We expect to do over $1 billion of adjusted EBITDA next year. As you say, we’ve improved the adjusted operating ratio by roughly a thousand basis points. So, it’s been a self-help margin expansion story in LTL, and we’re going to continue to do that. We intend to continue to grow the margin through operational excellence and execution. That means getting better and better at pickup and delivery, at managing 2 labor, at managing the linehaul, and at using algorithms to set pricing, rather than having people guess what the pricing should be. So, it’s really a bunch of singles and doubles — there are no home runs or grand slams. It’s the blocking and tackling of the business.

The full Q&A can be read here.