XPO reports fourth quarter and full-year 2013 earnings results

Non asset-based 3PL XPO Logistics reported fourth quarter and full-year 2013 results yesterday.

Total fourth quarter revenue for XPO Logistics—at $257.2—was up 137.1 percent, and gross margin dollars were up 238.8 percent annually to $53.1 million, with gross margin percentage up 620 basis points to 20.6 percent. But while revenue was up, XPO had a $10.6 million net loss in the fourth quarter compared to a net loss of $9.3 million in the year before. And fourth quarter EBITDA was up $343,000 in the fourth quarter, topping a loss of $9.9 million for the fourth quarter of 2012.

For all of 2013, XPO’s total revenue of $702.3 million marked a 152.1 percent annual increase, with a net loss of $48.5 million, which exceeded a 2012 net loss of $20.3 million. 2013 EBITDA was comprised of a $32.0 million loss compared to a $25.6 million loss in 2012, which XPO attributed to planned investments in scale and an increased in sales headcount.

Looking to 2014, XPO set various financial goals, including: an annual revenue run rate of at least $2.75 billion by December 31; an annual EBITDA run rate of at least $100 million by December 31; and at least $400 million of acquired historical annual revenue (not including the recent announced of the planned acquisition of Pacer International). It also revised 2017 financial goals, too, with a revenue goal of roughly $7.5 billion and about $425 million in EBITDA, which are up from previous targets of $5 billion in revenue and $300 million in EBITDA.

In an interview with LM, XPO Chairman and CEO Brad Jacobs said that these projected increases are the result of raising about $420 million of equity and increasing its ABL facility, which will provide it with more capital to continue making acquisitions, which has served as a cornerstone of its growth strategy.

“The organic growth of the company is strong, and we plan to continue to do a few hundred million worth of acquisitions per year,” he said. “At the beginning of 2013, we had a revenue run rate of about $500 million, but we said ‘look, our budget shows that by the end of the year we will have a $1 billion revenue run rate and be in the black in EBITDA,’ and we did that and achieved both things and exceeded all the major financial goals that we set in the two and a half years we have operated XPO.”

For the fourth quarter, Jacobs said it is the second straight quarter XPO has improved gross margin percentage in each of its business units, and improved the company’s margin as a whole by 620 basis points and: its freight brokerage margin by 790 basis points (with revenue up 202.5 percent at $215.2 million); expedited transportation margin by 100 basis points (with revenue up 19.4 percent at $26.4 million); and freight forwarding margin by 80 basis points (with revenue flat annually at $18.5 million).

The freight brokerage unit, said Jacobs, is seeing a very positive trajectory, as margin has headed up over the last 18 months, with sequential gross margin improvement over the last three quarters and five of the last six quarters.

And XPO’s freight brokerage cold starts (opening up new offices in new locations) continue to move along, with the revenue run rate a year ago for cold starts at about $60 million and now at about $150 million or roughly two and a half times better. The most recent cold start additions for freight brokerage are in Richmond, Va. and Houston, Texas.

Looking at the market on a year-to-date basis, Jacobs said the big topic of conversation continues to be the weather, which has wreaked havoc on shipper supply chains, especially in the Midwest.

“A lot of shippers have backlogs of a few weeks or more,” he noted. “Between strong demand and weather disruptions, capacity is tight. And since the second week in January, it has gotten even tighter. In terms of how is it affecting us, it is mixed. On the expedited side, business is booming, because demand for expedited services has never been higher and is very busy. On the truck brokerage side, it is a mixed bag because there is more business out there because some of the intermodal slowdown has pushed freight over the road, particularly in the Chicago area and the Midwest, so we are getting more loads but at lower margins, because truck mileage rates are going up as capacity gets tighter.”

On a positive note for truck brokerage, Jacobs said this situation is allowing XPO to handle more inbound calls from shippers due to their backlogs. This has in turn allowed XPO to show new customers what it can do, he said, and provide shippers with access to XPO’s 24,000-deep carrier base.