XPO Logistics, Inc. (XPO)
BRADLEY S. JACOBS is the Chief Executive Officer of XPO Logistics, Inc. A career CEO, he has led two public companies. United Rentals, Inc., which he cofounded in 1997; and United Waste Systems, Inc., founded in 1989. Mr. Jacobs served as Chairman and CEO of United Rentals for the company's first six years, and as Executive Chairman for an additional four years. He served eight years as Chairman and CEO of United Waste Systems. Previously, Mr. Jacobs founded Hamilton Resources (UK) Ltd. and served as its Chairman and Chief Operating Officer. This followed the cofounding of his first venture, Amerex Oil Associates, Inc., where he was Chief Executive. Mr. Jacobs is a member of the board of directors of the Beck Institute for Cognitive Behavior Therapy.

SECTOR - TRANSPORTATION (AWJ601) TWST: Please start by introducing our readers to XPO Logistics with a brief company history and an overview of its operations today. Mr. Jacobs: XPO Logistics is a non-asset-based transportation services provider in the logistics industry. We don't own any trucks, airplanes or ships. We're a middleman between shippers and carriers who outsource their logistics to us as a third-party broker. We reported $177 million of revenue in 2011, and we expect to reach our target of a $500 million revenue run rate by year end. Since taking control of XPO last September, we've put a strategy in place to grow the company to several billion dollars in revenue over the next few years with brokerage as our main focus. Our strategy has three prongs, all of which are in progress. Number one is acquisitions. We'll continue to acquire attractive truck brokerage operations that are scalable. Number two is cold starts. We'll continue to open greenfield locations, mainly truck brokers, throughout North America. And third, we are optimizing our existing operations. In eight months, we've completed two acquisitions and 12 cold starts, seven of which are in truck brokerage, and we've grown our existing operations in our three business segments of freight forwarding, expedite and truck brokerage. We've also put together a management team whose skill set matches this ambitious plan. TWST: Would you talk a bit more about the company's most recent acquisition, Keh-on Logistics, in terms of why that was an attractive acquisition target and a good flt for XPO? Mr. Jacobs: We purchased Kelron Logistics in early August. It's a $100 million revenue truck broker based in Canada with offices in Toronto, Vancouver, Montreal and Cleveland. Keh-on has built up strong relationships in the industry over 20 years. The first thing we did was to connect the Kelron team to our national operations center in Charlotte, which is providing them with access to more trucks. We're using this additional capacity to help grow our share of wallet with Kelron's long-term customers. Next, we'll migrate them to our technology platform.
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and then we're going to grow the business by adding salespeople at each of their locations. We expect Kelron's relationships and history to enhance the entire XPO system both in terms of pricing and finding trucks. TWST: I believe it was in the spring that XPO Logistics had a common stock offering. How well was it received by investors, and more broadly, would you describe the company's access to capital and its strategy for financing growth and acquisitions? Mr. Jacobs: In my previous companies, the teams I led raised over $6 billion of debt and equity, mostly in the public markets. Here at XPO Logistics, our business plan is to grow a large company with a smaller capital base, something in the hundreds of millions of dollars. Our first transaction was to invest up to $150 million into Express-1 Expedited Solutions, Inc., which was already a publicly traded company. We completed that transaction last year in September, and we tapped the public markets to raise another $ 137 million in a common stock offering that Morgan Stanley led in March of this year. The offering was upsized from the original filing, and we attracted a blue-chip shareholder base. At the end of the second quarter, we had about $191 million of cash on the balance sheet and zero debt after having completed a couple of acquisitions and a number of cold-starts as well as internal growth initiatives such as investments in technology development. TWST: How important is the company's technology platform to effíciencies, cost savings and serving its customers well? Mr. Jacobs: Technology is a very important part of our business plan. We've assembled a high-quality team of technology experts led by Mario Harik, who is a veteran CIO in the logistics industry. We also recently hired Dave Rowe, who was the Chief Technology Officer at Echo Global Logistics, a company whose technology is extremely well regarded in the industry. Our IT platform is very scalable, which is essential to our plan, and it's

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user friendly. TWST: What would you say are the main trends you are seeing in terms of XPO's customers, their needs and demand for the company's services, and how is XPO adapting to any changes? Mr. Jacobs: The truck brokerage industry is large, growing and fragmented, which is what makes it so attractive. Let's start with size. Over-the-road trucking is about $350 billion in the U.S., with about 250,000 truckload carriers servicing millions of shippers. The truck brokerage segment, which as I mentioned is our primary focus, is currently getting about $50 billion of that $350 billion, or about 15%. We're building a company not just for the $50 billion that's going through brokers dght now, but for the $300 billion that's currently going direct between shippers and carders.

"We're a relatively small company in a large field, which gives us the advantage of being able to grow fast. And we've got a management team in place that has a collective skill set that's well matched to our business plan to create a multibillion-dollar company over several years."

A critical factor, from our point of view, is that the logistics pie is expanding. Brokerage has been growing at about two to three times GDP. Still, the market is largely underpenetrated, and that 15% penetration rate of brokerage versus direct shipper to carder cartage is likely to increase. We are betting that more and more of the freight spend will go through brokers over time. The main thing that's driving penetration is an outsourcing trend with both shippers and carriers. This is less about cycles and more about the fact that it makes economic sense for most companies to utilize third-party logistics services. Instead of using internal staff to find trucks or freight, shippers and carriers are increasingly using brokers. Typically, only the largest shippers have the freight volume to warrant in-house logistics. And the other side of the equation, from the trucker's perspective, is that a good professionally run broker can help increase utilization and decrease empty miles. Our strategy will position XPO to benefit from what we expect will be a continuation of the outsourcing trend. In addition to being large and growing, the industry is fragmented. That makes it even more appealing. There are over 10,000 licensed truck brokers in the United States, and yet only about 25 of them, less than 1 %, have revenue of over $200 million. This creates a large potential acquisition universe for us. In many cases, a lack of access to working capital provides an incentive for these owners to sell. TWST: What were the key points or takeaways from XPO's most recent quarterly earnings? Mr. Jacobs: We're either on track or ahead of schedule with each of the three core components of our plan — acquisitions, cold starts and optimization of operations. We've opened 12 cold starts so far — seven of them in brokerage. We have two

acquisitions under our belt. Our national operations center in Charlotte has a lot of momentum and has been a big home run. Our footpdnt is up to 50 offices, half company-owned and half agent locations. Our model of centralized carder procurement and operations is helping us grow quickly companywide. We've made great strides in recruiting, training and IT, and nine months into the rollout of our strategy, we feel very good about our direction. TWST: Has XPO Logistics issued formal guidance, or more generally, would you talk about the company's outlook for the next 12 months or so? Mr. Jacobs: On our second-quarter conference call, we talked about the significant improvement in our operations. We increased our total gross-margin dollars by 18% last year. We grew revenue by over 100% in our brokerage business. Our expedite business generated double-digit growth on the top line and in profitability. And our freight-forwarding business, which is still facing a challenging external environment, turned the comer. As expected, the investments we've been making in our infrastructure are impacting the overall results in the short term, but those investments are important to our plan for growth. We are transforming the company to create significant value over time. We don't give formal guidance for eamings, although we've stated our goal of reaching a $500 million revenue run rate by year end. TWST: What would you say differentiates XPO from other companies from its peer group? Mr. Jacobs: We're a relatively small company in a large field, which gives us the advantage of being able to grow fast. And we've got a management team in place that has a collective skill set that's well matched to our business plan to create a multibilliondollar company over several years. TWST: You mentioned a couple of recent hires. Is there anyone else on the management team you'd like to introduce to readers? Mr. Jacobs: In the most recent quarter, we announced four important executive appointments. I mentioned one earlier, Dave Rowe, our new Chief Technology Officer, previously CTO of Echo. Dave led the design and development of Echo's technology platform. We also hired Angela Gibbons as VP of Human Resources. She has held senior HR positions for several Fortune 500 companies. We're very conscious of the fact that XPO Logistics is a nonasset company, and our main strength is our people, so HR is important to us. We also hired John Tuomala as VP of Talent Management. John led a team responsible for recruiting about 2,500 employees per year for Compass Group. And we named Bryan Tumbleson as our President of Bounce Logistics, which is our largest brokerage operation. Bryan had been a Senior Operations Manager at our Express-1 Expedite unit for about 10 years. TWST: Is there anything else you'd like to talk about? Anything else you would like investors to know about the company? Mr. Jacobs: We spoke about Kelron earlier. In addition to Kelron, we bought a company called Continental Freight Services in May. Continental is based in Columbia, S.C. We fully integrated the company onto our technology platform, and they're now using our operations center in Charlotte to find trucks. The Continental
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team has been a valuable addition to XPO. The transition is working as we anticipated, and we're moving the operation into a larger space. The plan in Columbia is to add salespeople and triple the headcount and revenue over the next several years. The other subject I can expand on is cold starts — that is, starting brokerage operations on a greenfield basis from scratch. We're ahead of schedule on cold starts. Our original projection was to open five new truck brokerage locations by the end of 2012. We recently announced four openings, which brought our total cold-start count to seven. These newest offices will be in Chicago; Jacksonville; Parsippany, N.J.; and Montgomery, Ala. Each one of these cold starts

is run by an industry veteran with a strongti-ackrecord. TWST: Thank you. (MN) BRADLEY S. JACOBS CEO XPO Logistics, Inc. 5 Greenwich Office Park Greenwich, CT 06831 (855) 744-7976 - TOLL FREE vrww.xpologistics.com e-mail: contact@xpologistics.com

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