XPO Logistics Announces Third Quarter 2018 Results

November 02, 2018 by David Tran
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XPO Logistics Announces Third Quarter 2018 Results

XPO Logistics has announced financial results for the third quarter 2018. Revenue increased 11.5% year-over-year to $4.34 billion. Net income attributable to common shareholders was $100.8 million for the quarter, compared with net income attributable to common shareholders of $57.5 million for the same period in 2017. Earnings per diluted share was $0.74 for the quarter, compared with $0.44 for the same period in 2017.

Adjusted net income attributable to common shareholders, a non-GAAP financial measure, was $121.3 million for the quarter, compared with $76.7 million for the same period in 2017. Adjusted earnings per diluted share, a non-GAAP financial measure, was $0.89 for the quarter, compared with $0.59 for the same period in 2017. EPS and adjusted EPS for the third quarter 2018 were decreased by $0.07 due to a charge of $15.6 million, or $11.4 million after-tax, related to a customer bankruptcy. Adjusted net income attributable to common shareholders and adjusted earnings per diluted share for the third quarter 2018 exclude: $16.8 million, or $12.3 million after-tax, of debt extinguishment costs; $11.7 million, or $10.8 million after-tax, of integration and rebranding costs; and a benefit of $0.7 million, or $0.5 million after-tax, of non-cash unrealized gains on foreign currency contracts. Reconciliations of non-GAAP financial measures used in this release are provided in the attached financial tables.

Adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"), a non-GAAP financial measure, increased to $414.9 million for the third quarter 2018, compared with $369.6 million of adjusted EBITDA for the same period in 2017. Adjusted EBITDA for the third quarter 2018 excludes integration and rebranding costs of $11.7 million. Adjusted EBITDA in the quarter reflects the impact of a $15.6 million charge related to a customer bankruptcy.



For the third quarter 2018, the company generated $288.2 million of cash flow from operations and $173.0 million of free cash flow. 

Updates Financial Targets

The company has updated its full-year 2018 target for adjusted EBITDA to approximately $1.585 billion, from at least $1.6 billion. The revised target for adjusted EBITDA primarily reflects the impact of a customer bankruptcy in the third quarter. The company has reaffirmed its 2017–2018 target for cumulative free cash flow of approximately $1 billion.

Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said, “Our robust organic growth of 10.5% in the quarter was led by strong demand for e-commerce logistics and freight brokerage. In our North American LTL business, we improved the adjusted operating ratio by 220 basis points from a year ago. Companywide, we again grew profitability faster than revenue, despite the impact of a customer bankruptcy.

“Our disciplined investments in growth over the past 18 months are gaining traction. We closed $918 million of new business in the quarter, up 43% from last year, due in large part to our expanded sales organization and proprietary technology. In contract logistics, we implemented a record 90 customer contracts through September, enabled by intelligent automation. And in North American brokerage, we used dynamic freight-matching algorithms to realize 18% revenue growth and 370 basis points of margin improvement with fewer people. This is the same technology used by XPO Connect, our digital freight marketplace.”

Jacobs continued, “Our leading positions in sectors such as e-commerce, as well as our capacity for innovation, should keep us growing faster than the industry in any macro environment. We’re continuing to explore acquisition opportunities that will further accelerate our trajectory."

Third Quarter 2018 Results by Segment

Transportation: The company's transportation segment generated revenue of $2.85 billion for the quarter, a 10.5% increase from the same period in 2017. Segment revenue growth was led by increases in freight brokerage and last mile in North America, as well as dedicated truckload transportation in the UK and France.

Operating income for the transportation segment increased to $195.2 million in the quarter, compared with $145.2 million for the same period in 2017. Adjusted EBITDA for the segment improved to $326.5 million, an increase of 20.0% from a year ago. The increases in operating income and adjusted EBITDA primarily were due to growth in global freight brokerage, less-than-truckload (LTL) operating margin improvement in North America, and growth in dedicated truckload in Europe. Within the North American less-than-truckload unit, the operating ratio was 87.0%. The adjusted operating ratio was 85.4%, a 220 basis point improvement from 87.6% for the third quarter 2017.
 
Logistics: The company's logistics segment generated revenue of $1.52 billion for the quarter, a 13.1% increase from the same period in 2017. Segment revenue growth was led by rising demand for e-commerce logistics globally, as well as by the consumer packaged goods and food and beverage sectors in North America and the fashion sector in Europe.

Operating income for the logistics segment decreased to $59.5 million, compared with $67.3 million for the same period in 2017. Adjusted EBITDA for the segment was $128.0 million, unchanged from a year ago. The decrease in operating income primarily was due to a $15.6 million charge related to a customer bankruptcy, and to a record number of contract start-ups year-to-date: 46 in Europe and 44 in North America.
 
Corporate: Corporate SG&A expense was $45.7 million for the quarter, compared with $35.8 million for the same period in 2017. The increase in corporate expense primarily reflects an increase in share-based compensation expense tied to the increase in the share price of XPO stock, as well as increased corporate headcount and information technology associated with the centralization of shared services from field operations.

Nine Months 2018 Financial Results

For the nine months ended September 30, 2018, the company reported total revenue of $12.89 billion, a 15.2% increase from the same period in 2017. Net income attributable to common shareholders was $305.2 million for the first nine months of 2018, compared with $124.5 million for the same period in 2017. Earnings per diluted share was $2.26 for the first nine months of 2018, compared with $0.99 for the same period in 2017.

Adjusted net income attributable to common shareholders, a non-GAAP financial measure, was $334.0 million for the first nine months of 2018, compared with $189.3 million for the same period in 2017. Adjusted earnings per diluted share, a non-GAAP financial measure, was $2.48 for the first nine months of 2018, compared with $1.50 for the same period in 2017. Adjusted net income attributable to common shareholders and adjusted earnings per diluted share for the first nine months of 2018 exclude $27.1 million, or $19.8 million after-tax, of debt extinguishment costs; $26.7 million, or $21.8 million after-tax, of integration and rebranding costs; and a benefit of $12.9 million, or $9.5 million after-tax, from non-cash unrealized gains on foreign currency contracts.

Adjusted EBITDA for the first nine months of 2018, a non-GAAP financial measure, improved to $1.18 billion, compared with $1.03 billion for the same period in 2017. Adjusted EBITDA for the first nine months of 2018 excludes $26.7 million of integration and rebranding costs.

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