XPO announces record-breaking second quarter results

Freight transportation and logistics services provider XPO Logistics announced late yesterday it had a record breaking second quarter on multiple fronts.

Total gross quarterly revenue for XPO was up 202.9 percent annually to $3.7 billion, and net income of $42.6 million, or earnings per share of $0.35, up significantly from a net loss of $75.1 million or $0.89 per share a year ago. Adjusted EBITDA for XPO at $354.9 million was up from $79.7 million a year ago, which was a company record. And along with posting its first-ever quarterly profit the company also set new records with $261 million in cash flow from operations and $170 million of free cash flow.

XPO said it also has increased its target for adjusted EBITDA to at least $1.265 billion from $1.25 billion and increased its target for free cash flow to at least $150 million from a range of $100 million to $150 million.

XPO Chairman and CEO Brad Jacobs told LM that based on these results it is clear XPO has reached an inflection point in its progress as a company as evidenced by the multiple quarterly records it hit.

“Our highest top-line growth came from our last-mile and truck brokerage operations in North America, as well as our contract logistics business in Europe continues to be a major driver,” he said. “We saw margin expansion for last-mile and had some major customer wins on both sides of the ocean. Our North American LTL business was a star in terms of profitability.”

Looking at quarterly results by business segment, XPO saw solid gains, including:
-Transportation total gross revenue was up 180.9 percent annually at $2.4 billion and net revenue margin up to 29.1 percent from 22.5 percent, which was mainly due to last fall’s acquisition of Con-way, specifically its LTL business and margin gains in last mile, and global forwarding that were partially offset by lower intermodal and expedite margins. The LTL business saw operating income rise 66 percent to $115.5 million (also a quarterly record); and
-Logistics total gross revenue came in a $1.3 billion, up 270.4 percent from $359.6 million a year ago, with operating income up $4.3 million at $51.1 million, with gains paced by volume increases from e-commerce, high-tech and its European business

XPO’s operating ratio for its LTL business was 86.7, its best in ten years going back to when it was still Con-way Freight, which Jacobs viewed as monumental considering it happened only seven months after XPO acquired Con-way.

“The integration of Con-way into the XPO business is nearly complete,” he said. “Things are going very well, and the numbers show that.”

On the truckload brokerage side, despite difficult market conditions in terms of sluggish volumes, low GDP, and excess capacity, Jacobs said that XPO’s North American truck brokerage business continues to grow significantly even in a soft economic environment, with both loads and shipments up 20 percent annually and revenue up 9 percent despite lower revenue per load.

“When you look at North American truckload, there are things like a tough freight environment with rates being down 2.7 percent but EBITDA was up 2 percent and volumes were flat, which is OK because many other companies saw volumes down,” he noted. “We did have the opportunity to take out costs on truckload because of the synergies between truckload and the rest of our business. For example, our LTL business is now sharing repair and maintenance facilities around the country that Con-way used to run separately. There are 80 LTL facilities that are now available to truckload. That keeps costs down and extends the life of the trucks and helps to be more proactive.”

When asked to describe the freight economy as it relates to XPO’s business lines, Jacobs said things are sluggishly growing and not contracting or getting worse.

“Things are ever so slightly better,” he said. “The good news is we built a very good company with robust infrastructure that is able to absorb, integrate, and optimize the acquisitions we have made and we have reached an inflection point in the evolution of our business where we have operating leverage and generating record profits, revenue, and EBITDA, and free cash flows.”