XPO Logistics set for more acquisitions 05 November 2014

XPO Logistics, Inc. has announced financial results for Q3, 2014. Total gross revenue increased 241.5% year-over-year to US$662.5 million, and net revenue increased 402.7% to US$175.1 million. The Company reported a net loss of US$11.7 million for the quarter, compared with a net loss of US$6.0 million for the same period in 2013.

Adjusted earnings (loss) before interest, taxes, depreciation and amortisation (adjusted EBITDA), improved to a gain of US$24.2 million for the quarter, compared with a loss of US$7.1 million for the same period in 2013. Adjusted EBITDA excludes US$10.0 million of transaction and integration costs primarily related to the acquisitions of New Breed, Pacer and ACL, as well as US$846,000 of rebranding costs; and includes 29 days of New Breed results, as well as US$1.8 million of non-cash share-based compensation.

The Company had approximately US$690.0 million of cash, including US$10.0 million of restricted cash, as of September 30, 2014.

Q3 was transformational for the Company on many fronts. It raised US$1.2 billion of capital to fund growth. It generated a net revenue increase of more than 400.0%, reflecting the benefit of acquisitions and 48.0% organic growth, and it recorded its strongest adjusted EBITDA performance to date which reflects less than a month of owning New Breed, its largest acquisition so far. The Company delivered 58.0% organic growth in its freight brokerage business, and more than doubled the revenue run rate of its brokerage cold-starts in 12 months to US$250.0 million.

In September, the Company gained critical mass when it acquired New Breed. The contract logistics business recorded a great start, ahead of plan in its first month out of the gate. In July, the Company acquired ACL, which recently had a big eCommerce customer win as part of XPO Last Mile.

In Q3, 2014, the Company's freight brokerage business generated total gross revenue of US$518.7 million, a 239.8% increase from the same period in 2013. Net revenue margin grew to 20.8%, from 18.1% in 2013, an improvement of 270 basis points. The year-over-year increases in revenue and margin were primarily due to the acquisitions of 3PD, Optima and Pacer, and 58.0% organic revenue growth. Organic revenue growth included cold-starts, which are on an annualised revenue run rate of approximately US$250.0 million, compared with US$120.0 million a year ago. Excluding the margin benefit of the last mile and intermodal operations, freight brokerage net revenue margin improved year-over-year. Q3 operating income improved to a gain of US$2.0 million, compared with a loss of US$3.4 million a year ago.

In Q3, 2014, the Company's contract logistics business generated net revenue of US$50.1 million and operating income of US$4.5 million. The New Breed acquisition was completed on September 2, 2014.

In Q3, 2014, the Company's expedited transportation business generated total gross revenue of US$36.5 million, a 45.4% increase from the same period in 2013. Net revenue margin grew to 30.2%, compared with 18.1% in 2013, an improvement of 1,210 basis points. The increase in net revenue margin is primarily attributable to the acquisition of NLM, which recognises revenue on a net basis. Q3 operating income increased to US$2.9 million, from US$1.7 million a year ago.

In Q3, 2014, the Company's freight forwarding business generated total gross revenue of US$59.7 million, a 212.2% increase from the same period in 2013. Net revenue margin was 10.5%, compared with 13.8% in 2013. The increase in total gross revenue and the decrease in net revenue margin were due in part to the consolidation of the former Pacer freight forwarding operations, which shifted the revenue mix toward higher-revenue, lower-margin international transactions. Q3 operating loss was US$20,000, compared with a loss of US$2.6 million a year ago. 

For the nine months ended September 30, 2014, the Company reported total revenue of US$1.5 billion, a 242.8% increase from the first nine months of 2013. For the first nine months of 2014, net loss was US$53.6 million, compared with net loss of US$37.9 million for the same period last year. Adjusted EBITDA improved to a gain of US$39.8 million for the first nine months of 2014, compared with a loss of US$27.0 million for the same period in 2013. Adjusted EBITDA for the first nine months of 2014 excludes US$22.3 million of transaction and integration costs related primarily to the acquisitions of New Breed, Pacer and ACL; US$1.2 million of charges related to the rebranding of the Company's ground expedited and last mile businesses; and includes US$5.6 million and US$3.4 million of non-cash share-based compensation for 2014 and 2013, respectively.

Looking ahead, the Company has reaffirmed its full year 2014 outlook for an annual revenue run rate of more than US$3.0 billion by December 31, and an annual EBITDA run rate of at least US$150.0 million by December 31. The Company stated that it is currently in discussions with a number of attractive acquisition prospects in a very active pipeline. Targets are primarily in existing lines of business, including contract logistics, last mile and freight brokerage.