CEVA Logistics AG –Investor Call Third Quarter/First 9 ...

CEVA Logistics AG – Q3 2018

CEVA Logistics AG – Investor Call

Third Quarter/First 9 Months 2018

13 November 2018

1


Highlights Third Quarter of 2018

� Revenue up 4.7% year on year in constant currency

� FM growth +6.8% in constant currency, with good Ocean volumes and flat in Air

� CL growth +2.8% in constant currency

� Adjusted EBITDA down US$30 million in Q3 / Q3 EBITDA negatively impacted by

Italy CL (US$ -26 million) out of which US$20 million one-time provisions

� Progress on many strategic initiatives / Excellence & cost-saving programs

intensified

� Strong new business momentum

� Broadening of CMA CGM partnership

2


Highlights First Nine Months of 2018

� Revenue up 5% year on year in constant currency

- FM growth +6.9% in constant currency,

- CL growth +3.4% in constant currency,

� Adjusted EBITDA down US$8 million year on year, in constant currency

� EBITDA negatively impacted by Italy CL (US$ -42 million)

� Strong new business momentum

� Refinancing now complete

3


Strengthened Partnership with CMA-CGM

4

� CEVA Logistics and CMA CGM have agreed that

CEVA Logistics will remain a listed company with an

arm's length business relationship with CMA CGM

� Partnership with CMA CGM opening more

opportunities than expected

� Synergies between CEVA and CMA CGM under

review, new medium-term guidance to be

disclosed

� CMA CGM will offer to CEVA Logistics' shareholders

wishing to exit their investment in CEVA Logistics to

purchase their shares for CHF 30.00 per share

The photo is credited to CMA CGM

CEVA Logistics broadens strategic partnership with CMA CGM


Agenda

5

Business Update and Strategic Progress1

Outlook3

Q3/9M 2018 Financial Results2


Business Development Momentum

� Investments in Sales, e.g. headcount increase by 10%, to accelerate sustainable

growth in strategic geographies and segments

� Continued strong momentum across all business lines

� New Business wins up nearly 8% YTD across all Freight Management products,

with highest growth in Ocean, and in Contract Logistics

� Significant new contracts and extensions won in Q3:

- Several >US$10 million new Air and Ocean freight contracts in Technology

and Automotive and >US$10 million new contracts in Contract Logistics in

Automotive, Healthcare, Consumer & Retail

6


Business line overview: Freight Management

7

* At constant FX

Key Figures

(in US$ m unless otherwise stated)Q3 2018 YoY %

Air tons (‘000) 123 -0.2%

Air NR/t (US$) 656 -0.2%

Ocean TEUs (‘000) 204 +6.3%

Ocean NR/TEU (US$) 262 -7.1%

Revenue 881 +6.8%*

EBITDA 22 -12.0%*

EBITDA Margin 2.5% -50bps*

Q3 Highlights

Air

� Overall flat volumes with strong performance on Intra Asia and

Far East westbound trade lanes

� Further productivity improvements resulting in a 6.6%

improvement in Files/Operator ratio during the first nine months

Ocean

� Good volumes with significant growth out of India, Middle East

and Southeast Asia

� Productivity gains through increased focus and standardization:

Files/Operator ratio improved by 5.4% in the first nine months

Ground

� North America driver shortage resulting in approx. 25% rise YoY

in cost per mile for independent contractors

� Cost increase not fully mitigated by price increases and creating

a US$3 million impact on EBITDA

Other FM

� Improved performance in US VAS (US$7 million improvement

YTD in EBITDA)


Quarterly Air and Ocean Volume and Yield Development

8

15,611,8

10,2

1,6

-1,3 -0,2

~2%

Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Market

Q3 18*

641 657 626772 711 656

Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

3,5 2,8

6,9 8,5 8,36,3

2-3%

Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Market

Q3 18*

289 282 266 285 274 262

Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

Yield: Net Revenue/t (US$)Air export volumes (t) quarterly growth (YoY, in %)

Yield: Net Revenue/TEU (US$)Ocean volumes (TEU) quarterly growth (YoY, in %)

Volumes (thousand t)

121.8 122.9 129.6 107.3 120.2 122.6

Volumes (thousand TEU)

180.0 192.4 189.1 181.6 194.9 204.5

* Company’s estimate


Update on Tariffs

� US-China trade for CEVA (combined east-and-westbound) represents 14% of Air &

Ocean revenues

� The contemplated tariff increase on US$200 billion of goods should not affect

more than 13% of our business in the US-China trade lane, driven in particular by

Consumer & Retail

� Switching procurement from China to alternative countries in Southeast Asia (e.g.

Vietnam, Cambodia, Myanmar, Thailand) will likely shift volumes over time from

CEVA China to CEVA operations in those countries

� Internal consumption in China affected

9

Base: H1 2018 revenues


Business line overview: Contract Logistics

10

Key Figures as reported

(in US$ m)Q3 2018 YoY %

Revenue 929 +2.8%*

EBITDA 7 -82.5%*

EBITDA Margin 0.8% -360bps*

Q3 Highlights

� Good volumes across existing contract portfolio and

implemented new businesses, e.g., Consumer, Retail,

e-commerce and Healthcare

� Productivity improvements across contracts and

clusters, continued productivity gains at focus

contracts:

- 50% of low margin contracts (out of 110 contracts in

total) already terminated, repriced or improved

- Focus contracts EBITDA improved by 30 bps in Q3 YoY

� 104 customers live on WMS Express and Standard

(Matrix OFS solution). Additional 20% customer rollout

expected by end of 2018

� Italy continued to be challenging (US$26 million

impact, including US$20 million one-time provisions)

� More new contract start-up costs

* At constant FX


Focus on Italy

� Two contracts with significant issues (incl. change of business scope, higher

operating costs)

� A local partner company (cooperativa) went bankrupt.

The negative impact of these items is as follows:

11

EBITDA impacts (in US$ m) Q3 2018 9M 2018

Provision for onerous contracts (16) (26)

Trading losses and additional labour costs (6) (12)

Provision for risk/ bankrupt partner (4) (4)

Total (26) (42)

� Plan to address these issues being implemented


Anji CEVA Business Performance

� Revenues up 17.6% in 9M 2018 in constant currency to US$1,069 million

- Automotive Division: Revenue up 15.7% in constant currency

- Non-Automotive Division gathering pace: significant new business activity

and strong pipeline. Non-Automotive diversification underway

� YTD EBITDA reached US$99 million, including a gain from a fixed asset disposal of

US$28 million in Q3 2018 (CEVA’s share US$14 million). In Q3 2017, there was a

gain of US$12 million (CEVA’s share US$6 million).

12


Agenda

13


Outlook3



Key figures

� Underlying EBITDA, excluding Italy CL issues was:

- US$ 55 million in Q3

- US$190 million for the first nine months

14

Quarter Ending

30 September 2018

Q3 2018

(US$ million)

Delta

at constant FX

(%/US$

million)

Revenue 1,810 +4.7%

EBITDA1 29 -55.4%

EBITDA Margin 1.6% -220bps

9 Months Ending

30 September 2018

9M 2018

(US$ million)

Delta

at constant FX

(%/US$

million)

Revenue 5,448 +5.0%

EBITDA1 148 -11.9%

EBITDA Margin 2.7% -50bps

1 Before specific items and Share-Based Compensation (SBC)


Group P&L

15

All figures above EBITDA are before specific items and SBC1

� Strong revenue growth in both

FM and CL vs. the same period

in 2017

� Specific Items: higher due to

IPO (+US$19 million) / SBC

(+US$7 million) whilst

restructuring cost much

reduced (US$ -12 million)

� D&A : accelerated amortization

of acquisition intangibles,

higher capex

� Net Finance Expense still mostly

reflects pre IPO capital

structure before the refinancing

in August 2018 – also includes

US$56 million IPO/ Refinancing

one-time costs

� FX impact related to translation

of BRL and TRY mainly in Q3,

but < US$3 million in 9M 2018.

9 Months Ending

30 September 20189M 2018

(US$ million)

9M 2017

(US$ million)

Delta

(%/US$

million)

Delta at

constant FX

(%/US$

million)

Revenue 5,448 5,099 +6.8% +5.0%

Net Revenue 2,721 2,571 +5.8% +3.7%

Operating Expenses (2,573) (2,398)

EBITDA before specific items & SBC 148 173 -14.5% -11.9%

EBITDA Margin 2.7% 3.4% -70bps -50bps

Specific items and SBC (51) (31) (20) (20)

Depreciation & Amortization (96) (83) (13) (10)

Net Finance Expense (199) (170) (29) (31)

Net Result from joint venture 25 15 10 10

Tax (25) (28) 3

Net Income (198) (124) (74)

Share in Anji-CEVA EBITDA 50 36 14

Adjusted EBITDA2 198 209 -5.3% -3.9%

Comments

1 SBC: Share-Based Compensation

2 Adjusted EBITDA includes the Group’s share of EBITDA from the Anji-CEVA joint venture, and excludes specific items and SBC


Results Freight Management

16

Quarter ending

30 September 2018

Q3 2018

(US$ million)

Q3 2017

(US$ million)

Delta

( %/US$

million)

Delta

at constant FX

( %/US$

million)

Revenue 881 840 4.9% +6.8%

Net Revenue 225 224 +0.4% +3.2%

Operating Expenses (203) (198) +2.5% +4.1%

EBITDA1 22 26 -4 -3


9 Months Ending

30 September 2018

9M 2018

(US$ million)

9M 2017

(US$ million)

Delta

( %/US$

million)

Delta

at constant FX

( %/US$

million)

Revenue 2,537 2,331 +8.8% +6.9%

Net Revenue 679 644 +5.4% +4.0%


EBITDA1 64 56 8 9

EBITDA Margin 2.5% 2.4% +10bps +20bps



Revenue of Air, Ocean and other FM – Q3 and 9M 2018

17

Revenue of FM Products

Quarter ending

30 September 2018Q3 2018

(US$ million)

YoY Growth

( %)

YoY Growth

at constant FX

( %)

Air 374 +7.5% +9.5%

Ocean 271 +3.4% +5.0%

Other FM 236 +2.6% +4.3%

Revenue of FM Products

9 Months Ending


(US$ million)

YoY Growth

( %)

YoY Growth

at constant FX

( %)

Air 1,074 +12.5% +9.8%

Ocean 774 +8.4% +5.6%

Other FM 689 +4.0% +4.2%


Results Contract Logistics

18

Quarter ending

30 September 2018

Q3 2018

(US$ million)

Q3 2017

(US$ million)

Delta

( %/US$

million)

Delta

at constant FX

( %/US$

million)

Revenue 929 942 -1.4% +2.8%

Net Revenue 656 657 -0.2% +2.8%


EBITDA1 7 43 -36 -33


9 Months Ending

30 September 2018

9M 2018

(US$ million)

9M 2017

(US$ million)

Delta

( %/US$

million)

Delta

at constant FX

( %/US$

million)

Revenue 2,911 2,768 +5.2% +3.4%

Net Revenue 2,042 1,928 +5.9% +3.5%

Operating Expenses (1,958) (1,811) +8.1% +5.3%

EBITDA1 84 117 -33 -29


� Italy CL significantly impacting

Q3 numbers.

� Underlying EBITDA, excluding

Italy issues was US$33 million in

Q3 2018 and US$126 million for

9M 2018.

Comments



Results Anji-CEVA – not consolidated

19

Quarter ending

30 September 2018Q3 2018

(US$ million)

Q3 2017

(US$ million)

Delta

at constant FX

( %/US$ million)

Revenue 336 331 2.1%

EBITDA 52 33 18

EBITDA Margin 15.5% 10% +520bps

Net Income 46 26 19

CEVA’s share of EBITDA 26 16 9

9 Months Ending

30 September 2018 9M 2018

(US$ million)

9M 2017

(US$ million)

Delta

at constant FX

( %/US$ million)

Revenue 1,069 870 +17.6%

EBITDA 99 73 23

EBITDA Margin 9.3% 8.4% +90bps

Net Income 58 37 20

CEVA’s share of EBITDA 50 36 12

� Strong revenue growth from

existing contracts, new

implementations and transfer

of CEVA China CL business (July

2017)

� US$28 million gain from

property sale in Q3 in total (for

100%) compared with US$12

million in 2017 (for 100%)

Comments


Specific Items affecting EBITDA

20

9 Months Ending


(US$ million)

9M 2017

(US$ million)

Restructuring 10 22

Litigation & legacy tax 6 (2)

Other 2 4

Sub-Total excl. IPO/ Refinancing 18 24

IPO and refinancing costs affecting EBITDA 19 -

Share-based compensation 14 7

� Much lower restructuring cost

compared to prior year

� Litigation in PY benefitted from

a US$10 million cargo claim

compensation and in 2018, this

mainly includes a claim in South

America

� Share-based compensation cost

increase reflects one-time

option grants issued in relation

to IPO

Comments


Net Working Capital

� NWC development impacted particularly

by

- Increase of Receivables due to lower

factoring primarily in Italy and

Turkey

- Payables lower than year end

� Continued focus on underlying structural

improvements, e.g. since year end

- Customer terms improved by 1 day

- Supplier payment terms increased

by 2 days

21

NWC Evolution (end of period)

US$ million

(300)

(250)

(200)

(150)

(100)

(50)

0

Q1 Q2 Q3 Q4

2018 2017 2016

(1.7)%

(2.4)%

(2.0)%

(1.2)%

(2.2)%

(2.4)%

(3.6)%

(1.8)%

(1.1)%

(0.4)%

(2.7)%

as % of LTM

Revenue

as % of LTM

Revenue

as % of LTM

Revenue


Cash Flow

22

9M 2018

(US$ million)

9M 2017

(US$ million)

Delta

(US$ million)

EBITDA 97 142 (45)

Gain on disposal of PP&E 0 (1) 1

Retirement Benefit Obligations (5) (2) (3)

Provisions 16 (1) 15

Change in working capital (135) (55) (80)

Other (4) 3 (7)

SBC 14 7 7

Operating cash flow (17) 93 (110)

Net finance expenses (160) (119) (41)

Tax (21) (27) 6

Divestments 0 0 0

Capital expenditure (80) (75) (5)

Dividends received 0 0 0

Free cash flow (278) (128) (150)

Proceeds from sale of PP&E 2 3 (1)

Net Fund movement (276) (125) (151)

� Operating cash flow is impacted

by US$7 million of paid costs

relating to the IPO and

Refinancing

� Working Capital change due to

comparative, growth, lower non

recourse factoring in Italy and

Turkey and earlier payment

terms, e.g., US payroll

� Finance expense increased due

to higher debt in H1 and rates

as well as a US$32 million

impact from the IPO and

Refinancing

Comments


$1.4bn Refinancing Completed

� We have repaid significant debt with proceeds from IPO

� Comprehensive refinancing completed including

- US$475 million Term Loan

- €300 million Notes,

- US$585 million Revolver and ancillary facility1

� Key benefits from new facilities

� Higher flexibility to pursue strategy; public company style covenants

� Longer maturities – 5-7 year tenor

� Enhanced liquidity

� Much lower interest cost

� US$100 million reduction in finance expenses confirmed, on a full-year basis

23

1 c.US$180 million for guarantees


Refinancing Q3 2018

� Refinancing of 9% PIK Notes (US$438 million), Term Loans (c.US$584 million) and Revolver (US$250

million) completed 3 August 2018

� Ancillary Facilities within the Revolver primarily used for guarantees (c.US$180 million)

Hedging

� In October 2018, CEVA entered into interest rate hedging contracts to fix the interest rate on the

majority of its floating rate debt for a period of 5 years

� Entered into a 3-year cross-currency swap of US$150 million principal debt from USD to EUR

24

New Facilities Amount(US$ equivalent)

Currency Maturity Rates

Term Loan B 475 USD 2025L+3.75%

(leverage step down to L+3.50%)

Notes350

(EUR 300)EUR 2025 5.25%

Revolving Credit and

Ancillary Facility585 multi currency 2023 L+2.375%


Agenda

25


Outlook3



Adj. EBITDA

FY 17A

Growth FM Margin CL Margin Anji JV Adj. EBITDA

Target

Medium

Term

CEVA Strategic Targets*

26

US$280 M

Contribution to EBITDA improvement – illustrative

2 2

EBITDA

Margin1 3.3% > 4.0%

Margin Improvement Initiatives

� FM Margin: 2.3% to c.3.5%

� CL Margin: 4.1% to 4.5% – 5.0%

Freight Management

Contract Logistics

Narrow Air & Ocean productivity gap with

peers ( process improvement and technology)

Improve Net revenue : procurement, pricing

Strengthen Ocean and grow through solutions

Address low margin/loss-making operations

1

2

3

4

Improve performance on focus contracts

Address low margin contracts and sites

Win new business more effectively/

standardized solutions

Commercial acumen (discipline in pricing,

capital employed)

1

2

3

4

* Set at IPO, excluding any additional benefits from the closer cooperation with CMA CGM

1 EBITDA margin excludes share of Anji-CEVA JV EBITDA and is before specific items and Share-Based Compensation (SBC)

2 Including SG&A


Outlook

27

� Confirming medium-term EBITDA margin target of 4%

and growth above market resulting in US$100 million

adjusted EBITDA improvement, excluding any

additional benefits from the closer cooperation with

CMA CGM

� CL operations in Italy expected to be fixed in the next

few months

� Strong productivity momentum and process

improvement have a high priority

� New sales organization delivering strong returns


Wrap-Up

28

� CEVA continues to deliver productivity and to execute

on its medium-term plan

� Q3 excluding Italy CL was broadly in line with

management expectations

� CEVA is on track to deliver its medium-term ambition

� CMA CGM partnership will provide more upside.

Appendix


Balance sheet

30

US$ million 30.09.2018 30.09.2017

Assets

Property, plant and equipment 167 168

Goodwill 1,325 1,333

Other intangibles 67 122

Others 384 316

Non-current assets 1,943 1,939

Trade receivables 1,163 1,061

Cash and cash equivalents 368 261

Others 240 251

Current assets 1,771 1,573

Total assets 3,714 3,512

US$ million 30.09.2018 30.09.2017

Liabilities and equity

Equity (parent company) 271 (625)

Non-controlling interests 2 3

Total equity 273 (622)

Non-current liabilities 1,883 2,475

Trade and other payables 1,394 1,391

Borrowings 32 184

Others 132 84

Current liabilities 1,558 1,659

Total liabilities and equity 3,714 3,512

All figures in actual currency


Debt maturity profile

31

393 360

82317 167

2018 2019 2020* 2021 2022 2023** 2024 2025

Drawn Facilities Undrawn Facilities

All figures in US$ million at actual Fx rates

* Includes only ABL facilities. Refinancing of ABL facilities underway, maturities of all ABL facilities will be extended after the refinancing

** Includes ancillary facilities of up to USD 250 million


Quarterly financial performance – actual currency

32

2018 (US$ million) 2017 (US$ million) Delta (%)

Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD

Freight Management

Revenue 803 853 881 - 2,537 702 789 840 - 2,331 14.4 8.1 4.9 - 8.8

Net Revenue 224 230 225 - 679 203 216 224 - 643 10.3 6.5 0.4 - 5.6

EBITDA1 15 27 22 - 64 10 20 26 - 56 50.0 35.0 -15.4 - 14.3

Contract Logistics

Revenue 987 995 929 - 2,911 894 932 942 - 2,768 10.4 6.8 -1.4 - 5.2

Net Revenue 691 695 656 - 2,042 624 647 657 - 1,928 10.8 7.4 -0.2 - 5.9

EBITDA1 38 39 7 - 84 35 39 43 - 117 8.6 0.0 -83.7 - -28.2

Group

Revenue 1,790 1,848 1,810 - 5,448 1,596 1,721 1,782 - 5,099 12.2 7.4 1.6 - 6.8

Net Revenue 915 925 881 - 2,721 827 863 881 - 2,571 10.7 7.2 0 - 5.8

EBITDA1 53 66 29 - 148 45 59 69 - 173 17.8 11.9 -58.0 - -14.5

Adjusted

EBITDA2 66 77 55 - 198 54 70 85 - 209 22.2 10.0 -35.3 - -5.3

2017 figures in actual currency

1 Excluding specific items and share-based compensation

2 Adjusted EBITDA includes the Group’s share of Anji-CEVA but excludes specific items and share-based compensation


Quarterly financial performance – Constant 2018 currency

33

2018 (US$ million) 2017 (US$ million) Delta (%)

Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD Q1 Q2 Q3 Q4 YTD

Freight Management

Revenue 803 853 881 - 2,537 739 809 825 - 2,373 8.7 5.4 6.8 - 6.9

Net Revenue 224 230 225 - 679 212 223 218 - 653 5.7 3.1 3.2 - 4.0

EBITDA1 15 27 22 - 64 10 20 25 - 55 50.0 35.0 -12.0 - 16.4

Contract Logistics

Revenue 987 995 929 - 2,911 960 950 904 - 2,814 2.8 4.7 2.8 - 3.4

Net Revenue 691 695 656 - 2,042 671 663 638 - 1,972 3.0 4.8 2.8 - 3.5

EBITDA1 38 39 7 - 84 35 38 40 - 113 8.6 2.6 -82.5 - -25.7

Group

Revenue 1,790 1,848 1,810 - 5,448 1,699 1,759 1,729 - 5,187 5.4 5.1 4.7 - 5.0

Net Revenue 915 925 881 - 2,721 883 886 856 - 2,625 3.6 4.4 2.9 - 3.7

EBITDA1 53 66 29 - 148 45 58 65 - 168 17.8 13.8 -55.4 - -11.9

Adjusted

EBITDA2 66 77 55 - 198 55 69 82 - 206 20.0 11.6 -32.9 - -3.9

2017 figures in constant currency

1 Excluding specific items and share-based compensation

2 Adjusted EBITDA includes the Group’s share of Anji-CEVA but excludes specific items and share-based compensation


This news release contains specific forward-looking statements. These forward-looking statements include, but are not

limited to, discussions regarding the proposed private offering of the Notes described above, its guidance for 2018 and

beyond, discussions regarding industry outlook, CEVA's expectations regarding the performance of its business or joint

ventures, its liquidity and capital resources, and other non-historical statements. These statements can be identified by the

use of words such as "believes" "anticipates," "expects," "intends," "plans," "continues," "estimates," "predicts," "projects,"

"forecasts," and similar expressions. All forward-looking statements are based on management's current expectations and

beliefs only as of the date of this news release and, in addition to the assumptions specifically mentioned in the above

paragraphs, there are a number of factors that could cause actual results and developments to differ materially from those

expressed or implied by these forward-looking statements, including the effect of local and national economic, credit and

capital market conditions, a downturn in the industries in which we operate (including the automotive industry and the air

freight business), risks associated with CEVA's global operations, fluctuations and increases in fuel prices, CEVA's substantial

indebtedness, restrictions contained in its debt agreements and risks that it will be unable to compete effectively. Further

information concerning CEVA and its business, including factors that potentially could materially affect CEVA's financial

results, is contained in the annual and quarterly reports of CEVA Logistics AG (and its predecessor CEVA Holdings LLC),

available on the Company's website, which investors are strongly encouraged to review. Should one or more of these risks or

uncertainties materialise or the consequences of such a development worsen, or should underlying assumptions prove

incorrect, actual outcomes may vary materially from those forecasted or expected. CEVA disclaims any intention or obligation

to update publicly or revise such statements, whether as a result of new information, future events or otherwise.

This presentation includes certain non-GAAP financial information. Because not all companies calculate non-IFRS financial

information identically (or at all), the presentations herein may not be comparable to other similarly titled measures used by

other companies. Further, such non-GAAP financial information of the Company should not be considered a substitute for the

information contained in the historical financial information of the Company, if any, prepared in accordance with IFRS

included herein.

Safe harbor statement

34


Investors:

Pierre Bénaich

SVP Investor Relations

[email protected]

+41 41 547 00 48

Media:

Matthias Hochuli

Group Head of Marketing and Communications

[email protected]

+41 41 547 00 52

Contact

35

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