XPO Logistics, Inc. (NYSE:XPO) Recommendation: BUY

Colin Gutzmer

1 Investment Thesis Recommendation: XPO Logistics, Inc. (NYSE:XPO) is undervalued in the market with substantial long-term upside; therefore, I recommend a buy considering recent rarities present a great entry opportunity.

Rationale: XPO’s strong fundamental business model and room for growth put the Company in a good position to capitalize on eCommerce’s rapid growth and the increasing importance of logistics

1 Rising capacity due to substantial growth of eCommerce

2 Developing role of logistics as inventory and consumer demands change

3 Experienced management with a plan

Price Target: $66.00

35.0% upside to current price $48.88

2 Company Overview

Company Profile Historical Stock Chart § XPO is a leader in both the transportation and logistics segment Volume (000’s) § Within the transportation segment, the company specializes in $140 45,000 freight brokerage, truckload, and less-than-truckload (LTL) $120 40,000 35,000 § XPO Logistics is a leader of transportation in both the $100 U.S. and Europe 30,000 § Within the logistics segment, XPO specializes in value-added $80 25,000 warehousing, eCommerce fulfillment, and supply chain $60 20,000 15,000 management $40 § Large companies and small companies alike outsource 10,000 inventory management to XPO Logistics, whether in $20 5,000 totality or partially $0 - § XPO offers omni-channel solutions with hopes to cross-sell its services after forming relationships with their 55,000+ customers Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Volume XPO 2018 Revenue by Segment Revenue Breakdown ($ in millions)

France Logistics Europe $20,000 10% 35% 14% 12%

UK 8% 12% $15,000 $6,065 $5,229 Other NA $4,761 6% 2% $10,000 Other 4% 1% $2,768 $5,000 $9,976 $10,276 $11,343 $216 2% $4,924 $2,140 $0 0% Transportation 2014 2015 2016 2017 2018 65% U.S. 59% Tr ansportation Logistics EBITDA Margin

Source: Company filings, Bloomberg 3 Company Overview (cont.)

Logistics Transport

§ Drayage § Expedite § Moving shipping containers short § Ground, air, and cross-border solutions distances § Full Truckload § Intermodal § XPO is the world’s second largest freight § Cost-effective, specialized transport rooted broker in extensive coverage and technology § XPO Connect serves as a digital § Reverse marketplace to engage customers and § XPO logistics handles 2 million returns drive the sales experience annually, often concerning heavy § Global Forwarding household goods § Ocean, air, and insurance services § Can clean, inspect, etc. provided § Supply Chain § Last Mile § Second largest contract logistics provider § 85 hubs provide a last mile experience for worldwide consumers § ~185 million square feet of facilities § 99% of U.S population covered § XPO Direct § Flexible, customer-tailored § Positions inventory within two-day ground options transportation of vast majority of U.S § Less-than-truckload population § Emphasizes speed and reliability with one of the largest fleets in industry § Over 75,000 next-day and two-day lanes

Source: Company Filings 4 Volatility

Spruce Point Short Earnings Call Updates § Jacobs’ past company, United Rentals, used M&A activity in order to § Board approved an additional $1.5B buyback following Q4 release exploit fair value estimates and inflate company value § Company lost ~600MM of projected revenue in short notice § Reports insist that income manipulation overstates EPS by over 50% § XPO Connect (digital freight marketplace) has doubled number of and that free cash flows cannot support debt level bids seeking loads § Announced $8B acquisition that never happened in 2018, raising § Logistics segment revenue grew 10% along due in large part to questions about debt-levels consumer packaged goods, food and beverage, and eCommerce § The publication of said short-seller report sent shares plummeting § Organic growth this year will largely stem from supply chain due to down 26% in December its contractual nature. Transportation will struggle given that biggest § Deutsche Bank found many simplistic errors in the short-seller’s customer is gone report § Will get full year contribution from 2018’s record number of logistics § XPO responded that the report was intentionally misleading and start-ups authorized a $1B share buyback § Goal is to have total package of supply chain solutions for big customers especially 1 Year Historic Stock Chart $140 45,000,000 40,000,000 $120 35,000,000 $100 30,000,000 $80 25,000,000

$60 20,000,000 15,000,000 $40 10,000,000 $20 5,000,000 $- - Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19

Volume XPO

Source: Spruce Point Capital Report, Company Filings 5 Industry Overview

Transportation Overview U.S Market Size1 § MM Long-term, the transportation industry will continue to grow as $1,800,000 consumers demand their goods faster and faster. $1,600,000 2% CAGR § and Walmart set the gold standard, offering free two-day $1,400,000 shipping. By end of FY2020, Walmart wants to offer one-day $1,200,000 delivery to 50% of the U.S population. $1,000,000 § As smaller businesses try to compete with the giants, it is $800,000 necessary for them to match the industry’s transportations $600,000 standards. $400,000 § Activity within the transportation industry is extremely $200,000 responsive to tariffs and oil prices. $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Transportation Logistics Logistics Overview Market Segmentation

§ The logistics industry is characterized by long-term contractual Transportation Logistics relationships with low cyclicality § Retail and eCommerce currently act as the main drivers of the logistics industry, grocery could soon prompt additional growth XPO § Logistics companies typically specialize in one or two verticals and Other Other XPO 3% lack the ability to provide holistic solutions 97% 99% 1% § The U.S contract logistics is expected to grow at 2-3 times GDP driven mainly by 3PL § Major players include XPO Logistics, FedEx, UPS, and Amazon § Differentiators include technology and scope

Source: IBISWorld, Company Filings 6 1 Based on 2018 revenues 1 eCommerce will continue to grow rapidly

Overview eCommerce Market ($B) § eCommerce is on pace for double-digit growth immediately, high single-digit in the future $800 10% CAGR § With giants like Amazon setting the pace of 2-day and faster $700 delivery, smaller companies (think Fortune 500 all the way to small cap) need to keep pace $600

§ Walmart aiming to reach 50% of population in one day by end $500 FY2020 § Smaller companies than these giants demand solutions $400 § XPO ready for capacity opening record number of logistics $300 hubs last year $200

$100

$- 2 Logistics drives solutions 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E

Overview Favorable Positioning

§ XPO’s large footprint allows for products to be in close reach § Customers continue to buy large, heavy items online of nearly any consumer § Last mile logistics on heavy goods alone projected to § XPO’s omni-channel offerings satisfy emerging trends such as grow at 3x to 5x GDP in the U.S temperature-controlled inventory, sustainable packing, and reverse logistics § Tenure of logistics contract is ~5 years with a 95% retention rate § XPO keeps its competitive edge within the logistics industry with its heavy technology expenditures § No other companies resemble Amazon- need to outsource logistics § Acquisitions or not, XPO is primed to grow § Record number of logistics hubs opened in 2018

Source: IBISWorld, Company Filings 7 3 Strong Model and Strong Management

Bradley Jacobs, CEO Proven Model § Jacobs founded XPO in 2011 • Named one of the World’s Most Admired Companies by with an acquisition of a Fortune, 2018 and 2019 $150MM third-party shipping solutions company • Named to the Fortune Future 50 list of US companies best positioned for breakout growth by Fortune, 2018 § Planning to use M&A to grow, he promised $5B revenue in 5 • Ranked #7 of the Glassdoor Top 20 UK companies with the best years; he delivered. $15B leadership and culture at work, 2018 company 4 years later § As CEO and chairman of United • Ranked #67 of Largest US Employers by Fortune, 2018 Rentals, the stock outperformed the S&P 500 Index by a factor of • CEO Jacobs ranked #10 on Barron's list of World's Best CEOs, 2.2 2018 Kenny Wagers, COO • Awarded Company of the Year for innovation by Assologistica (Italy), 2017 and 2018 § Previously oversaw Amazon’s worldwide transport and • Recognized by (Europe) for logistics excellence, 2015, logistics 2016, 2017, 2018 § Spent 17 years with UPS and was instrumental in the • Named a top-performing US company on the Global 2000 by expansion of 3PL services Forbes, 2017 § Worked with Dr. Pepper Snapple • Named one of America’s Best Employers by Forbes, 2017 Group in supply chain management • Named a Worldwide Leader in the Magic Quadrant for Third- Party Logistics Providers by Gartner, 2018

• Named a Top 75 Green Supply Chain Partner by Inbound Logistics for 2016, 2017, 2018

Source: Company Filings 8 Primary Research

Management

• Mr. Reid’s experience with new management has been “nothing but positive”

• Brad Jacobs keeping a startup mentality, seeking warm leads and growth opportunities

• Changes in management to invest in growth

Technology

Thomas Reid • XPO a tech company just as much as logistics Mendoza ‘03 Director of Financial Planning and Analysis • “Out in front” regarding technology XPO Global, NA Transport, Freight Brokerage • Real-time load-to-truck ratios

Q4

• Hurricanes and snow storms on top of #1 customer loss

• Improbable that extreme market conditions will replicate

• Amazon 2.0 cannot happen

Source: Thomas Reid 9 Key Risks

Key Risks Mitigants

û Amazon acquires FedEx ü Amazon is unlikely to make such a large acquisition, but given segmentation, XPO has plenty of room to grow

û Developing logistics industry players could usurp ü XPO is a frontrunner in technology and has a XPO’s market share massive geographic span

ü While some areas of EU are on the decline, XPO has some tailwinds like being the number one û Full-blown French recession provider of fashion logistics in Italy

ü Logistics industry is rapidly expanding and has room for multiple major players. XPO’s omni- û Amazon becomes direct competitor channel offerings solidify it is a front-runner short-term.

10 SWOT

Strengths Weaknesses • Management predicts contract logistics, 35% of • XPO’s largest customer recently pulled out two- XPO’s revenue source, will grow at 3x GDP thirds of its business with XPO, will cause • XPO Connect solidifies XPO’s position as the scaling issues early 2019 second largest freight brokerage firm globally, • European transport industry, asset heavy, profit project at 3x-4x GDP growth light

Opportunities Threats

• New management brings an exciting • Brexit uncertainties and a slowing French uncertainty: where will XPO pivot next? economy loom over EU revenues • Underexposed to Asian-Pacific and Indian • Accounting scandal market

11 Final Recommendation

Downside Case Base Case Upside Case

Price Target: $41.21 Price Target: $66.00 Price Target: $89.66 Downside: -14.9% Upside: 35.0% Upside: 83.4%

Recommendation: XPO Logistics, Inc. (NYSE:XPO) is undervalued in the market with substantial long-term upside; therefore, I recommend a buy

12 Appendix

13 Management Concerns

Senior Year Hired Primary Occupation Management

Troy Cooper Previously worked for United Rentals 2011 (President) and United Waste Systems

Sarah Glickman 13+ year senior manager at PWC, 8 2018 (Acting CFO) years CFO experience

Kenny Wagers Previously oversaw Amazon’s 2018 (COO) worldwide transport and logistics.

Michele Chapman Former global head of sales operations 2018 (SVP) for Amazon Business

Richard Cawston Formerly managed UK and Ireland after (MD of EU Supply 2015 his company was acquired Chain)

Formerly worked with Goldman Sachs, Matthew Fasler 2018 16x Institutional Investor’s All-America (CSO) Research Team

Luis-Angel Bradley Jacobs mentioned him as a Izaguirre 2018 pivotal hire in the earnings call (Transport- EU) Mario previously consulted to many Mario Harik 2018 Fortune 100 firms, role will develop as (CIO) technology investment continues

14 Valuation – Comparable Companies Analysis

Valuation Statistics Market Enterprise EV / Revenue EV / EBITDA Price / Earnings Company Ticker Capitalization Value 2017A LTM 2017A LTM 2017A LTM Deutsche Post AG XTRA:DPW $33,349 $47,085 0.9x 0.8x 11.5x 10.3x 18.2x 16.3x , Inc. LSTR 4,392 4,336 1.2x 0.9x 15.1x 11.6x 28.8x 17.7x J.B. Hunt Transport Services, Inc. JBHT 11,744 12,890 1.9x 1.5x 13.6x 11.5x 30.6x 24.4x Knight- Holdings Inc.KNX 5,839 6,686 2.7x 1.3x 14.9x 6.7x 64.2x 14.3x C.H. Robinson Worldwide, Inc. CHRW 12,469 13,436 0.9x 0.8x 14.9x 13.5x 26.6x 19.3x XPO Logistics, Inc. XPO $5,477 $9,325 1.0x 0.5x 11.8x 6.2x 76.1x 17.4x

25th Percentile $5,116 $5,511 0.9x 0.8x 12.6x 8.5x 22.4x 15.3x Mean 13,559 16,887 1.5x 1.1x 14.0x 10.7x 33.7x 18.4x Median 11,744 12,890 1.2x 0.9x 14.9x 11.5x 28.8x 17.7x 75th Percentile 22,909 30,261 2.3x 1.4x 15.0x 12.6x 47.4x 21.8x

Operating Statistics Revenue Revenue Growth EBITDA EBITDA Margin Company Ticker 2017A LTM '16-'17A LTM 2017A LTM 2017A LTM Deutsche Post AG XTRA:DPW $61,019 $61,421 5.6% 1.9% $4,703 $4,560 7.7% 7.4% Landstar System, Inc. LSTR 3,649 4,619 15.1% 26.6% 284 374 7.8% 8.1% J.B. Hunt Transport Services, Inc. JBHT 7,190 8,615 9.7% 19.8% 1,010 1,117 14.1% 13.0% Knight-Swift Transportation Holdings Inc.KNX 2,425 5,344 116.9% 120.3% 439 1,002 18.1% 18.7% C.H. Robinson Worldwide, Inc. CHRW 14,869 16,631 13.1% 11.8% 854 994 5.7% 6.0% XPO Logistics, Inc. XPO $15,381 $17,279 5.2% 12.3% $1,282 $1,513 8.3% 8.8%

25th Percentile $3,037 $4,982 7.6% 6.9% $361 $684 6.7% 6.7% Mean 17,830 19,326 32.1% 36.1% 1,458 1,609 10.7% 10.6% Median 7,190 8,615 13.1% 19.8% 854 1,002 7.8% 8.1% 75th Percentile 37,944 39,026 66.0% 73.5% $2,857 $2,838 16.1% 15.9%

15 Valuation – WACC

WACC Calculation Capital Structure Debt-to-Total Capitalization 38.36% Equity-to-Total Capitalization 61.64%

Cost of Debt Cost of Debt 6.27% Tax Rate 26.00% After-tax Cost of Debt 4.64%

Cost of Equity Risk-free Rate(1) 2.65% Market Risk Premium(2) 6.00% Levered Beta 1.36

Cost of Equity 10.81%

WACC 8.44%

16 Valuation – DCF (Base)

FYE December 31, FYE December 31, ($ in millions) 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E 2024E 2025E Total Revenue $7,623.2 $14,619.0 $15,381.0 $17,279.0 $17,604.8 $18,181.2 $18,780.8 $19,404.6 $20,052.1 $20,724.5 $21,422.7 Revenue Growth -- 91.8% 5.2% 12.3% 1.9% 3.3% 3.3% 3.3% 3.3% 3.4% 3.4% Expenses COGS 6,538.4 12,503.0 13,138.0 14,737.0 15,026.2 15,512.3 16,026.9 16,557.7 17,111.0 17,684.3 18,280.4 Gross Profit $1,084.8 $2,116.0 $2,243.0 $2,542.0 $2,578.6 $2,668.9 $2,753.9 $2,846.9 $2,941.1 $3,040.1 $3,142.3 Gross Margin 14.2% 14.5% 14.6% 14.7% 14.6% 14.7% 14.7% 14.7% 14.7% 14.7% 14.7% SG&A 1,113.4 1,628.0 1,619.0 1,745.0 1,760.5 1,818.1 1,840.5 1,901.6 1,925.0 1,989.6 2,056.6 Operating Expenses 1,113.4 1,628.0 1,619.0 1,745.0 1,760.5 1,818.1 1,840.5 1,901.6 1,925.0 1,989.6 2,056.6 Operating Income (EBIT) ($28.6) $488.0 $624.0 $797.0 $818.1 $850.8 $913.4 $945.3 $1,016.1 $1,050.6 $1,085.8 EBIT Margin (0.4%) 3.3% 4.1% 4.6% 4.6% 4.7% 4.9% 4.9% 5.1% 5.1% 5.1% Income Tax Expense (28%) -90.9 22.0 -99.0 122.0 229.1 238.2 255.7 264.7 284.5 294.2 304.0 EBIAT $62.3 $466.0 $723.0 $675.0 $589.1 $612.5 $657.6 $680.6 $731.6 $756.4 $781.8 Cash Flow Plus: D&A 364.9 643.0 658.0 716.0 757.0 727.2 713.7 698.6 681.8 663.2 642.7 Discretionary Cash Flow 427.2 1,109.0 1,381.0 1,391.0 1,346.1 1,339.8 1,371.3 1,379.2 1,413.4 1,419.6 1,424.4 Less: Increase in NWC 0.0 3.2 (192.9) 58.0 (47.5) (28.1) (0.8) (15.5) (8.5) (12.7) (11.2) Less: CapEx (858.3) (4,085.4) (142.0) (386.0) (528.1) (490.9) (544.6) (582.1) (601.6) (621.7) (642.7) Free Cash Flow ($431.1) ($2,973.2) $1,046.1 $1,063.0 $770.4 $820.8 $825.9 $781.5 $803.3 $785.1 $770.5 Free Cash Flow Growth -- 589.7% (135.2%) 1.6% (27.5%) 6.5% 0.6% (5.4%) 2.8% (2.3%) (1.9%) Unlevered Free Cash Flow WACC 8.44% Discount Period 0.5 1.5 2.5 3.5 4.5 5.5 6.5 Discount Factor 0.96 0.89 0.82 0.75 0.69 0.64 0.59 Present Value of Free Cash Flow $739.8 $726.9 $674.4 $588.5 $557.8 $502.7 $455.0

17 Valuation – DCF (Base)

Enterprise Value DCF Sensitivity Analysis DCF Sensitivity Analysis Cumulative Present Value of FCF $4,245.2 WACC Terminal Value 66.23 6.4% 7.4% 8.4% 9.4% 10.4% Terminal Year EBITDA $1,728.4 6.5x $59.00 $54.80 $50.86 $47.17 $43.70 Exit Multiple 8.5x 7.5x $67.47 $62.77 $58.36 $54.24 $50.37 Terminal Value $14,690.5 EV/EBITDA 8.5x $75.94 $70.74 $65.87 $61.31 $57.03 Discount Factor 59.05% 9.5x $84.41 $78.71 $73.37 $68.38 $63.69 Present Value of Terminal Value $8,674.5 10.5x $92.88 $86.68 $80.88 $75.45 $70.36 % of Enterprise Value 67.1% Enterprise Value $12,919.6

DCF Implied Equity Value and Share Price Method Weight Price Enterprise Value $12,919.6 Comparable Companies 50% $65.8 Less: Total Debt $4,415.0 DCF 50% $66.2 Plus: Cash & Cash Equivalents $502.0 Fair Value Estimate $66.00 Implied Equity Value $9,006.6 Implied Share Price $66.23 Shares Outstanding 136

Comps Implied Equity Value and Share Price Enterprise Value $12,859.3 Less: Total Debt $4,415.0 Plus: Cash & Cash Equivalents $502.0 Implied Equity Value $8,946.3 Implied Share Price $65.78 Shares Outstanding 136

18 Valuation – DCF (Upside)

FYE December 31, FYE December 31, ($ in millions) 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E 2024E 2025E Total Revenue $7,623.2 $14,619.0 $15,381.0 $17,279.0 $17,831.6 $18,642.5 $19,432.9 $20,191.8 $20,924.9 $21,651.7 $22,367.9 Revenue Growth -- 91.8% 5.2% 12.3% 3.2% 4.5% 4.2% 3.9% 3.6% 3.5% 3.3% Expenses COGS 6,538.4 12,503.0 13,138.0 14,737.0 15,210.4 15,902.0 16,576.3 17,223.6 17,848.9 18,468.9 19,079.8 Gross Profit $1,084.8 $2,116.0 $2,243.0 $2,542.0 $2,621.2 $2,740.4 $2,856.6 $2,968.2 $3,076.0 $3,182.8 $3,288.1 Gross Margin 14.2% 14.5% 14.6% 14.7% 14.7% 14.7% 14.7% 14.7% 14.7% 14.7% 14.7% SG&A 1,113.4 1,628.0 1,619.0 1,745.0 1,783.2 1,864.2 1,904.4 1,978.8 2,008.8 2,078.6 2,147.3 Operating Expenses 1,113.4 1,628.0 1,619.0 1,745.0 1,783.2 1,864.2 1,904.4 1,978.8 2,008.8 2,078.6 2,147.3 Operating Income (EBIT) ($28.6) $488.0 $624.0 $797.0 $838.1 $876.2 $952.2 $989.4 $1,067.2 $1,104.2 $1,140.8 EBIT Margin (0.4%) 3.3% 4.1% 4.6% 4.7% 4.7% 4.9% 4.9% 5.1% 5.1% 5.1% Income Tax Expense (28%) -90.9 22.0 -99.0 122.0 217.9 227.8 247.6 257.2 277.5 287.1 296.6 EBIAT $62.3 $466.0 $723.0 $675.0 $620.2 $648.4 $704.6 $732.2 $789.7 $817.1 $844.2 Cash Flow Plus: D&A 364.9 643.0 658.0 716.0 766.8 745.7 738.5 726.9 711.4 692.9 671.0 Discretionary Cash Flow 427.2 1,109.0 1,381.0 1,391.0 1,386.9 1,394.1 1,443.1 1,459.1 1,501.2 1,510.0 1,515.2 Less: Increase in NWC 0.0 3.2 (192.9) 58.0 (53.1) (31.3) (4.4) (17.7) (10.1) (13.7) (11.6) Less: CapEx (858.3) (4,085.4) (142.0) (386.0) (534.9) (503.3) (563.6) (605.8) (627.7) (649.6) (671.0) Free Cash Flow ($431.1) ($2,973.2) $1,046.1 $1,063.0 $798.9 $859.5 $875.1 $835.6 $863.3 $846.8 $832.6 Free Cash Flow Growth -- 589.7% (135.2%) 1.6% (24.8%) 7.6% 1.8% (4.5%) 3.3% (1.9%) (1.7%) Unlevered Free Cash Flow WACC 8.44% Discount Period 0.5 1.5 2.5 3.5 4.5 5.5 6.5 Discount Factor 0.96 0.89 0.82 0.75 0.69 0.64 0.59 Present Value of Free Cash Flow $767.2 $761.1 $714.6 $629.2 $599.5 $542.2 $491.6

19 Valuation – DCF (Upside)

Enterprise Value DCF Sensitivity AnalysisDCF Sensitivity Analysis Cumulative Present Value of FCF $4,505.5 WACC Terminal Value 88.75 6.4% 7.4% 8.4% 9.4% 10.4% Terminal Year EBITDA $1,811.8 8.7x $83.95 $78.32 $73.06 $68.13 $63.50 Exit Multiple 10.7x 9.7x $92.83 $86.68 $80.92 $75.54 $70.49 Terminal Value $19,436.8 EV/EBITDA 10.7x $101.70 $95.03 $88.79 $82.95 $77.48 Discount Factor 59.05% 11.7x $110.58 $103.39 $96.66 $90.36 $84.46 Present Value of Terminal Value $11,477.1 12.7x $119.46 $111.74 $104.52 $97.77 $91.45 % of Enterprise Value 71.8% Enterprise Value $15,982.6

Method Weight Price Implied Equity Value and Share Price Comparable Companies 50% $90.6 Enterprise Value $15,982.6 DCF 50% $88.7 Less: Total Debt $4,415.0 Plus: Cash & Cash Equivalents $502.0 Fair Value Estimate $89.66 Implied Equity Value $12,069.6 Implied Share Price $88.75 Shares Outstanding 136

Comps Implied Equity Value and Share Price Enterprise Value $16,231.4 Plus:Less: CashTotal &Debt Cash Equivalents $4,415.0$502.0 Implied Equity Value $12,318.4 Implied Share Price $90.58 Shares Outstanding 136

20 Valuation – DCF (Downside)

FYE December 31, FYE December 31, ($ in millions) 2015A 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E 2024E 2025E Total Revenue $7,623.2 $14,619.0 $15,381.0 $17,279.0 $17,483.5 $17,715.0 $18,031.0 $18,324.4 $18,598.9 $18,853.8 $19,112.6 Revenue Growth -- 91.8% 5.2% 12.3% 1.2% 1.3% 1.8% 1.6% 1.5% 1.4% 1.4% Expenses COGS 6,538.4 12,503.0 13,138.0 14,737.0 14,913.4 15,110.9 15,380.5 15,630.7 15,864.8 16,082.3 16,303.0 Gross Profit $1,084.8 $2,116.0 $2,243.0 $2,542.0 $2,570.1 $2,604.1 $2,650.6 $2,693.7 $2,734.0 $2,771.5 $2,809.6 Gross Margin 14.2% 14.5% 14.6% 14.7% 14.7% 14.7% 14.7% 14.7% 14.7% 14.7% 14.7% SG&A 1,113.4 1,628.0 1,619.0 1,745.0 1,748.3 1,771.5 1,767.0 1,795.8 1,785.5 1,810.0 1,834.8 Operating Expenses 1,113.4 1,628.0 1,619.0 1,745.0 1,748.3 1,771.5 1,767.0 1,795.8 1,785.5 1,810.0 1,834.8 Operating Income (EBIT) ($28.6) $488.0 $624.0 $797.0 $821.7 $832.6 $883.5 $897.9 $948.5 $961.5 $974.7 EBIT Margin (0.4%) 3.3% 4.1% 4.6% 4.7% 4.7% 4.9% 4.9% 5.1% 5.1% 5.1% Income Tax Expense (28%) -90.9 22.0 -99.0 122.0 230.1 233.1 247.4 251.4 265.6 269.2 272.9 EBIAT $62.3 $466.0 $723.0 $675.0 $591.6 $599.5 $636.1 $646.5 $683.0 $692.3 $701.8 Cash Flow Plus: D&A 364.9 643.0 658.0 716.0 751.8 708.6 685.2 659.7 632.4 603.3 573.4 Discretionary Cash Flow 427.2 1,109.0 1,381.0 1,391.0 1,343.4 1,308.1 1,321.3 1,306.2 1,315.3 1,295.6 1,275.2 Less: Increase in NWC 0.0 3.2 (192.9) 58.0 (47.3) (20.8) 3.2 (9.4) (2.5) (5.5) (3.9) Less: CapEx (858.3) (4,085.4) (142.0) (386.0) (524.5) (478.3) (522.9) (549.7) (558.0) (565.6) (573.4) Free Cash Flow ($431.1) ($2,973.2) $1,046.1 $1,063.0 $771.6 $808.9 $801.6 $747.1 $754.9 $724.5 $698.0 Free Cash Flow Growth -- 589.7% (135.2%) 1.6% (27.4%) 4.8% (0.9%) (6.8%) 1.0% (4.0%) (3.7%) Unlevered Free Cash Flow WACC 8.44% Discount Period 0.5 1.5 2.5 3.5 4.5 5.5 6.5 Discount Factor 0.96 0.89 0.82 0.75 0.69 0.64 0.59 Present Value of Free Cash Flow $740.9 $716.3 $654.6 $562.5 $524.2 $463.9 $412.1

21 Valuation – DCF (Downside)

Enterprise Value DCF Sensitivity Analysis DCF Sensitivity Analysis Cumulative Present Value of FCF $4,074.6 WACC Terminal Value 42.62 6.4% 7.4% 8.4% 9.4% 10.4% Terminal Year EBITDA $1,548.1 4.2x $34.57 $31.79 $29.17 $26.72 $24.41 Exit Multiple 6.2x 5.2x $42.16 $38.93 $35.89 $33.05 $30.37 Terminal Value $9,541.7 EV/EBITDA 6.2x $49.75 $46.07 $42.62 $39.38 $36.34 Discount Factor 59.05% 7.2x $57.33 $53.21 $49.34 $45.71 $42.31 Present Value of Terminal Value $5,634.2 8.2x $64.92 $60.34 $56.06 $52.05 $48.28 % of Enterprise Value 58.0% Enterprise Value $9,708.8

Implied Equity Value and Share Price Method Weight Price Enterprise Value $9,708.8 Comparable Companies 50% $39.8 Less: Total Debt $4,415.0 DCF 50% $42.6 Plus: Cash & Cash Equivalents $502.0 Fair Value Estimate $41.21 Implied Equity Value $5,795.8 Implied Share Price $42.62 Shares Outstanding 136

Comps Implied Equity Value and Share Price Enterprise Value $9,325.2 Plus:Less: CashTotal &Debt Cash Equivalents $4,415.0$502.0 Implied Equity Value $5,412.2 Implied Share Price $39.80 Shares Outstanding 136

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