XPO Logistics Boosts Fourth Quarter Revenue in Full Year Results
24th February 2017
For the fourth quarter of 2016, revenue increased at XPO Logistics by 10.0% year-over-year to $3.68 billion. Announcing it’s annual results, the company reaffirmed its full year targets for adjusted EBITDA of at least $1.350 billion for 2017 and $1.575 billion for 2018. The company issued a 2017–2018 cumulative free cash flow target of approximately $900 million, including at least $350 million of free cash flow generated in 2017.
Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said, “I’m pleased that we delivered record fourth quarter results for net income, cash flow from operations, adjusted EBITDA and free cash flow. We generated the strongest growth in last mile and contract logistics, driven primarily by e-commerce, more than offsetting a weak intermodal environment. Our less-than- truckload operations in North America capped an outstanding year with a 40% increase in fourth quarter adjusted operating income.
“Our focus remains on further enhancing customer service while realizing the significant profit improvement opportunities embedded in our business. This year, we’ll get the full 12-month benefit of numerous efficiencies we implemented throughout 2016 in procurement, real estate, back office operations and workplace technologies. We have more savings to realize in each of these areas, along with cross dock and warehouse automation, labor productivity and the global adoption of best practices. In addition, we’re marketing our services with a high caliber sales organization that draws on our total supply chain offering to help customers operate more productively.”
Jacobs continued, “We’re continuing to execute our strategy for high growth and high returns. We have a concrete bridge to an EBITDA margin of more than 10% in 2018 — an increase of approximately 200 basis points over two years. We expect to grow free cash flow at an even faster rate than EBITDA, with a cumulative, two-year target of approximately $900 million of free cash flow by year-end 2018, including at least $350 million in 2017.”
Transport and Logistics By Segment
• Transportation: The company’s transportation segment generated total revenue of $2.33 billion for the quarter, compared with $2.10 billion for the same period in 2015. The year- over-year increase in revenue was primarily due to the acquisition of Con-way Inc. on October 30, 2015, and to organic growth in both North America and Europe, partially offset by the divestiture of the North American full truckload unit on October 27, 2016. Organic revenue growth for the segment was led by the last mile unit, primarily driven by an increase in e-commerce business. Revenue growth was partially offset by softness in North American intermodal volumes.
Operating income for the transportation segment increased to $84.0 million, compared with an operating loss of $6.1 million a year ago. Adjusted EBITDA for the segment improved by
40% to $211.9 million, compared with $151.4 million a year ago. The increases in operating income and adjusted EBITDA were primarily due to the Con-way acquisition, significant year- over-year operating margin improvement in the North American less-than-truckload unit, and growth in the last mile unit.
• Logistics: The company’s logistics segment generated total revenue of $1.38 billion for the quarter, compared with $1.27 billion for the same period in 2015. The year-over-year increase in revenue was primarily due to the Con-way acquisition and to organic growth in both North America and Europe. In Europe, organic growth from new contracts with e- commerce and cold-chain customers was negated by the adverse impact of foreign exchange rates. In North America, growth was largely driven by gains in e-commerce, food and beverage, and aerospace business, partially offset by softness in automotive.
Operating income for the logistics segment increased to $51.2 million, compared with $34.8 million a year ago. Adjusted EBITDA for the segment improved to $108.6 million, compared with $98.5 million a year ago. The increases in operating income and adjusted EBITDA were primarily due to the Con-way acquisition and to organic growth, as well as better utilization of site assets and other productivity improvements.