Logistics And Frieght Forwarding

XPO Logistics reports record third quarter earnings results

A week after announcing it sold off its truckload business[1], freight transportation and logistics services provider XPO Logistics[2] announced very strong third quarter earnings results late yesterday.Total quarterly revenue for Greenwich, Conn.-based XPO was up 57.2 percent annually to £3.7 billion, and net income was £13.8 million, or earnings per share of £0.11, which was up sharply from a net loss of £93.4 million or £0.94 per share a year ago. Adjusted EBITDA for the quarter rose to £352.7 million for a 53 percent annual increase, and XPO generated £137.0 million in cash flow from operations and £64.8 million of free cash flow. The company also upped its full-year 2016 free cash flow target to at least £175 million from its previous goal of at least £150 million, as well as updating 2016 adjusted EBITDA of at least £1.245 billion, which is in line with its previous target of £1.265 billion and accounts for a £20 billion impact from the divestment of its truckload business.“We had record third quarter results for net income, cash flow from operations, and adjusted EBITDA, and we generated strong free cash flow of £65 million,” said XPO Chairman and CEO Brad Jacobs in an interview. “Based on this bullish guidance, we raised full-year 2017 adjusted EBITDA 17 percent on a year-over-year basis.”For quarterly results by business segment, XPO saw solid gains, including:
-Transportation total gross revenue was up 72.5 percent annually at £2.4 billion and net revenue margin up to 29.1 percent from 22.6 percent, with the revenue gain mainly due to the October 2015 acquisition of Con-way and organic growth that was partially offset by lower fuel-related revenue but saw gains paced by last mile, due to gains in e-commerce business.

The net revenue increase was mainly due to the acquisition of Con-way’s less-than-truckload (LTL) business and last-mile margin gains that were partially offset by a lower freight brokerage margin; and-Logistics total gross revenue came in a £1.3 billion, up 35.6 percent from a year ago, with operating income up 52.2 percent at £75.3 million, with gains mainly attributed to the Con-way acquisition and organic growth. XPO noted for its logistics business European sales growth was mainly led by new contract starts with e-commerce and cold chain customers and more than offset by the adverse impact of unfavorable foreign exchange rates. And in North America XPO said growth was driven by e-commerce and technology contracts, with traditional retail being weakerLooking at the XPO’s LTL business, which saw operating income rise 40 percent annually, with the company ahead of its plan to improve annual profit in LTL by £170 million to £210 million by late 2017.

At the 12-month mark post-acquisition, XPO said it has already achieved a profit improvement run rate of £130 million and raised its customer service levels.“LTL pricing has been key, and our yields were up 4.5 percent, although volumes were down 5.3 percent, which is in line with expectations,” said Jacobs. “Much of the volume that went down, though, was low margin or money-losing tonnage that we wanted to lose. Part of our strategy was to identify customer-by-customer, lane-by-lane where we were making money and where we were not making money and to address that. Volumes and revenues are both up at local accounts and the unadjusted operating ratio came in at 89.1 percent, which is a nice improvement from 92.5 percent last year. “Jacobs explained that XPO executed precisely and with discipline the plan it outlined a year ago when it bought Con-way in introducing a culture of accountability, reduce unnecessary costs, and be disciplined on price, while giving clear objectives to the group and raising the bar on performance increasing already high levels of customer service.Looking at the company’s market-leading North American last mile business, Jacobs said it was XPO’s revenue growth leader for the quarter, up around 15 percent, due mainly to new contract start-ups, especially in e-commerce, and higher shipment volumes that were partially offset by lower fuel revenue.“We are seeing an extraordinary uptick in new opportunities,” he said. “Last mile net revenue margins were up 50 basis points in the quarter.

We have closed about £80 million of new last mile business in the first nine months of 2016, and we have a record sales pipeline in last mile of more than £250 million. This is one example where are on a tear in sales. If you look at North American contract logistics, we have closed over £300 million of new business so far this year, and with £175 million coming from the third quarter alone.

And in Europe, where we are number one in outsourced e-fulfillment, we have won over £330 million Euros of new logistics business in the first nine months of 2016.

For contract logistics globally, we have a new business pipeline of more than £1 billion, so our cross-selling success is continuing to accelerate, with about 21 percent of the sales we generate from our top customers now come from secondary service lines, which is up from 14 percent last year.”Jacobs said that XPO is currently in the process of winnowing down its supplier base that has gained in numbers to its myriad acquisition in recent years from 80,000 to roughly 10,000.Led by the XPO procurement team that has led the first wave in attacking £4.3 billion of its global spend spread out over 80,000 suppliers, Jacobs said that number will be reduced to 10,000 over the next three years, with ultimately 2,000 of those suppliers accounting for about 80 percent of XPO’s procurement spend.“This is something I did at United Rentals in cutting down the vendor base and formed strategic relationships with a smaller number of vendors and saved a lot of money in giving those smaller number of vendors a larger amount of business,” he said. “We are putting out some bids one by one for labor, office supplies, tractors, trailers, facilities management, real estate, IT and a host of other categories, and we are making great progress at zeroing in on which vendors we want to have strategic relationships with.

We have a big opportunity to save hundreds of millions of dollars a year through this strategic sourcing project.”

References

  1. ^ sold off its truckload business (www.logisticsmgmt.com)
  2. ^ XPO Logistics (www.logisticsmgmt.com)



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