XPO(XPO) - 2024 Q2 - Quarterly Report

Part I—Financial Information Financial Statements (Unaudited) Presents XPO, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income, comprehensive income, cash flows, and equity changes for Q2 and YTD 2024 Notes to Condensed Consolidated Financial Statements Details accounting policies, strategic developments, segment performance, debt, and legal contingencies, highlighting LTL network expansion and a one-time tax benefit - In December 2023, the company acquired 28 less-than-truckload (LTL) service centers previously operated by Yellow Corporation to expand its LTL network capacity[23] - The Board of Directors has authorized the divestiture of the company's European business, though there is no assurance of the timing or completion of a transaction[23] Segment Revenue and Adjusted EBITDA (in millions) | Segment | Revenue (Q2 2024) | Adjusted EBITDA (Q2 2024) | Revenue (YTD 2024) | Adjusted EBITDA (YTD 2024) | | :--- | :--- | :--- | :--- | :--- | | North American LTL | $1,272 | $297 | $2,493 | $551 | | European Transportation | $808 | $49 | $1,605 | $87 | Total Debt Composition (in millions) | Debt Component | Carrying Value (June 30, 2024) | Carrying Value (Dec 31, 2023) | | :--- | :--- | :--- | | Term loan facility | $1,088 | $1,087 | | Senior secured/unsecured notes | $2,066 | $2,063 | | Finance leases and other | $240 | $254 | | Total Debt | $3,394 | $3,404 | - A legal entity reorganization in the European Transportation business resulted in a one-time tax benefit of $41 million in the second quarter of 2024[57] Condensed Consolidated Balance Sheet Summary (in millions) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $7,729 | $7,492 | | Total Current Assets | $1,548 | $1,593 | | Total Long-term Assets | $6,182 | $5,899 | | Total Liabilities and Equity | $7,729 | $7,492 | | Total Liabilities | $6,230 | $6,226 | | Total Equity | $1,499 | $1,266 | Condensed Consolidated Statement of Income Summary (in millions) | Account | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $2,079 | $1,917 | $4,097 | $3,824 | | Operating Income | $197 | $107 | $335 | $165 | | Net Income | $150 | $33 | $217 | $47 | Condensed Consolidated Statement of Cash Flows Summary (in millions) | Account | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $355 | $207 | | Net cash used in investing activities | ($483) | ($342) | | Net cash used in financing activities | ($35) | ($36) | | Net decrease in cash | ($162) | ($173) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q2 and H1 2024 financial performance, highlighting North American LTL growth, consolidated results, segment performance, liquidity, and cash flow Executive Summary XPO operates North American LTL and European Transportation, focusing on LTL 2.0 growth via network expansion and technology, gaining market share in a challenging freight environment - XPO is one of the largest LTL providers in North America, with an estimated 9% share of the $52 billion U.S. market as of December 31, 2023[66] - The company acquired 28 service centers from Yellow Corporation in December 2023, adding approximately 2,900 doors to its LTL network[67] - Proprietary technology is a key focus, used to optimize linehaul, pickup-and-delivery, and pricing, managing the movement of approximately 18 billion pounds of freight over the trailing 12 months[69] Consolidated Results of Operations Consolidated revenue grew 8.5% in Q2 and 7.1% in H1 2024, driven by North American LTL, with operating income doubling and a one-time tax benefit reducing the effective tax rate Consolidated Financial Performance (in millions) | Metric | Q2 2024 | Q2 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $2,079 | $1,917 | $4,097 | $3,824 | | Operating Income | $197 | $107 | $335 | $165 | | Net Income | $150 | $33 | $217 | $47 | - Purchased transportation costs decreased as a percentage of revenue due to insourcing a greater proportion of linehaul from third-party providers[75] - The effective income tax rate for Q2 2024 was (2.0)% compared to 28.8% in Q2 2023, primarily due to a $41 million tax benefit from a legal entity reorganization in Europe[77] Segment Financial Results North American LTL drove growth with 12.0% revenue increase and expanded Adjusted EBITDA margin; European Transportation saw modest revenue growth and stable margins North American LTL Segment North American LTL revenue increased 12.0% in Q2 2024, driven by 9.0% yield growth and 3.4% volume increase, boosting Adjusted EBITDA margin to 23.3% North American LTL Operating Metrics (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | Change % | | :--- | :--- | :--- | :--- | | Pounds per day (thousands) | 72,658 | 70,290 | 3.4% | | Shipments per day | 53,519 | 51,220 | 4.5% | | Gross revenue per hundredweight (ex-fuel) | $23.56 | $21.63 | 9.0% | North American LTL Financial Summary (in millions) | Metric | Q2 2024 | Q2 2023 | Change % | | :--- | :--- | :--- | :--- | | Revenue | $1,272 | $1,136 | 12.0% | | Adjusted EBITDA | $297 | $208 | 42.8% | | Adjusted EBITDA Margin | 23.3% | 18.3% | +500 bps | European Transportation Segment European Transportation revenue grew 3.5% to $808 million in Q2 2024, with Adjusted EBITDA increasing to $49 million and a slightly improved margin of 6.1% European Transportation Financial Summary (in millions) | Metric | Q2 2024 | Q2 2023 | Change % | | :--- | :--- | :--- | :--- | | Revenue | $808 | $781 | 3.5% | | Adjusted EBITDA | $49 | $46 | 6.5% | | Adjusted EBITDA Margin | 6.1% | 6.0% | +10 bps | Liquidity and Capital Resources XPO had $836 million in total liquidity as of June 30, 2024, with operating cash flow increasing to $355 million in H1 2024, anticipating $700-800 million in full-year capital expenditures - Total liquidity was approximately $836 million as of June 30, 2024, comprising $250 million in cash and $586 million in ABL Facility availability[87] Cash Flow Summary (Six Months Ended June 30, in millions) | Cash Flow Source | 2024 | 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $355 | $207 | | Net cash used in investing activities | ($483) | ($342) | | Net cash used in financing activities | ($35) | ($36) | - The company anticipates full-year 2024 gross capital expenditures to be between $700 million and $800 million, funded by cash on hand, operating cash flow, and available liquidity[93] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures regarding interest rates, foreign currency, and commodity prices since the 2023 Form 10-K - There have been no material changes to the company's market risk exposures related to interest rates, foreign currency, and commodity prices since the 2023 Form 10-K[95] Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2024[96] - No material changes to the company's internal control over financial reporting occurred during the quarter ended June 30, 2024[97] Part II—Other Information Legal Proceedings Refers to Note 9 of the financial statements and the 2023 Annual Report on Form 10-K for information on legal proceedings - For information on legal proceedings, the report directs readers to Note 9—Commitments and Contingencies within this Form 10-Q and the company's 2023 Annual Report[98] Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023 - There are no material changes to the risk factors previously disclosed in the 2023 Form 10-K[99] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported during the period - None reported[99] Defaults Upon Senior Securities No defaults upon senior securities were reported - None reported[99] Mine Safety Disclosures This item is not applicable to the company - Not applicable[99] Other Information No other information required to be disclosed under this item was reported - None reported[99] Exhibits Lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - Exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act of 2002[100]