XPO Logistics reports major gains in Q1 revenues along with a net loss

While a fair amount of first quarter earnings reports for transportation and logistics companies were on the mundane side, first quarter earnings issued by XPO Logistics yesterday were mostly positive.

Total gross first quarter revenue for XPO was up 404.4 percent annually to $3.5 billion, with net revenue up 510.5 percent to $1.6 billion.  While gross and net revenue were up, the company reported a net loss of $23.2 million, or $0.21 per diluted share and an adjusted net loss attributable to common shareholders of $9.3 million or $0.08 per share. First quarter EBITDA at $249.3 million was ahead of the first quarter of 2015 at $29.2 million. XPO said it remains on track for its full-year EBITDA of at least $1.25 billion in 2016 and roughly $1.7 billion for 2018.

“We started the year off with a bang,” said XPO Chairman and CEO Brad Jacobs in an interview. “Our organic revenue growth was 12 percent, and we have been able to buck the sluggish macro trends for three reasons: 1-we are well-diversified by geography, by industry verticals, and by service offerings; 2-about one-third of our business is in contract logistics, which has low cyclicality and is very predictable; and 3-we have synergies in quantitating opportunities through the two major acquisitions we did last year, which are unique to XPO, and include a global procurement [component]. Our fastest top-line growers are in truck brokerage and last mile, but Europe, which is one-third of our business, is also firing on all cylinders as both transportation and logistics in Europe beat budget again this quarter as they have done every quarter since we entered Europe a year ago.”

Jacobs added that XPO’s European transportation business experienced strong shipment growth broadly across almost all regions in the quarter, with that trend continuing in April, especially for its truckload and less-than-truckload groups performing consistently well across its European footprint. 

Looking at quarterly results by business segment, XPO saw solid gains, including:
-Transportation total gross revenue was up 308.6 percent annually at $2.3 billion and net revenue margin up to 28.3 percent from 21.6 percent, which was due to the acquisitions of Norbert Dentressangle and Con-way in 2015 and the margin gains were due to its acquisition of Con-way Freight and organic margin improvements in last mile and truck brokerage that was partially offset by lower intermodal and expedite margins; and
-Logistics total gross revenue came in a $1.3 billion, topping 2015’s $140.8 million by 795.4, with gross margin at $156.7 million up 691.4 percent from $19.8 million, and operating income at $31.9 million, ahead of last year’s $13.1 million by 398.4 percent. Logistics adjusted EBITDA at $98.5 million was ahead of $26.0 million a year ago.

XPO said the gains in adjusted EBITDA and operating income for its logistics business, which topped expectations, were driven by higher e-commerce volume, high-tech, and its European business; and
-Logistics total gross revenue came in a $1.3 billion, well ahead of 2014’s $166.5 million, with gross margin at $166.4 million up from $25.2 million, and operating income at $34.8 million, ahead of $13.1 million. Logistics EBITDA at $98.5 million was ahead of $26.0 million a year ago.

Addressing XPO’s North American business, Jacobs cited increased volumes in e-commerce, technology and food and beverage customers, with the logistics pipeline in the region having more than doubled to over $400 million, up from $150 million at the beginning of 2016.

And XPO’s North American LTL business was described by Jacobs as one of XPO’s “brightest stars” in the quarter, with its operating ratio improving by 270 basis points at 92.9 compared to 95.6 percent a year ago.

“We now have the second best OR among all LTL carriers,” he said, “and we grew LTL operating income by 54 percent. No other LTL carrier came even close to that level of profit growth. We have now improved profit in LTL by $90 million on a run rate business in the last six months, and the two biggest components of that were taking unnecessary costs out of the business and refitting the linehaul.”

XPO also remains on target for a profit improvement from its Con-way acquisition of $170-to-$210 million by late next year through the merging of the Con-way’s $250 million truckload brokerage business, which has since merged with XPO’s truckload brokerage business and running on the same IT platform, sharing the same capacity, and network. That figure also included Con-way’s former contract logistics business, which has since been integrated with XPO’s, too/ 

On the truckload side, Jacobs said XPO has put in a new management team and instilling the same sense of urgency that it created at LTL. He said XPO Truckload has begun selling some of its capacity to its brokerage network, which has resulted in far more truckload bids than ever before.

“There is a strong emphasis on profitable organic revenue growth and we are hiring additional sales staff in Europe and North America, with a big part of our strategy is to cross-sell our services to our largest customers,” he said. “Our plan calls for doubling the size of our strategic account managers this year. We had an extremely strong quarter across North America and Europe. Truck brokerage and last mile were the biggest top line growers, and North American LTL generated the biggest profit improvement.”