XPO Logistics Q1 revenue is up 156 percent, company acquires Interide Logistics
May 08, 2013
Non asset-based 3PL XPO Logistics reported first quarter results yesterday and also announced that it acquired Interide Logistics, a freight brokerage business.
First quarter revenue for XPO Logistics—at $114.0 million—was up 155.8 percent annually, and gross margin dollars increased 140.0 percent annually to $16.3 million, with gross margin percentage up 14.3 percent.
Like in recent quarters, XPO said that consistent with its previously announced strategy its investments in long-term growth impacted quarterly results, with a net loss of $14.5 million for the quarter compared to a $2.7 million net loss for the same period a year ago. As of March 31, 2013, XPO had $206.2 million in cash.
For its full-year outlook, XPO reaffirmed its outlook for an annual run rate of more than $1 billion as of December 31, which includes at least $300 million of acquired historical annual revenue and positive EBITDA for the fourth quarter of this year.
XPO’s freight brokerage business had quarterly revenue of $78.2 million, which was up 886.8 percent annually, and company officials attributing revenue gains to previous acquisitions of Turbo Logistics, Kelron Logistics, Continental Freight Services and BirdDog Logistics in 2012 and Covered Logistics on February 26, 2013, as well as revenue growth from the company’s eight brokerage cold-start locations.
“Our freight brokerage group had a really strong quarter, which speaks to the impact of the cold starts, sale force acquisitions and expansions,” said Brad Jacobs, XPO Chairman and CEO, in an interview. And on top of the positive revenue and gross margin numbers, our liquidity is still strong, and the 8 cold starts (opening up new offices in new locations) had a combined run rate of about $78 million in March, which is really good considering all but one of them is less than a year old.”
The expedited services group at XPO had $23.9 million in revenue for a 6.5 percent annual increase, which XPO said was due in part to its February acquisition of East Coast Air Charter. XPO said the decline in expedited’s gross margin percentage to 15.9 percent from 18.6 percent reflects a softer expedited freight environment.
On the freight forwarding side, XPO said the business generated total revenue of $16.2 million, which was up 5.0 percent annually, with gross margin percentage up to 14.7 percent from 10.3 percent a year ago. XPO said that the increase in gross margin percentage was primarily driven by company-owned conversions from independently-owned stations, and cold-starts.
XPO continues to gain share in freight forwarding by remaining focused on its core competency of serving small- and medium-sized customers in this segment and is also adding freight forwarding offices to expand its presence in local markets, including a new location in Orlando rolled out this week and offices in Nashville and Montreal earlier this year.
Jacobs said that in March XPO had a record month for revenue at $44 million. He said that this is an important statistic, because when that is annualized it comes to roughly $525 million, which he explained puts XPO solidly on track to achieve its previously stated more than $1 billion run rate by the end of the year.
As evidenced by this week’s acquisition of Interide Logistics, XPO’s continues to show it is executing on its plan to grow through acquisition.
“We will buy at least $300 million of revenue this year,” said Jacobs. “We are about one-third of the way through the year and we are about one-third of the way there with Interide, ECAC and Covered Logistics, which represents $98 million in revenue.”
When asked to describe the current state of the freight economy, Jacobs said that transportation demand has been soft so far this year. Truckload capacity is available, and produce season has not really started either, he added.
But despite a relatively weak market, he said XPO has been able to substantially grow its business even in this kind of environment by adding sales people and remaining highly focused on providing world-class service to customers and having strong relationships with 22,000 carriers looking for freight.
“Come July 1, HOS rules may take some capacity out, and I think there will be a little more freight as the economy rebounds a little bit with things getting a little tighter as the year goes on,” he said.
Interide Logistics acquisition: XPO said that it has acquired all of the operating assets of Interride Logistics. Interide had 12-month revenue of roughly $28 million as of March 31, according to XPO, and the purchase price was $3.1 million in cash and $600,000 in common stock with no assumption of debt and will be immediately accretive to earnings.
Interide has roughly 900 customers from its three main locations in Salt Lake City, Utah, St. Paul, Minn., and Louisville, Ky. and is led by Sean Snow, former president of England Logistics. One of Snow’s first duties, said XPO, will be to increase the size of the locations and expand Salt Lake City into a mega-branch.
Interide has about 35 employees that have all joined XPO, according to Snow.
“We are in a relationship business,” he said. “It is all about the people we have and it is a service business. Our assets are our people so it was critical that we were able to maintain our employees and our agents that are spread around the country. This deal had a lot great upside and opportunity and it is exciting for everybody on the Interide team.
Snow said that Interide provides primarily refrigerated and flat-bed freight services, with most of its business coming from the Western half of the country. The business, he said is split between truckload and LTL logistics, and it has a good platform for participating on a larger scale in the LTL freight brokerage market.
With 3PL brokerage units taking a more active role in securing LTL capacity for shippers in recent years, Snow explained that the market is still extremely competitive at a time when the economy is still rebounding.
“We are seeing tremendous opportunity on the LTL side,” he said. “The amount of customers that have opportunities to ship smaller volumes as opposed to full truckload is so much greater, and we are able to start combining the mass and scale to drive rates and improve margins on the LTL business. It is a great business and we look forward to using the technology and resources XPO has to build that portion of the business.”
Snow added that as shippers have tried to reduce the number of suppliers and vendors they depend on, they do no longer want to go with separate companies for multiple services like truckload, LTL, international, and expedited, as opposed to looking for a group to come in and to help maximize efficiencies across all of those service lines.
“People are wanting just in time freight at smaller quantities and quicker speed, and that is why there are increases in LTL shipping opportunities,” he said.
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