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XPO Logistics Announces Second Quarter 2020 Results

Press Release | Greenwich, Conn. | July 30, 2020

Provides third quarter guidance for adjusted EBITDA

XPO Logistics, Inc. (NYSE: XPO) today announced its second quarter 2020 financial results, which were impacted by the COVID-19 pandemic. Revenue was $3.50 billion for the quarter, compared with $4.24 billion for the same period in 2019. The company reported a net loss attributable to common shareholders of $132 million for the quarter, or a diluted loss per share of $1.45, compared with net income attributable to common shareholders of $122 million, or diluted earnings per share of $1.19, for the same period in 2019.

The adjusted net loss attributable to common shareholders, a non-GAAP financial measure, was $57 million for the second quarter 2020, or an adjusted diluted loss per share of $0.63, compared with adjusted net income attributable to common shareholders of $132 million, or adjusted diluted earnings per share of $1.28, for the same period in 2019.

Adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"), a non-GAAP financial measure, was $172 million for the second quarter 2020, compared with $455 million for the same period in 2019. Adjusted EBITDA for the second quarter 2020 excludes the impacts of $50 million of restructuring costs, and $46 million of transaction and integration costs, primarily related to the company’s terminated review of strategic alternatives. Adjusted EBITDA includes $48 million of net incremental costs related to the COVID-19 pandemic.

For the second quarter 2020, the company generated $214 million of cash flow from operations and $121 million of free cash flow, a non-GAAP financial measure. Reconciliations of non-GAAP financial measures used in this release are provided in the attached financial tables.

Third Quarter 2020 Guidance

Based on current market conditions, the company expects to generate at least $350 million of adjusted EBITDA in the third quarter 2020. The company previously withdrew its full-year guidance in April due to the COVID-19 pandemic.

CEO Comments

Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said, “The ramifications of COVID-19 dominated the second quarter. Nevertheless, we beat expectations on revenue, adjusted EBITDA and adjusted EPS, and generated notably high cash flow from operations of $214 million and free cash flow of $121 million. Business trends improved across our segments and geographies as the quarter progressed, and continued in July.

“We’ve seen a recovery take hold in Europe and start in North America. E-commerce continues to be our strongest tailwind, benefitting contract logistics and last mile. Our last mile network in North America generated year-over-year revenue growth of 3% in the quarter, with a net revenue margin of 37%.”

Jacobs continued, “We’ve stayed intensely focused on the safety of our employees, and they’ve stayed focused on serving our customers. Based on the current market conditions, we expect to generate at least $350 million of adjusted EBITDA in the third quarter.”

Liquidity

As of June 30, 2020, the company had approximately $2.8 billion of total liquidity, including $2.3 billion of cash and cash equivalents and $500 million of available borrowing capacity. In the second quarter 2020, the company issued $1.15 billion of 6.25% senior notes maturing in 2025 and added a new $350 million term loan and letter of credit facility.

Second Quarter 2020 Results by Segment

  • Transportation: The company's transportation segment generated revenue of $2.13 billion for the second quarter 2020, compared with $2.75 billion for the same period in 2019. The decrease in revenue primarily reflects the impact of COVID-19.

    Second quarter 2020 operating loss for the transportation segment was $15 million, compared with operating income of $243 million for the same period in 2019. The operating loss in 2020, compared with the operating income in 2019, is primarily related to the decrease in segment revenue and to costs related to the terminated exploration of strategic alternatives. Adjusted EBITDA for the segment was $146 million for the quarter, compared with $362 million for the same period in 2019. Operating loss and adjusted EBITDA include the impact of $27 million of COVID-related costs.

    In North American less-than-truckload (LTL), yield excluding fuel improved by 1.9% year-over-year for the second quarter 2020. The second quarter operating ratio for LTL was 93.6% and the adjusted operating ratio was 90.1%, both of which include the impact of $20 million of COVID-related costs.

  • Logistics: The company's logistics segment generated revenue of $1.40 billion for the second quarter 2020, compared with $1.53 billion for the same period in 2019. The decrease in revenue primarily reflects the impact of COVID-19 and the company’s elimination of certain low-margin business.

    Second quarter 2020 operating loss for the logistics segment was $43 million, compared with operating income of $61 million for the same period in 2019. The operating loss in 2020, compared with the operating income in 2019, is primarily related to the decrease in segment revenue, an increase in depreciation and amortization expense, costs related to the company’s terminated exploration of strategic alternatives, restructuring-related expenses and COVID-19-related costs, partially offset by a reduction in temporary labor costs. Adjusted EBITDA for the segment was $83 million for the quarter, compared with $136 million for the same period in 2019. Operating loss and adjusted EBITDA include the impact of $19 million of COVID-related costs.

  • Corporate: Corporate expense was $83 million for the second quarter 2020, compared with $46 million for the same period in 2019. The increase in corporate expense includes approximately $23 million of costs primarily related to the terminated exploration of strategic alternatives and restructuring, as well as $2 million of COVID-related costs.

Executive Appointments

In July, the company announced three additions to its executive leadership team, all effective August 3, 2020. Eduardo Pelleissone has been named chief transformation officer. He joins the company with 20 years of experience leading multinational operations in the food, logistics and transportation industries. Alex Santoro has been named executive vice president, operations. He has more than two decades of executive experience in the transportation, logistics and food and beverage leaders. LaQuenta Jacobs has been promoted to the position of chief diversity officer, after serving as XPO’s head of human resources for the company’s last mile business unit. Her 23-year career in human resources includes leadership roles in culture and talent development with global public companies.

Conference Call  

The company will hold a conference call on Friday, July 31, 2020, at 8:30 a.m. Eastern Time. Participants can call toll-free (from US/Canada) 1-877-269-7756; international callers dial +1-201-689-7817. A live webcast of the conference will be available on the investor relations area of the company’s website, xpo.com/investors. The conference will be archived until August 31, 2020. To access the replay by phone, call toll-free (from US/Canada) 1-877-660-6853; international callers dial +1-201-612-7415. Use participant passcode 13706704.

About XPO Logistics

XPO Logistics, Inc. (NYSE: XPO) is a top ten global logistics provider of cutting-edge supply chain solutions to the most successful companies in the world. The company operates as a highly integrated network of people, technology and physical assets in 30 countries, with 1,506 locations and approximately 96,000 employees. XPO uses its network to help more than 50,000 customers manage their goods most efficiently throughout their supply chains. XPO's corporate headquarters are in Greenwich, Conn., USA, and its European headquarters are in Lyon, France. xpo.com

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 press release to the most directly comparable measure under GAAP, which are set forth in the financial tables attached to this release.

XPO’s non-GAAP financial measures for the three and six months ended June 30, 2020 and 2019 used in this release include: earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted EBITDA and adjusted EBITDA margin on a consolidated basis and for our transportation and logistics segments; free cash flow; adjusted net income (loss) attributable to common shareholders and adjusted earnings (loss) per share (basic and diluted) ("adjusted EPS"); net revenue and net revenue margin for our transportation and logistics segments and net revenue for our intersegment eliminations; and adjusted operating income and adjusted operating ratio for our North American less-than-truckload business.

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 (loss) attributable to common shareholders and adjusted EPS include adjustments for transaction and integration costs, as well as restructuring costs. Transaction and integration adjustments are generally incremental costs that result from an actual or planned acquisition or divestiture and may include transaction costs, consulting fees, retention awards, and, in the case of acquisitions, 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 and adjusted EBITDA margin 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 (loss) 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 net revenue and net revenue margin improve the comparability of our operating results from period to period by removing the cost of transportation and services, in particular the cost of fuel, incurred in the reporting period as set out in the attached tables. 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 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 third quarter 2020 financial target for adjusted EBITDA, a reconciliation of this non-GAAP measure to the corresponding GAAP measure is not available without unreasonable effort due to the variability and complexity of the reconciling items described above that we exclude from the non-GAAP target measure. 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 prepared in accordance with GAAP that would be required to produce such a reconciliation.

Forward-looking Statements

This release 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 the company’s third quarter 2020 financial target for adjusted EBITDA. 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: the severity, magnitude, duration and aftereffects of the COVID-19 pandemic and government responses to the COVID-19 pandemic; public health crises (including COVID-19); economic conditions generally; competition and pricing pressures; our ability to align our investments in capital assets, including equipment, service centers and warehouses, to our customers' demands; our ability to successfully integrate and realize anticipated synergies, cost savings and profit improvement opportunities with respect to acquired companies; 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; our ability to implement our cost and revenue initiatives; our ability to maintain positive relationships with our network of third-party transportation providers; our ability to attract and retain qualified drivers; litigation, including litigation related to alleged misclassification of independent contractors and securities class actions; 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; risks associated with our self-insured claims; risks associated with defined benefit plans for our current and former employees; fluctuations in currency exchange rates; fluctuations in fixed and floating interest rates; fuel price and fuel surcharge changes; issues related to our intellectual property rights; 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 natural disasters, terrorist attacks or similar incidents. All forward-looking statements set forth in this release 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 release 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.

Condensed Consolidated Statements of (Loss) Income

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Cash Flows

Transportation Summary Financial Table

Transportation Key Data by Service Offering

North American LTL Summary Data Table

North American LTL Adjusted Operating Ratio

Logistics Summary Financial Table

Logistics Key Data by Geography

XPO Corporate Summary of Sales, General and Administrative Expense

Intersegment Eliminations Summary Financial Table

Consolidated Reconciliation of Net (Loss) Income to Adjusted EBITDA

Consolidated Reconciliation of GAAP Net (Loss) Income and Net (Loss) Income Per Share to Adjusted Net (Loss) Income and Adjusted Net (Loss) Income Per Share

Reconciliation of Cash Flows from Operating Activities to Free Cash Flow

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