XPO reports mixed Q4 and full-year 2015 earnings results
February 25, 2016
Fourth quarter and full-year 2015 earnings issued by non asset-based 3PL XPO Logistics late yesterday were strong.
Total gross fourth quarter revenue for XPO saw a 302.3 percent annual increase to $3.3 billion, with net revenue up 419.8 percent to $1.6 billion. But it also had an adjusted net loss of $23.1 million, or $0.21 per share for the quarter, which exceeded Wall Street estimates of a $0.06 loss per share and was 23 percent higher than the fourth quarter of 2015. Fourth quarter EBITDA at $218 million was ahead of the fourth quarter of 2015 at $42 million.
And for the full-year 2015 XPO had total revenue of $7.6 billion for a 223.5 percent annual increase, with a net loss of $191.6 million compared to a $63.6 million loss in 2014. Adjusted 2015 EBITDA came in at $493.1 million compared to $81.4 million in 2014.
“It was a strong fourth quarter as we more than quadrupled our total revenue year-over-year and our organic revenue growth accelerated to 8.4 percent (excluding fuel impact), and we affirmed that we are on track for $1.25 billion in EBITDA this year and $1.7 billion in 2018.”
XPO generates about two-thirds of its revenue from its asset-light business and one-third on the asset-heavy side, explained Jacobs. And the company has grown its freight brokerage business to more than $3 billion globally, while generating margin improvement in its brokerage business in ten of the last 11 quarters. Jacobs pointed out the XPO’s brokerage customers have consistently ranked the company as the top player in the industry for on-time deliveries and tender exceptions. And its asset-light last mile business arranged more than 10 million deliveries of heavy goods in 2015 and is on track to arrange more than 12 million deliveries in 2016.
“We have a number of large contracts in our pipeline, mainly due to the growth of e-commerce and are also ramping up a new last mile service in Europe,” he said. “And our European logistics business is firing on all cylinders, driven by an increase in e-commerce activity and a number of new contract starts. Our North American Logistics business is also strong and led by increased volumes from e-commerce, retail, and technology customers, and we are getting significant synergies by integrating our North American contract logistics business with the former Jacobson and Menlo, which is now one integrated business line.
Looking at quarterly results by business segment, XPO saw solid gains, including:
-Transportation total gross revenue was up 216.8 percent at $2.1 billion and net revenue margin up to 27.3 percent form 20.0 percent, which was due to the acquisitions of Norbert Dentressangle, Con-way, Bridge Terminal Transport, and UX Specialized Logistics and organic revenue growth by the last-mile and freight brokerage groups. Net revenue gains were paced by the acquisition of Con-way Freight, its less-than-truckload (LTL) group and margin growth in its existing businesses, including freight brokerage, last mile, expedite and global forwarding; 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.
Con-way integration: Jacobs said that XPO’s integration of Con-way, which was made official last fall, is going extremely well.
“We immediately assimilated their $27 million truck brokerage operation and integrated Menlo into our supply chain organization, with Menlo having $1.3 billion in managed transportation that we merged with ours in increasing our freight by management to $2.7 billion, making us a top 5 global provider in managed transportation,” he said.
On the LTL side, Jacobs said XPO has streamlined things to make it run more efficiently, while remaining committed to increasing profit from LTL operations by $170-to-$210 million over two years and is already at more than $50 million. What’s more, XPO is also reducing LTL procurement costs related to tractors and trailers, diesel, tires, office supplies, and other categories where it is a big level purchaser.
“Since the acquisition, our service levels are up, on-time pickup is up, on-time delivery is up, damages and claims have improved, linehaul productivity has improved, and we continue to offer more next-day and two-day lanes than any other LTL provider while covering about 99 percent of all zip codes in North America,” he said.
When asked about the relationship on a transactional basic between XPO’s LTL business and 3PL brokerage players, Jacobs said that XPO’s LTL business is comprised of three groups of customers: large national accounts, small and medium sized businesses, and 3PLs.
And he said that XPO’s business with 3PLs since buying Con-way is up a bit and while it is doing more business with certain types of 3PLs than others, he noted XPO “plays very well in the sandbox with other 3PLs and has great relationships with almost all the major 3PLs,” with about 6 percent of total global business coming from other 3PLs.
While XPO is well-known for its aggressive acquisition strategy and history, 2016 will be a bit different in that its focus is more internal in optimizing the $15 billion in business it does with 55,000 customers and becoming more efficient and cost-effective in serving customers and cross-selling its services to those customers, and refining back office operations on a global integration basis, Jacobs said.
“We are really not focusing on acquisitions this year,” he said, “but we will keep an open mind, of course.”
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