Bradley S. Jacobs - Chairman & Chief Executive Officer John J. Hardig - Chief Financial Officer Scott B. Malat - Chief Strategy Officer.

Robert H. Salmon - Deutsche Bank Securities, Inc. Kevin W. Sterling - BB&T Capital Markets Chris Wetherbee - Citigroup Global Markets, Inc. (Broker) Alexander Vecchio - Morgan Stanley & Co. LLC John R. Mims - FBR Capital Markets & Co. Scott A. Schneeberger - Oppenheimer & Co., Inc. (Broker) Brandon Robert Oglenski - Barclays Capital, Inc.

Patrick Tyler Brown - Raymond James & Associates, Inc. Donald Allen Broughton - Avondale Partners LLC Todd C. Fowler - KeyBanc Capital Markets, Inc. Jason H. Seidl - Cowen & Co. LLC Jack Atkins - Stephens, Inc..

Welcome to the XPO Logistics Second Quarter 2015 Earnings Conference Call and Webcast. My name is Hilda and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

Before the call begins, let me read a brief statement on behalf of the company regarding forward-looking statements and the use of non-GAAP financial measures.

During this call, the company will be making certain forward-looking statements within the meaning of applicable security laws which, by their nature, involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those projected in the forward-looking statements.

A discussion of factors that could cause actual results to differ materially is contained in the company's SEC filings.

Forward-looking statements in the company's earnings release or made on this call are made only as of today and the company has no obligation to update any of these forward-looking statements, including its outlook except to the extent required by law.

During this call, the company also may refer to certain non-GAAP financial measures as defined under applicable SEC rules. Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earnings release and the related financial tables.

You can find a copy of the company's earnings release, which contains additional important information regarding forward-looking statements and the non-GAAP financial measures, in the Investors section of the company's website at www.xpo.com. I will now turn the call over to Mr. Brad Jacobs. Mr. Jacobs, you may begin..

Thank you, operator, and good morning, everybody. Thanks for joining our call. With me today are John Hardig, our CFO; Scott Malat, our Chief Strategy Officer; and Tavio Headley, our Director of Investor Relations. As you saw from the strong results we reported last night, we're continuing to grow the company at a fast clip.

We more than doubled our growth revenue year-over-year, we grew net revenue by more than four times and we increased EBITDA more than fivefold, so some very strong growth. Our acquisition of Norbert Dentressangle was the big news in the quarter. We bought a well-established company with long-term customer relationships.

These are blue chip companies that are a who's who of European business. The Norbert integration is exceeding expectations. Our teams in the U.S. and Europe have been working together closely and the rebranding to XPO Logistics is moving along quickly.

Our team is doing a great job at taking a decades old culture that was focused on stability and excellent customer service and adding an additional focus on growth. On the M&A front, we have an active two-prong pipeline of attractive acquisition prospects on both sides of the Atlantic.

We have over $1.7 billion in available capital including about $1.2 billion in cash and an undrawn $415 million ABL facility. Last night, we shared our target for full year 2019 revenue of $23 billion and EBITDA of $1.5 billion. We expect to grow organically at a rate of about 9.5% annually. Our world view is the same today as it was in 2011.

The global transportation and logistics industry is the last large industry that's still consolidated but should be. Our plan is to continue to capitalize on this trend for the benefit of our shareholders and customers as the industry evolves.

Our team has put together a highly integrated platform that has a lot growth potential embedded in our lines of business. Now that we've achieved critical mass on a global scale we have a huge opportunity to grow business not just organically but also by acquiring complementary companies.

Today, at $9 billion, we have a tiny piece of the transportation and logistics pie. And even when we're a $23 billion company four years from now, we'll still have a small share of the global spend. With that, I'll turn it over to John to review the quarter.

John?.

Thanks, Brad. We increased gross revenue in the quarter by $635 million or 109% year-over-year. Our results included 22 days of the Norbert acquisition and one month of Bridge Terminal Transport. $429 million of the $635 million increase came from the operations of Norbert and BTT. Adjusted EBITDA was $80 million in the quarter, up 465% from last year.

The increase was due to acquisitions organic growth and margin improvement. The acquisitions of Norbert and BTT contributed $34 million of adjusted EBITDA. Organic revenue growth companywide was 4% or 10% excluding the year-over-year decline in fuel revenue. Gross revenue for our Transportation segment was up 48%.

The acquisition of Norbert added $186 million of transportation revenue in the quarter. Net revenue in our Transportation segment increased on a year-over-year basis by 59%. Transportation net revenue margin was 22.5% versus 21% in the prior year quarter.

The increase in margin was due to the improvements we made for our Last Mile operations, expansion of our North American truck brokerage margins, and the acquisition of Norbert.

In our North American truck brokerage business, despite a tepid truckload market, we drove strong year-over-year volume growth and increased net revenue margins by 100 basis points. In Last Mile, the demand for home delivery of heavy goods continues to snowball primary driven by e-commerce sales.

We won several large Last Mile awards this quarter, eight in June alone. Revenues and margins have been on a nice upward trend in Last Mile since late last year. Our Expedite business had another strong quarter.

Some of the freight caught up in the West Coast port slowdowns spilled over into April and automotive production activity remained robust throughout the quarter. Our Logistics segment continued to perform well in the quarter.

In North America, we drove higher efficiency in our operations while activity at our core customer sites continued at a strong pace. We won several new contracts during the quarter that will contribute to revenue later in the year. Many of these were the results of cross-selling efforts with our transportation team.

The acquisition of Norbert added $35 million of North American revenue to our Logistics segment in the quarter. In corporate, second quarter SG&A expense increased to $57.4 million from $15.1 million a year ago. Corporate expense included $39.8 million of one-time transaction expenses related to acquisitions and $2.5 million of re-branding expenses.

Excluding transaction and integration and re-branding costs in both years SG&A increased only 4% year-over-year, reflecting strong cost control. Corporate expenses quarter also included $1.9 million of non-cash share-based compensation expense and $1.4 million of litigation costs. Capital expenditures for the quarter were $31 million.

Our net CapEx estimate for the remainder of the year is $90 million to $100 million. Depreciation and amortization for the quarter was $56 million. We expect D&A for the third quarter to be in the range of $105 million to $110 million including a full quarter contribution from Norbert. Net interest expense was $36 million for the quarter.

Interest expense included $9 million for debt commitment fees related to the Norbert acquisition. We expect interest expense to be in the range of $58 million to $62 million in the third quarter given our current capital structure. Our effective tax rate was a 11% benefit in the quarter.

At the end of the quarter, we had $205 million of federal tax NOLs and we expect an effective tax rate of 18% to 23% in the third quarter. I'll turn the call over to Scott and then we'll go to Q&A..

Thanks, John. I'll start with the macro picture. North America is continuing to grow at a moderate pace. Transportation capacity remains relatively loose and, as a result, we've been able to increase our margins with lower purchase transportation costs. We expect to see demand pick up as the retail season kicks off starting with back-to-school.

Within Transportation, in North America, we're especially excited about the Last Mile opportunity. Our Last Mile volumes have been solid with existing customers and we expect to accelerate our growth with some new wins in e-commerce that we'll be ramping up.

We're also working on securing some very large, multiyear Last Mile contracts that we're uniquely qualified to handle. In Europe, we're continuing to see signs of economic improvement especially in Spain and the UK.

Over the last few weeks, we met with a few dozen of our top European customers and they say they're more optimistic about the macro environment now then they've been in years. These same customers gave us glowing descriptions of our customer service. Norbert was a company that, for 36 years, was focused on giving stellar customer service.

We'll keep that strong focus on the customer while accelerating our sales efforts and driving growth. We see a lot of opportunity to scale up our European operations by adding more salespeople, adjusting incentive compensation and giving our employees the benefit of a common CRM technology.

We're excited about our e-fulfillment business that's taking off in Europe and we'll install our proprietary Freight Optimizer technology to build on the more than €1 billion of brokerage business that we currently serve. Many of our European customers are interested in high-quality last mile logistics.

Europe hasn't developed its heavy goods home delivery as much as North America has, and there is a lot of room to improve customer satisfaction levels. It's a fragmented landscape with a lot of regional providers. There is a concrete opportunity for us to apply our technology and expertise and develop the last-mile sector for heavy goods in Europe.

Our European operations have adopted the XPO Logistics brand with enthusiasm and the transition is going very smoothly. The XPO name is making its way across Europe. We had a high profile at the Tour de France, for example. Our social campaign has taken off, it's with the hashtag #WeAreXPO. It is being rolled out on our trucks and in print ads.

Even though the Norbert acquisition is just eight weeks old, we've already had our first big cross-selling win between North America and Europe. We'll be opening an important e-commerce facility in Pennsylvania to serve the U.S. footprint of an international fashion retailer.

This is a company that's a top 10 customers of ours in Europe where they have a big presence and they've been growing quickly in the U.S. market. This is just one example of many opportunities where we can leverage the strong track records of both our European and our North American operations.

Our other acquisition in June was the drayage provider BTT, which came on board on June 1. Since then, the operations have been performing very well. Drayage capacity is in demand and our customers now have access to a larger network. We're consolidating our facilities and increasing our lane density, while eliminating costs.

We're also sharing best practices across our drayage network, especially in recruiting and retaining the owner operators in our system. Since we announced the BTT acquisition agreement just in May, those operations are up over 100 trucks.

In sum, we've delivered a strong first half of the year and we'll continue to push the pace on our many initiatives for growth. Employee engagement globally is off the charts high.

We have a clear line of sight to $625 million in EBITDA on a run rate basis by the end of this year, and we have well-defined plan to grow to 2.5 times that amount over the next several years. With that, operator, we'll turn it over to questions..

Thank you. We will now begin the question-and-answer session. We have a question from Rob Salmon from Deutsche Bank..

Hey, thanks and appreciate you guys taking my question here. A little bit of more clarification in terms of the longer-term guidance.

Could you give us a sense in terms what's embedded from a bottom line leverage perspective from organic growth and what sort of acquisition assumptions regarding the price – regarding the profitability of those companies and how that's kind of playing into revenue and EBITDA that are kind of growing at a very similar CAGR over the next several years?.

Thanks Rob, its Scott. The assumptions embedded in the targets are organic growth over the next several years of 9% to 10% on the top line. It's important to note that we'll grow EBITDA at a faster rate than that.

For instant, in these quarters – like, in this quarter and in 2015, we grew 10% organically ex-fuel this quarter and our organic EBITDA is more in the 40% to 50% range right now. So, there are certain times we're getting a lot of leverage.

But over the next several years, we should expect 9% to 10% organic growth on average, some quarters above that, some quarters below that; but in general, 9% to 10% with EBITDA growing at a faster rate. And then on top of that, we'll deploy $5 billion in capital towards acquisitions.

That $5 billion in capital will come from the existing cash we have in the balance sheet of $1.2 billion plus free cash flow over the next several years, and then debt as we keep our leverage in the 3.5 to 4 turns of net debt-to-EBITDA..

Thanks, Scott. That's really helpful.

And then, as we think about that 9% to 10% organic growth rate, how much of a role do you feel kind of the freight markets are playing into hitting those targets? Like for example, if the economic backdrop gets softer, would there be an opportunity to kind of use more leverage from the M&A standpoint to get to the top line targets you guys are hoping to achieve?.

The macro environment does matter, and we factored in very relatively low growth of 2%, 2.5% GDP growth in both North America and in Europe. Right now, in the eurozone, we're growing much faster than that in the areas that we are exposed to.

The biggest areas were exposed to are Spain; we do business in the UK; and in France and Spain, we're growing – GDP is growing 3.5% to 4%. The UK is growing relatively in line with those levels. So, on a blended basis, the eurozone is growing at a faster rate than U.S. is. We factor into our estimates is 2%, 2.5% GDP for both.

It will impact our revenue growth what that economic growth is. In terms of leverage, we don't want to stay at – for any prolonged period of time, more than 4 turns of net debt.

We will for certain acquisitions on a temporary basis, and then figure out ways to delever quickly either through growth or through fund-raising; but in general, we'll look to keep that leverage at 4 turns and below on a more sustainable basis..

Perfect. Thanks so much for the time..

Thank you, Rob..

We have a question from Kevin Sterling from BB&T Capital Markets..

Thank you. Good morning, gentlemen..

Good morning, Kevin..

Good morning, Kevin..

Hey, Brad, just help us – your 2019 targets of $23 billion and $1.5 billion in EBITDA. Can you help us with the road map to get there? And what I mean by that is as you think about XPO and the platform, what services do you need to add; what holes do you need to fill in, maybe what are you missing? And you also mentioned the two-pronged M&A approach.

I assume that means both global and North America, so maybe you can expand on that a little bit more, too?.

Okay. Thanks for the question, Kevin. So, let's back up for a second and start with who we are and then what we're evolving into.

So who are we in respect to the questions you asked are, we're roughly 50% of our profit come – when I say profit, I'm talking about EBITDA, coming from North America; roughly 50% of our EBITDA coming from Europe, plus or minus. We're roughly half of our EBITDA coming from contract logistics.

We're roughly half of our EBITDA coming from transportation. And we break our transportation comprised of last mile, intermodal, truck, expedite. So, we have a fairly balanced mix right now both geographically and service line.

Now long-term, to answer your question, I think we will be having business mix that is more reflective as we get into the tens and tens of billions of dollars of the end markets. So, when you look at those different end markets, some are much larger than others. The contract logistics is a much, much bigger market than, say, expedite for example.

So, you would expect us to be much bigger in contract logistics than expedite when we're at $20 billion, $30 billion, and $40 billion. When you look at last mile, we're the leader in last mile by a long shot. And we've made a lot of investment in that in order to get that status.

We're going to grow that organically very, very, very fast both here and in Europe; but you're not going to have the opportunity there to grow by acquisition because neither here nor in Europe do you have large last mile companies to buy, so that's an organic grower.

Intermodal kind of a question mark here in the United State because there is only a very few number of sizable acquisition candidates and they may or may not be very right to buy at the moment. So, it's unsure what our path's going to be on intermodal in United State.

But surely in Europe, there is no big intermodal company to buy because there is no big intermodal industry. The rail infrastructure is not as advanced there as it is here. So, that's kind of the lay of the land as we're seeing it.

Does that get you where we need to go?.

It does. Thank you. That's very helpful. I really do appreciate the additional color. Let me touch on some of the recent acquisition activity in the space. Now, we see UPS dipping their toe in the water.

From a multiple perspective are you seeing some multiples get stretched somewhat maybe particularly domestically?.

No. I mean, we obviously saw that UPS-Coyote transaction; it looks like a really exciting transaction. But in terms of the way it affects the rest of the world, I haven't seen an effect on multiples or on seller expectations or on anything in the M&A world..

Okay. Thank you. And one last question here. It sounds like some of your European customers now with the Norbert acquisition are asking for your help with growth opportunities in the U.S.

One, is that a right read? And two, maybe this cross-selling opportunity, is it a little bit better than what you initial thought when you first bought Norbert?.

So, that is an absolutely correct read. It's a right read that there are – so we just came back from two trips to Europe in the last month and we met with dozens and dozens of customers. And there's a big buzz about XPO in Europe because it kind of came out of nowhere and no one has heard of us; and suddenly, we're all over the place.

We did a big ad campaign and we met lots of customers, and just a lot of activity around the name XPO in Europe right now. There is absolutely a big receptivity and willingness and desire with the top European customers that we inherited with the Norbert acquisition to also do business with us in the United States.

There's this clear unequivocally black and white what's happening.

And we already have, even though we've only owned Norbert less than two months, we already had our first big win in contract logistics where a big Spanish retailer, a Spanish-based retailer, it's a global retailer, very large company that has a small but growing presence in United States.

They only have about 50 stores now, but they'll have more and have a growing internet presence. We've already signed a contract with them to open up a facility in Pennsylvania to do their e-fulfillment.

So that's a customer that is a top 20 customer for us in Europe and I expect that's going to be top 20 customer for us eventually here in the United States. That's just one example. Lots and lots of discussions going on.

The other way, very interesting trend, so in the customer meetings we've had the big topic seems to be Last Mile in Europe because there is no very advanced Last Mile industry like there is in the United States in there.

There's a lot of regional players, different players in different parts of the continent in the UK and the level of customer satisfaction with Last Mile heavy goods delivery is lower in Europe then it is here.

So, we have a big, big demand from customers in Europe to take our Last Mile expertise and technology that we have here and cross-fertilize it, bring it over to Europe and we have many customers who want to give us a trial test and see how it works. So it's something very exciting..

Thank you, Brad. It's very helpful. Congratulations and best of luck and you've come a really long way since I first met you few years ago in Buchanan, Michigan. So that's about....

I remember that meeting, I remember. Thank you, Kevin..

Thank you..

We have a question from Chris Wetherbee from Citi..

Hey, thanks. Good morning, guys..

Good morning..

The question on the long-term guidance, I guess when you think about the 2019 outlook for a $1.5 billion in EBITDA and $23 billion on the top line, is the margin there – I think the implied margin is roughly the same is what the margins are today.

I guess when I sort of think about the long-term opportunity of the business, I also sort of thought about some margin accretions sort of built into the core business over the course of time as you guys mature and really generate leverage on operating base that you put down.

How should we think about that and maybe is there something in the acquisition market or how you think about that growth profile that might change that thought around margins? Just any help around that would be great,.

Yeah, Chris, it's Scott. And we do expect organic EBITDA margin expansion, again, EBITDA growing faster than revenue. You're right that the guidance implies 6.5% EBITDA margins. Some of that is mechanical.

The way we've been running our models for the last several years that has worked well is we build in acquisitions coming on board at a 6% EBITDA margin. So when we deploy that $5 billion in capital just from a mechanical basis, we're bringing on 6% EBITDA margin business and it's diluting from that growth organically that you're seeing.

It's very likely we buy companies that are above that margin and then we buy contract logistics companies, for instance, where the blended margin will be much higher than that. We could buy other businesses that have lower margins but the revenue would be higher but the margins would be lower.

But generally, what's happening is, from a mechanical standpoint, the blended average comes out to 6.5%..

So it's fair to say that you freeze acquisitions, the margins get better because there's that organic pace underneath it.

So it's the fact that you're adding the $5 billion of acquisitions over the period of time, right?.

Absolutely, Chris..

Okay..

And it depends on the mix of the acquisitions..

Okay, no, that's helpful. I just wanted to make sure I sort of understood how you're thinking about it.

And then if you could give us a little bit of sort of color on, sort of the margin differentials within the Europe business now, the truckload in full, and the truckload business relative to maybe the logistics business seems like there's a margin profile difference there.

Just wanted to get a rough sense of maybe how we think about this as the first or a stub quarter but going forward maybe how that looks?.

Sure, Chris. It's John Hardig. So obviously, the transportation business in Europe has slightly lower margins than our logistics business does. And it's, mainly because of its non-assets based nature, the EBITDA margins are running, kind of they're a little bit higher this 22 days that we own them, but it's going to run 6% or so.

The logistics business is going to be a little bit higher and, again, I think the transportation is little bit lower, mainly driven by the non-asset base nature of the business versus the logistics side..

Okay, okay, that's helpful. If you'll indulge me, one more, just one more here, wanted to get a quick sort of thought on the current market within brokerage. Scott, I think you mentioned sort of maybe an opportunity for the retail market to pick up a little bit here back-to-school.

How do you see the market sort of today sitting here in early 3Q and maybe how that retail components looks will be great. Thank you..

So far in 3Q, I would characterize it has relatively loose capacity. You can find a truck. So we track inbound and outbound calls to carriers. And our ratio of inbound costs from carriers has gone up way up.

So carriers are calling up and saying, hey what loads do you have for us? Do you have any freight for us? And in turn, that is taking down generally taking down purchase transportation across the board. So our net revenue dollars accelerated into July. Most of that has to do with increasing net revenue dollars per load.

As you look into the retail landscape, it's too early to tell. You'll see a ramp-up through August with back-to-school. It will continue to ramp up and we'll be strong all the way till Thanksgiving. So it's too early to tell how that shapes up. But for right now, it's relatively easy to find a truck..

Okay, that's helpful color. Thanks for the time, guys. Really appreciate it..

Thank you..

We have a question from Alex Vecchio from Morgan Stanley..

Hey there. So on Norbert, it's historically grown at kind of mid single-digit organic growth rate and it sounds like the cross-selling opportunities are coming to fruition which should help that accelerate.

But can you, Brad, maybe can you comment a little bit on early reception or feedback from employees to the new incentive-based compensation program you're rolling out at Norbert and sort of what gives you the confidence that organic growth rate will actually accelerate and help you get the total company to that 9% to 10%?.

I have a lot of confidence that the growth rate in Europe is going to be higher than it was historically for a few reasons. Number one, they were operating – and so we forget what 2007 and 2008 were like. It seems like so long, long, long ago. They have a different cycle. I mean, they've been operating up until recently in a prolonged malaise.

So they've had a poor external environment that even if you're doing a good job, it's hard to grow when your customer is not growing. That's point number one. Point number two, as you mentioned, we're changing the compensation plan. We have not done that yet. So compensation plan, some things, we do very, very fast.

Some things, we are careful not to do very fast. Changing compensation plans have to be done methodically and communicated and get the buy in and input and participation of lots of different stakeholders and have to be well thought out because once you change a compensation plan, you don't want to be changing it again anytime soon.

And you want to make sure that you're motivating peoples behaviors to the exact things you want to be and not having unintended consequences. But we have a lot of resources and lot of effort getting that new compensation plan designed first and then we'll roll it out later this year.

Even apart from the compensation plan, it's very, very evident from the many, many employee meetings that we've had all across UK and the continent that the organization there is ready for growth. They're embracing growth. They want to do it. Their head's in the game. It's something they want to do. They want to win. They want to become bigger.

They want to expand. They want more market share. They want to serve their customers more. They want to offer more things. It's absolutely receptive in the environment there. Now, there's several different levers we're going to push and we are pushing for growth. One is cross-selling as you mentioned. We talked about that earlier in the call.

Another is cross-fertilization of best practices and, by the way, that's not a one-way street. That's a two-way street between Europe and United States. Another thing is technology and automation.

So, one thing that we're very excited about and Europeans are very excited about is taking our proprietary XPO Freight Optimizer technology that we spent so much money, so much time and so much resources into getting this fantastic truck brokerage technology, transferred over to Europe to take that more than €1 billion of brokerage business that we have and optimize it.

And I'm very, very confident we can optimize that business and improve that business. We're putting that whole network on a network which means you need to have – that whole geography on one network which takes a little time, takes technology rollout, takes investments and we're absolutely committed to doing that.

The other things that we're pushing in terms of leverage to grow the business there is expanding the size of the sales force. So we look at the organizational chart and we just together collaboratively saying where we want to expand it.

And clearly, where we want to expand it is the size of the sales force and how the sales force is structured, getting increased sales force effectiveness and empowering them with a common CRM technology which is kind of a basic concept over here but really isn't over there. So getting everyone on Salesforce.com is very, very important thing.

And then another thing I would mention that gives me confidence in the growth that we're planning on having in Europe is we have a leading e-fulfillment position in Europe and it is growing very, very, very fast. I mean, it's grown 30% year-over-year organically.

And the facilities that we visited that are doing e-fulfillment are very, very impressive and the customers that we visited who are e-commerce customers have very high expectations for their own growth. So that's something we're going to be putting more resources into.

And we're number one in e-commerce logistics in Europe, we're number one in UK and we're number one is Spain, so a lot of opportunities there. So I could go on and on and on about growth in Europe.

But I think you get the flavor of it that we're very confident that we're going to be able to grow and stimulate Europe and there's a lot of receptivity for that..

Yeah, no, great. That was a very thorough and helpful answer there. Okay, that's helpful. And then on the acquisition, the financing of the acquisition, Scott, I think you mentioned the financing coming from the cash on the balance sheet, free cash flow and incremental debt.

How are you thinking about incremental equity raises? Is it something you'd entertain or is it something at this point that you just don't plan on doing? How should we sort of think about the equity component of financing transactions coming forward?.

Well, the $1.5 billion in EBITDA that we plan over the next several years does not depend on equity.

But that said the same way we've done it over the last several years if we somehow come across a large opportunity or something that will increase our free cash flow per share in outer years, something that will very accretive to what we were doing, we would take a look at it.

That would be cherry on the top that will be something that we can earn in excess of $1.5 billion of EBITDA in 2019. So it's something that would be on the table. It depends on the opportunities..

Okay, and that's helpful. And just one last one here, you highlighted $80 million of transaction and integration cost in the quarter. That seems a bit high, but maybe I'm kind of sort of missing something there.

Can you talk a little bit about, how much of that might be transaction versus integration and do you expect kind of the integration costs to be elevated going forward?.

Yeah, hi, it's John Hardig. I'll cover that. So the vast majority of the $80 million that we incurred in transaction and integration costs were related to the transaction. And so that's breaks down about $40 million of that was bank commitment fees, hedging fees for hedging the currency that we had to pay in euros for the purchase.

And then we had about $24 million of fees to advisors and then we had some additional kind of purchase price type items that flowed through the P&L. Of that total, really it was $92 million if you include the restructuring and the re-branding, you had about $8 million of restructuring and re-branding expenses.

So the vast majority all but $4 million is related to either re-branding or – the cost to close the deal..

Okay, so very little on the actual integration expense itself?.

Right. And on a go-forward basis, we will continue to have some restructuring charges related to Norbert. So we're kind of in the early innings of determining exactly what the detailed plans will be. We have some very good ideas of what we're going to do on a go forward basis, but you will see some restructuring charges in the next couple of quarters..

Okay, great. Thanks very much for the time..

Thank you..

We have a question from John Mims from FBR Capital Markets..

Thank you, good morning, everybody..

Good morning, John..

Hey, so on this Pennsylvania deal which I kind of assume is for Zara, what's the lead time for these type of buildouts in the U.S.? I mean, I think you highlighted there's a pretty deep pipeline of the European customers that you can cross-sell into the U.S., but kind of what's the cadence of the start-up costs versus the real revenue opportunity of putting these new distributions centers in for these big European retailers?.

So, normally a lead time for a project like that is a long lead time. It could be a year. In this case, one of the reasons that that customer, and we're not going to say the name of the customer, picked us and worked with us is because we can move fast, we can mobilize very fast.

And Louis' group put together a plan to have that up and running in eight weeks from signing and we signed it and we're well along the way to get that up and running..

So, is that specific to this deal or as part of your sales pitch to XYZ European guy is we can move a year-long typical lead time to eight weeks to 12 weeks?.

We can't always do that. In this case, due to the specifications and due to collaboration, we were able to figure out a way to do that. But I think one hallmark of XPO Logistics is speed, is agility, is thinking clearly and moving fast, and this is just one example of that..

Sure. I mean, sticking with the logistics side and kind of a 1% operating margin this quarter, what's the right way of looking at that as you get a full quarter's benefit of Norbert plus you get a few more of these things up and running? Kind of what's the cadence of where that operating margins should be over the next couple years..

John, what number are you referring to?.

Just the logistics piece you did off of gross, let me pull it up – now I can't find it, of course..

So, John..

Hold on one second..

Yeah, this is Scott, so there were some integration charges included....

Yeah..

...in the logistics side, if you take that out.

From an EBITDA perspective, contract logistics will be in the 8.5 times percent range, 8% to 8.5% range on an EBITDA basis and then we can go through D&A with you separately to breakout?.

Yeah, sure..

It's about 8% to 8.5% EBITDA margin on logistics..

Right, it was that 4.3 number I was looking at, so. But still, just from a pure operating basis, if that's when you – is that kind of, can that be a 5% margin business or....

Well, on EBITDA, it's 8% to 8.5% I'll have to go through the D&A schedule and just grab with you, I'll be happy to do it offline and we'll break it out for you and give a piece but on EBITDA, like I said, 8% to 8.5%..

But, John, to be fair, that EBITDA margin level that we're at on logistics, we're comfortable with that. Our customers are comfortable with that. Our plan is not to try to raise that up.

Our plan is try to grow organically, get more business, satisfy our customers more, get repeat business, get additional customers in the door and just keep margin stable..

Right, okay. And just one last one on the margins, and I know it's been touched on before but I'm still just trying to figure out how we should think about incremental margins over this big long buildout timeframe.

As you layer people on to this common system as you have the kind of the synergies and your comments that EBITDA will grow faster than revenue, but then the long-term target is kind of in line with where we are now. Like what's the right sort of incremental margin for broader XPO as you continue to build this out..

Hey, John. It's Scott. So it will be – it's a blended average, right now you are talking much different levels of organic growth on EBITDA than top line. So like I said, we were at about $150 million – give you an example, we're at a $150 million EBITDA run rate on average by the end of last year.

Organically, we'll take that base and bring it to about $225 million.

So it's about 50% EBITDA organic rate because we're leveraging that $60 million in corporate expense, because our truck brokerage operations are increasing tenure of our sales reps and becoming productive, all these different reasons we're leveraging and our incremental margins are a lot higher over the longer period of time you can expect our EBITDA to grow at a few percentage points higher than revenue..

Sure, but the end game is still – I guess that's where I'm not quite understanding that. The end game's still kind of – so you're talking about layering more contract logistics which is an 8% to 8.5% margin business. And the brokerage side is kind of running at 6% where you now.

So I guess how does that all equal 6.5%? Am I missing something or?.

Yeah, I mean you have, like I said, about 8% to 8.5% of the contract you said yeah 5.5% to 6% EBITDA margins on transportation then you have about $60 million of corporate expense of top of that, right.

So over the next several years it will likely on an organic basis given the mix of business we have today rise above 6.5% but the 6.5% in the long-term guidance is based on just an assumption of buying companies that are on the 6% EBITDA range.

That could be wrong or right and does depend on the mix of businesses that we buy but the organic basis will be above 6.5%..

Sure, that makes sense, so okay. All right, thanks for the time..

Thank you..

We have a question from Scott Schneeberger from Oppenheimer..

Thank you. Good morning..

Good morning..

Hey, Brad. I'd like to start off just talking the 9% to 10% organic growth rate for the total company because if you could elaborate a little bit, starting with contract logistics of what you're assuming by segments, contract logistics and maybe some of the components of the transportation segments? Thanks..

Well, I don't want to go detail by detail every little segment and breakout organic growth. But generally speaking ,you're going to see some higher, some lower both by U.S. segments – not segments, U.S. business lines and you're going to see different parts of the cycle in Europe and North America.

The main point is when we do our analysis and we do a high low base case scenario for each of the service lines, each one of geographies, we feel comfortable that the likely scenario is 9%, 10% blended throughout the cycle. There'll be times more than that. There'll be times below that.

There'll be some parts of that are exceeding, some parts that are missing. But on average, that's the level that we feel comfortable with..

Okay, thanks.

Scott or John, what's implicit in free cash flow generation in this new long-term guidance? I know you probably not going to give exact numbers but where are you now, how do you think that builds? Any bit of help there would help us kind of building out on the components of what goes into the capital structure and acquisition build over the coming years? Thanks..

Yes, sure, Scott. So basically, you know what our EBITDA expectations are and what those margins are. We're going to have about 3.5 times leverage on the model in terms of what the long-term targets imply and so you can use that to kind of figure out what the interest expense will be. Working capital needs will run at around 5% to 6% of revenue.

That's on growth revenue as we grow the top line organically. And then CapEx runs about 2.5% of revenue a year and that's very consistent between both our legacy XPO business and the European business of Norbert. So that will give you a sense of kind of how to think about the cash flow overall..

Okay, thanks, I appreciate that. One more in here kind of biting on the commentary with regards to the Last Mile opportunity in Europe and, I mean, obviously, you guys are a leader in North America in that business service offering.

Just curious what kind of any elaboration you care to provide on go-to-market and how you would capitalize on that seemingly large opportunity overseas? Thanks..

Yes, Scott, thanks. It's Scott. We're starting with the landmark tenants. We're working with a current customer where we're their largest Last Mile provider in North America and working on a contract in London and getting going, getting started with that landmark customer. Now we have LTL networks or palletized networks set up throughout Europe.

We are one of the largest providers of LTL in – we are the largest in France. We are the largest in Spain. We're one of the largest in UK, either one or two. So using that network, we can then stage the goods and we can use that network to deliver the goods in Last Mile. And what we do is deploy the same technology we have in North America.

We can use an owner-operator base very similar to what we're doing in North America. Like I said, we'll start with one landmark tenant that we just – we're getting started with now, and then we'll try to grow it from there..

Great. Thanks..

We have a question from Brandon Oglenski from Barclays..

Hey. Good morning, everyone..

Good morning..

John, I wanted to follow-up on the cash flow question real quick.

So, given the integration costs that you went through and some of the fees that you had this quarter, should we start seeing positive cash from operations going forward now?.

Yeah. I mean, we definitely will see some positive cash flow in future quarters. I mean, the big drag this quarter obviously was the transaction-related expenses. So, when you think about that $80 million of restructuring and transaction, all but about $20 million or $25 million of that was cash.

So, that was the big drag really on cash flow this quarter. We also – big uptick this quarter in terms of revenue activity, so we had lot of AR that went on to the balance sheet, accounts receivable, to support the growth of the business. But on a go forward basis, you will see positive free cash flow..

Okay, and I didn't mean to get in such near-term on the call here but I think that is important. Brad, I think what investors and Wall Street analysts have really hard time getting their arms around is just how powerful culture change can be.

And have you really had an impact on the Norbert organization? It really sounds like there's been reinvigoration over in Europe.

Is that what's driving a lot of this confidence that you're going to see that higher single-digit growth rate coming out of that organization?.

I think it's fair to say that we have a certain positive energy about us that we've brought over there, but I think what's more important is the receptivity and it's a fantastic company that we bought.

I mean, it's just a really solid company with solid people, with solid customer relations, who know what they're doing, who's – it's just a really good organization.

So, if you come into an organization that's been focused on stability and customer service and maintaining the margin which is mainly been their strategic focuses which is all fine, particularly given the share ownership that it had, it's not that difficult frankly for someone like us to come in and say, okay, let's keep doing all that, but let's also focus now on growth, growth, growth.

So, I think the receptivity of the organization to grow is high, and the platform is very well-developed. So, it's kind of like a giant that we're getting up on its shoulders and taking it to a new higher level..

Okay. And can you talk a little bit about the customer side.

Have you seen customers now cross-utilizing more and more of your services? I mean, is there any sort of statistics you can provide us where you're seeing cross pollination across all these lines of operations that you have now at XPO?.

Absolutely, Brandon; it's Scott. We're seeing a lot of cross-selling across the organization. I have some stats around cross-selling. It's about....

While you're looking for your stats, Scott. So, when you look at our customers, it's very rarely do you find – it's almost never that you find a customer who only uses one mode in their supply chain.

So, when you mee t the zone or the chief supply chain officer or senior transportation person and a shipper, whether it's a manufacturer, whether it's a retailer, whether it's food and beverage, they're not thinking just by mode; they're thinking I got customers, I got ops, I got product, I got to move it from where it starts to get it to the customer.

And they have ops people who are saying, you need to do this in the most efficient way. So whether that ends up being rail or whether that ends up being truck or whether that means a tighter supply chain than doing more expedites, it's – that's the puzzle, it have to be solved. So our customers, by their nature, are multimodal..

And then, just overall, to give you the numbers and to level set and we can track over the next several years, but our customers are already using us for a number of services, so – including Europe.

So, now we've combined Europe and said what services are they using of us, 32 of our top 50 customers, or two-thirds basically, are using us for multiple services; 15 of the top 50 are using us for three or more of our services. So we are – we have a big opportunity to continue to grow that, to cross-sell more of those accounts and more our services.

The areas we've been strongest and if we just look at the numbers and the dollars, we've been very strong in cross-selling retail. Retail has been sold in intermodal, in truckload, in last mile. We've also – we're doing a lot in the auto category. Auto is using expedite, also intermodal, also truckload..

Okay. Appreciate that. And I guess, I do want to ask one more of you, Brad.

Who do you view is your biggest competition right now?.

Our biggest competitor is different in every line of business that we have and it's also different when you go to Europe versus here. I mean, in Europe, we're running into DHL, and DB Schenker, and Kuehne + Nagel, and Geodis, and Dachser, and companies like that don't have a big presence if any presence here at United States.

Here, United States, we run into different competitors in intermodal where we're competing against J.B. Hunt, and competing against Hub, and other fine intermodal providers, but we're not running into them on expedite, for example; that's a different world. So, there is different competitors in different places.

And as we get bigger, that's going to be even more accentuated where we're doing a larger geographic footprint, and we're doing more comprehensive services, so we'll be competing against different competitors in different spaces..

Appreciate it. Thank you..

Thank you..

We have a question from Tyler Brown from Raymond James..

Hey, good morning, guys..

Good morning..

Hey. So, Brad, things are progressing very nicely here, but I am curious and I want to kind of go back to Brandon's question about culture.

I mean, how are you kind of putting in, let's just call it, cultural guard rails just to make sure that you've got 50,000 employees, it sounds like that's going to be a lot more in the future, but that the XPO service culture is really assimilated across all the business lines and that one segment doesn't do it one way and another segment doesn't do it another?.

We are big believers in standardization; in most things, not all things, and getting process standardized and getting quality accounted for. But let me make something very, very clear. In the Norbert – the former Norbert operations in Europe, there is no issue about trying to get them more customer service oriented.

That is a very customer service oriented organization. They have customer, customer, customers all over the culture, metrics to please the customer; metrics for quarterly – I mean it's all over the culture. It's very, very deeply ingrained on and that's the only reason why you can keep a customer for decades, it's if you give good customer service.

So the focus on customer service that we have here is no greater or no less than it is in Europe; it is completely equivalent..

Okay. Perfect. Now, that's very helpful.

And then, I know you guys kind of touched on this and you have an extraordinarily talented team on the technology side, but can you kind of again go over the long-term strategy on technology? So, specifically, do you plan the run a number of discrete platforms or are you going to migrate to, call it, one big global technology platform? I don't know if you want call it shared services or whatnot, but what is the technology model over the longer term?.

Yeah. Hey, it's Scott. We do integrate technology. We integrate technology across the organization. So, everything we're doing in North America is moved towards our .NET platform.

Now, there is different tools that come off of that .NET platform that are all on the same technology and on the same platform and all integrated; one is Rail Optimizer, one is the Freight Optimizer in truckload. We also have a desktop management – so our last-mile technology that handles customer experience management.

So, each of the different areas have their own screens but it all integrates together on to a .NET platform. In Europe, we will we will roll out our Freight Optimizer technology across the truckload universe. We're right now underway – planning is underway to roll that out and see the differences in what their needs are and what we can provide.

And that's a process to roll out across Europe that will take a year to a year-and-a-half or so..

Okay. Yeah. No, very interesting. Thanks..

Thank you..

We have a question....

Operator, any more question?.

I apologize. We do have a question from Donald Broughton from Avondale Partners..

Donald, good morning..

Good morning, Brad; good morning, everybody. Since we're playing when we first met, I can remember we first met back in Dallas in 2010. And how things have changed in the last five years..

They have, and grown..

They have. You guys have been very, what I would call, strategically opportunistic.

And over that time, I've watched you do things that I thought were marketplace opportunity driven, currency driven, lackluster company that needed a fix, extraordinary company that happened to be available at a fair price, something you needed that was an addition to your service offering for your customers.

When you sit there, help me understand how you think about it? When you sit there today, given what you've amassed, given what you've built, what do you need next? Is it a service offering? Is it a geographical concentration? What is the next great big thing that XPO needs in its portfolio?.

Well, the great thing about the next great next thing is, I don't know what will be next. I know what will be long-term, but we're going to be opportunistic. We're going to be agile. We're going to be nimble to react to opportunities that make sense that have and a compelling logic to do them in that sequence.

But long-term, to answer your question, we want to go deeper in contract logistics. That is the field that is the most stable. It's the most recurring revenue that you can add the most value to the customer, long five year plus contracts. It's just – that's a business we want to absolutely go much, much, much, much deeper in.

Last mile is a business that we want to continue to capitalize on the industry-leading position. We've got North America and transplant that over to Europe. I really do feel, based on my customer visits, that the customers are yearning for this in Europe.

The customers are wanting a real strong high-quality last mile solution that is all across the continent and England, not just a regional and – variable in terms of customer satisfaction solution. So, we'll build that one. Intermodal.

We'll grow that business, we'll absolutely grow that business and that will grow depending on how fast the conversion from over-the-road to rail is, and that will depend on a number of factors that are completely outside of our control.

Truck brokerage is a big industry, tens of billions of dollars of size inside a trucking industry that's hundreds of billions of dollars. So, that's a big market that we'll continue to grow in; that's something that our customers use and value and need all the time. So, we'll absolutely keep growing on that.

Expedite; we got the number one position on that. We just renewed a contract with important customer and we have high, high levels of customer satisfaction, near 100% on time pick-up and delivery in expedite. It's really, really great franchise we have there. That's something we also want to be transplanting over to Europe.

And then in Europe, we look at it as two sections. Of course, freight forwarding overlapped all of this. In freight forwarding, we're not a big player yet. We're a few hundred million euros in size on that globally, but we're continuing to grow it. And in Europe, on the transportation side, we have a big trucking company.

I mean, we have a big trucking company here too, but it's non-asset. We have more than 6,400 owner-operators in our fleet. It's a big calling card to many customers. In Europe, we've got 7,000 some odd trucks that we own. We got another few thousand trucks that are owner-operators.

We're going to keep developing that fleet and keep using that to be tied in with the customer. So, business line, all of them are going to grow; geographically, ultimately, but that's – it comes back to my first comment about what's next is eventually but probably not right away. Eventually have to be in Asia.

Our customers are global; they're in Asia also. We'll have to be in Asia in due course..

Fantastic. Thank you..

Thank you, Donald..

We have a question from Todd Fowler from KeyBanc Capital Markets..

Good morning, Todd..

Great. Hey, Brad. Good morning. Thank you for taking the questions. So, on the 2019 targets, my rough math is coming up with about – implies about $10 billion of acquired revenue, kind of, give or take.

Can you just kind of give some comments on your visibility into the acquisition pipeline and I know that, obviously, two Norbert's can get you to $10 billion pretty quickly.

But your visibility, what you're thinking about and some thoughts on timing which I know can obviously be tricky as well?.

Well, your math is absolutely right; we're at about $9 billion now. To get to the $23 billion we'll be at in 2019, we're going to add $14 billion. $10 billion of that will come from acquired revenue. $4 billion of that will come from organic. These are all plus and minus numbers, but you're absolutely in the right....

Right..

...neighborhood there. And in terms of acquisitions, we have a very active pipeline. We have a lot of discussions going on both here and in Europe with interesting possibilities. And we're not going to be able to do all of them, obviously; but I'm confident and optimistic that we will complete one or two of them between now and the end of the year..

Okay. And so, thinking about the $10 billion though just to follow-up on that. I mean is your view, Brad, that that comes in a couple of big chunks or is that split out between several smaller acquisitions? I mean, how do you just think about the size of the acquisitions that you're looking at, or how should we think about that, I should say..

The answer is I don't know. The answer is we are talking to large acquisitions; we are talking to small acquisition; and we are talking to medium size acquisitions.

So, any company that is a good company, that's got services that customers – that our customers want, that our customers need, that our customers would value, that our customers when they would read the press release they would say, yeah, that's great that helps me, we're interested in that; provided we can get them at a affordable price.

So, having a wide geographic dispersion of acquisition opportunities helps with that, helps with that a lot. Because at any one point in time in the M&A world, there is a bell curve. And there's some acquisitions that are to the right to left, and some in the middle. So, we're trying to stay more towards the middle on valuation..

Okay. Fair enough. And then, it really seems like that – I mean, there are several bright spots but North American last mile, it seems like it was a very good quarter here, a lot of positive commentary about that business going forward.

Can you give us a sense of what you think the organic growth rate for that business should be trending at, and also talk a little bit about the availability of additional acquisitions for that business line?.

So, you're getting the second bite at the apple that I didn't give to Scott when he asked that question, Scott Schneeberger. We don't want to start breaking out organic growth for every little part of our business and then every quarter have to be called to task on that, because we just don't want to run the business like that.

We want to run the business what makes most sense for our customers and for our business and not reacting to analysts reaction to all that. So, we want to give it in aggregate in growth.

In last mile, though, what I can share with you is that because retailers are outsourcing more of their last mile logistics, and because e-commerce is one of the fastest-growing parts of the economy, that will be towards the higher end of the organic growth scale. Last mile is a fast-grower. But....

I thought maybe....

...to answer the other part of your question, Todd, we are the largest. So by definition, we're not going to buying anybody big or bigger than us – and so there is not lot of large acquisitions in last mile. That's not a mature industry; it's very fragmented..

Got it. Okay. That's what I thought. I thought by being later down in the queue, maybe I can kind of sneak one pass you, but I guess that wasn't the case, so..

Sorry..

Just the last one I – that's right.

Just the last one I had, John, in the CapEx guidance that you gave about 2.5% of revenue per year, does that include IT spending or how do you – what would you ballpark the spending on IT investment on an annual basis be at going forward?.

Yeah, the vast majority, the largest component of that CapEx is IT. So, runs about 2.5% of the business overall for total CapEx and IT is going to be at least 40% of that in terms of the IT investment..

Okay. Perfect. That's what I had this morning. Thanks for the time..

Thank you, sir..

We have a question from Jason Seidl from Cowen and Company..

Hey, gentlemen, good morning.

And, Brad, you kind of almost answered my question about Asia but since you did bring it up, where would you think you would look to land first with Asia? What capabilities do you think XPO needs to start giving a footprint in Asia?.

Well, we want to do contract logistics in Asia. We want to do last mile in Asia. There is not a big intermodal business in Asia. There is not a very developed truck brokerage business in Asia; well, there is an asset-based trucking business, but it's very segmented, it's very fragmented. And there is an expedite business.

And of course there is a big freight forwarding business. So, that's the lay of the land over there and those are the services that our customers utilize over there, so those are what we'll end up doing..

I imagine some of your existing customer base is already asking about potential capabilities in Asia?.

Oh, yeah. All the time. But unfortunately, that conversation doesn't last very long as our capabilities are very minimum other than freight forwarding..

Well, knowing you guys, that conversation could change within six months, so. All right. That's all I had and thanks for the time, guys..

Thank you, sir..

Thanks..

And we have a question from Jack Atkins from Stephens..

Great. Thanks for the time, guys. Thanks for squeezing me in here..

No problem..

So, I just – I guess, just to go back to freight forwarding for a moment, Brad. I mean, that really is the area of the portfolio where you guys are undersized and I think about you guys being a global logistics provider, which you are, I would think you'd want to bulk that up.

So, how do you address that over time and is this something that's really top of mind for you guys as you look for potential M&A targets?.

It's not top of mind; it's in our mind. We haven't found the fit yet. We haven't found a freight forward target that the stars all lined up for in terms of desirability on both sides and valuation and everyone wanting to do a deal, so that hasn't – and terms that work for everyone.

So there hasn't been a concrete opportunity that made sense where it all lined up..

Okay. Okay. That's makes sense. One more bigger picture then one quick housekeeping item. Brad, could you talk a little bit about the differences and similarities between the brokerage market in the U.S.

and Europe? I'm just sort of curious how those two markets look compared to one another?.

Well, they're very different in one respect. In the United States, it's one market with some submarkets in geography, but it's basically when you come into the office whether you're in Phoenix or whether in Charlotte, whether in Chicago, you're seeing the same screen. You're seeing all the loads come on. You're seeing all the trucks coming on.

You're seeing them crossed. You're seeing the same hot charts. You're seeing the demand rate, the load-truck ratios. It's all one network as everyone is plugged in, it doesn't matter where you are, you could be at home, and you're still in the same information flow.

In Europe, even though it's a big truck brokerage operation, it's well over €1 billion of truck brokerage, and they have very satisfied customers and we're one of the best truck brokers in Europe, it's still very fragmented.

So, when you go on to your system in Spain, you're seeing what's going – well, actually you're seeing what's going in Liberia, you're seeing with Spain, Portugal, Morocco, but you're really not seeing in live – in real time what's going on in the rest of the continent.

When you go to our office in Italy and look at what's going on in truck brokerage, you're looking really what's going on in Italy, period. So, there is a lot of information that's siloed, that's fragmented, that's trapped in different places.

We think there's a huge value to approaching truck brokerage in Europe as all of Europe, and that's the path that we're on.

As Scott was mentioning before how we're rolling out the Freight Optimizer, first in the English-speaking countries, because we have the code all written in English; second in the French, because we have French code for – that we did for our business up in Montréal a couple of years ago when we bought Kelron.

And then in due course, but it's going to take us a year or two to get all the code written in the other languages. We want everyone on all one system, and that's the big difference..

Okay. That makes sense. And then one last housekeeping item.

John, could you maybe help us think about the non-controlling interest line and how that should flow in the third quarter, assuming that there is no resolution to this issue with the remaining interest in Norbert?.

Yeah, I mean, in terms of modeling perspective, Jack, I mean....

Yeah..

...I would just think about it as a same percentage of total net income as we had in this quarter. So, just....

Okay..

...with the full quarter effect....

Okay..

... versus just the 22 days. So, I would think about it that way..

Okay. That helps. Thanks so much..

Thanks for your questions, Jack.

Operator, any other questions?.

Thank you. We have reached the end of the question-and-answer session. I would like to turn the call back over to Mr. Jacobs for any final remarks..

Thank you, everyone, for participating in the call. I'm sorry we went nine months into the trading morning and we'll put a period right there. Thanks again. Bye..

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect..