XPO Logistics Announces First Quarter 2013 Results

  • Acquires Interide Logistics
  • Reaffirms Full Year Financial Outlook

XPO Logistics, Inc. (NYSE: XPO) today announced financial results for the first quarter of 2013.

Total revenue was $114.0 million for the first quarter, a 155.8% increase from the same period of the prior year. Gross margin dollars increased 140.0% year-over-year to $16.3 million, and gross margin percentage was 14.3%.

Consistent with the company's previously announced strategy, investments in long-term growth impacted results. The company reported a net loss of $14.5 million for the quarter, compared with a net loss of $2.7 million for the same period of the prior year. The first quarter net loss available to common shareholders was $15.3 million, or a loss of $0.85 per diluted share, compared with a net loss available to common shareholders of $3.4 million, or a loss of $0.36 per diluted share, for the same period of 2012.  

Earnings (loss) before interest, taxes, depreciation and amortization ("EBITDA"), a non-GAAP financial measure, was a loss of $9.8 million for the first quarter of 2013, compared with a loss of $3.9 million for the same period of the prior year. EBITDA includes $1.1 million and $1.0 million of non-cash share-based compensation for the first quarters of 2013 and 2012, respectively. A reconciliation of EBITDA to net income is provided in the attached financial tables.

The company had $206.2 million of cash as of March 31, 2013.

Acquires Interide Logistics

On May 6, 2013, the company acquired substantially all of the operating assets of Interide Logistics LC, a freight brokerage business with trailing 12 months revenue of approximately $28 million as of March 31, 2013. The purchase price was $3.1 million in cash and $600,000 in XPO common stock, with no assumption of debt. The acquisition is expected to be immediately accretive to earnings.

Interide Logistics serves a diversified mix of approximately 900 customers from its locations in Salt Lake City, Utah; Minneapolis-Saint Paul, Minn.; and Louisville, Ky. The operations will continue to be led by industry veteran Sean Snow, who will scale up the locations and grow Salt Lake City into a mega-branch. Snow is the former president of England Logistics, a C.R. England subsidiary that he grew to approximately $300 million in revenue before taking control of Interide in 2009.

Reaffirms Full Year 2013 Financial Outlook

The company has reaffirmed its full year outlook for an annual revenue run rate of more than $1 billion as of December 31, including at least $300 million of acquired historical annual revenue, and positive EBITDA for the fourth quarter of 2013.

CEO Comments

Brad Jacobs, chairman and chief executive officer, said, "In the first quarter, we delivered a 156% increase in revenue year-over-year, and 140% more gross margin dollars. The impact of our cold-starts, sales force expansion and acquisitions - including two transactions in February - drove March revenue to a record high of $44 million. We reached a milestone of 1,000 employees in the quarter, and we plan to increase that number to 1,600 by year-end.

"Our strategy is creating momentum in the second quarter as well. This week, we acquired Interide Logistics, a well-respected brokerage business run by transportation veteran Sean Snow. Sean has a strong industry track record, and he's excited about growing the Salt Lake City operation into an XPO mega-branch. Our eight freight brokerage cold-starts are progressing well - as of March, they had a combined annual revenue run rate of approximately $78 million. We opened a freight forwarding cold-start in Orlando this month. And we see huge potential in our new strategic accounts team led by Jeff Battle, a former Turbo Logistics executive with nearly two decades of industry experience."

Jacobs continued, "We remain solidly on track to build XPO into a multi-billion dollar company over the next few years. We've reaffirmed our 2013 outlook for an annual revenue run rate of more than a billion dollars by year-end, including $300 million of acquired revenue. We also expect to achieve positive EBITDA in the fourth quarter, while continuing to make the strategic investments that will drive exceptional returns over time."

First Quarter 2013 Results by Business Unit

  • Freight brokerage: The company's freight brokerage business generated total revenue of $78.2 million for the quarter, an 886.8% increase from the same period of the prior year. Year-over-year revenue growth was primarily due to the acquisitions of Turbo Logistics, Kelron Logistics, Continental Freight Services and BirdDog Logistics in 2012 and Covered Logistics on February 26, 2013, as well as revenue growth from the company's eight brokerage cold-start locations. Gross margin percentage for the freight brokerage business was 12.9% for the quarter, compared with 13.0% for the same period in 2012. The first quarter operating loss was $3.8 million, compared with an operating loss of $86,000 a year ago. The increase in 2013 operating loss primarily reflects an increase in SG&A costs for sales force expansion, technology development and training.
  • Expedited transportation: The company's expedited services business generated total revenue of $23.9 million for the quarter, a 6.5% increase from the same period of the prior year. Revenue growth was driven by the acquisition of East Coast Air Charter on February 8, 2013. Gross margin percentage was 15.9% for the quarter, compared with 18.6% for the same period in 2012. The decrease in gross margin percentage primarily reflects a softer expedited freight environment. First quarter operating income was $753,000, compared with $1.8 million a year ago, primarily reflecting the decrease in gross margin and an increase in the number of sales and service personnel.
  • Freight forwarding: The company's freight forwarding business generated total revenue of $16.2 million for the quarter, a 5.0% increase from the same period of the prior year. Gross margin percentage was 14.7% for the quarter, compared with 10.3% for the same period in 2012. The increase in gross margin percentage was primarily driven by company-owned conversions from independently-owned stations, and cold-starts. First quarter operating income was $372,000, a 54% increase year-over-year. The increase in operating income reflects a higher gross margin partially offset by the SG&A cost of new company-owned locations in Chicago, Houston, Los Angeles, Minneapolis, Charlotte, Atlanta and Montreal.
  • Corporate: Corporate SG&A expense for the first quarter of 2013 increased by $2.5 million to $8.7 million, compared with $6.2 million for the first quarter of 2012. The increase was primarily driven by added headcount in corporate shared services and a higher expenditure on purchased services. Corporate SG&A expense for the first quarter of 2013 included $1.1 million of non-cash share based compensation, $1.1 million of litigation-related costs, and $300,000 of acquisition-related transaction costs.

Conference Call

The company will hold a conference call on Wednesday, May 8, 2013, at 8:30 a.m. Eastern Time. Participants can call toll-free (from U.S./Canada) 1-888-895-5271; international callers dial +1-847-619-6547. A live webcast of the conference will be available on the investor relations area of the company's website, www.xpologistics.com/investors. The conference will be archived until June 7, 2013. To access the replay by phone, call toll-free (from U.S./Canada) 1-888-843-7419; international callers dial +1-630-652-3042. Use participant passcode 34686844.

Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures as defined under Securities and Exchange Commission ("SEC") rules, such as earnings (loss) before interest, taxes, depreciation and amortization ("EBITDA") for the quarters ended March 31, 2013, and March 31, 2012. As required by SEC rules, we provide reconciliations of these measures to the most directly comparable measure under United States generally accepted accounting principles ("GAAP"), which are set forth in the attachments to this release. We believe that EBITDA improves comparability from period to period by removing the impact of our capital structure (interest expense from our outstanding debt), asset base (depreciation and amortization) and tax consequences. In addition to its use by management, we believe that EBITDA is a measure widely used by securities analysts, investors and others to evaluate the financial performance of companies in our industry. Other companies may calculate EBITDA differently, and therefore our EBITDA may not be comparable to similarly titled measures of other companies. EBITDA is not a measure of financial performance or liquidity under GAAP and should not be considered in isolation or as an alternative to net income, cash flows from operating activities and other measures determined in accordance with GAAP. Items excluded from EBITDA are significant and necessary components of the operations of our business, and, therefore, EBITDA should only be used as a supplemental measure of our operating performance.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, our 2013 outlook with respect to annual revenue, acquisitions, fourth quarter 2013 EBITDA and the number of personnel we expect to add during 2013. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "should," "will," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target" or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances.

These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include, but are not limited to, those discussed in our filings with the SEC and the following: economic conditions generally; competition; our ability to find suitable acquisition candidates and execute our acquisition strategy; our ability to raise capital; our ability to attract and retain key employees to execute our growth strategy; our ability to develop and implement a suitable information technology system; our ability to maintain positive relationships with our network of third-party transportation providers; litigation; and governmental regulation. All forward-looking statements set forth in this press release are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Forward-looking statements set forth in this press release speak only as of the date hereof and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, including our 2013 outlook.

XPO Logistics, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
             
  Three Months Ended  
  March 31,  
    2013     2012    
             
Revenues $ 113,999   $ 44,560  
Expenses            
  Direct expense   97,739     37,787  
    Gross margin   16,260     6,773  
  Sales general and administrative expense   27,627     10,997  
Operating (loss) income   (11,367)     (4,224)  
  Other (income) expense   (109)     (21)  
  Interest expense   3,064     12  
Loss before income tax provision   (14,322)     (4,215)  
  Income tax benefit   222     (1,521)  
Net loss   (14,544)     (2,694)  
  Cumulative preferred dividends   (743)     (750)  
Net loss available to common shareholders $ (15,287)   $ (3,444)  
             
Basic loss per share            
  Net loss $ (0.85)   $ (0.36)  
Diluted loss per share            
  Net loss $ (0.85)   $ (0.36)  
Weighted average common shares outstanding            
  Basic weighted average common shares outstanding   18,032     9,501  
  Diluted weighted average common shares outstanding   18,032     9,501  

 

XPO Logistics, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
           
  March 31,   December 31,
  2013   2013
ASSETS (Unaudited)      
Current assets:          
  Cash and cash equivalents $ 206,182   $                252,293
           
  Accounts receivable, net of allowances of $1,068 and $603, respectively   73,455                      61,245
  Prepaid expenses   1,657                        1,555
  Deferred tax asset, current   1,266                        1,406
  Income tax receivable   2,913                        2,569
  Other current assets   3,785                        1,866
    Total current assets   289,258                    320,934
           
  Property and equipment, net of $6,073 and $5,323          
  in accumulated depreciation, respectively   14,011     13,090
  Goodwill   66,904     55,947
  Identifiable intangible assets, net of $5,382 and $4,592          
  in accumulated amortization, respectively   29,373     22,473
  Deferred tax asset, long-term   79     0
  Other long-term assets   829     764
   Total long-term assets   111,196                      92,274
    Total assets $ 400,454   $                413,208
           
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities:          
  Accounts payable $ 20,227   $ 22,108
  Accrued salaries and wages   2,687     3,516
  Accrued expenses, other   20,410     21,123
  Current maturities of notes payable and capital leases   791     491
  Other current liabilities   1,477     1,789
    Total current liabilities   45,592                      49,027
           
  Convertible senior notes   109,718                    108,280
  Notes payable and capital leases, net of current maturities   1,121                          676
  Deferred tax liability, long term   6,855                        6,781
  Other long-term liabilities   3,770                        3,385
    Total long-term liabilities   121,464                    119,122
           
Stockholders' equity:          
 Preferred stock, $.001 par value; 10,000,000 shares;          
   74,275 shares issued and outstanding   42,794                      42,794
  Common stock, $.001 par value; 150,000,000 shares authorized;          
  18,197,929 and 18,002,985 shares issued, respectively;          
  and 18,152,929 and 17,957,985 shares outstanding, respectively   18                            18
  Additional paid-in capital   266,267                    262,641
  Treasury stock, at cost, 45,000 shares held   (107)                         (107)
  Accumulated deficit   (75,574)                     (60,287)
    Total stockholders' equity   233,398                    245,059
      Total liabilities and stockholders' equity $ 400,454   $                413,208

 

XPO Logistics, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
             
    Three Months Ended
    March 31,
      2013       2012
Operating activities          
 Net loss $ (14,544)   $ (2,694)
Adjustments to reconcile net loss to net cash from operating activities          
  Provisions for allowance for doubtful accounts   231     53
  Depreciation & amortization expense   1,554     317
  Stock compensation expense   1,097     1,033
  Accretion of debt   1,438     0
  Other   (200)     0
Changes in assets and liabilities, net of effects of acquisitions:          
  Accounts receivable   (9,770)     (1,979)
  Deferred tax expense   135     13
  Income tax receivable   (814)     (1,737)
  Other current assets   6     (1,780)
  Prepaid expenses   (68)     0
  Other long-term assets and advances   (2)     (102)
  Accounts payable   (5,199)     1,818
  Accrued expenses   (2,280)     2,282
  Other liabilities   403     0
Cash provided used by operating activities   (28,013)     (2,776)
Investing activities          
  Acquisition of businesses, net of cash acquired   (16,560)     0
  Proceeds from sale of business interests   125     0
  Payment of acquisition earn-out   0     (450)
  Payment for purchases of property and equipment   (1,081)     (836)
Cash Flows used by investing activities   (17,516)     (1,286)
Financing Activities          
  Credit line, net activity   478     0
  Payments of notes payable and capital leases   (284)     (2,084)
  Excess tax benefit from stock options   0     167
  Proceeds from stock offering, net   0     136,985
  Proceeds from exercise of options, net   10     233
  Payment of tax withholdings for shares   (31)     0
  Dividends paid to preferred stockholders   (743)     (750)
Cash flows (used) provided by financing activities   (570)     134,551
Effect of exchange rate changes on cash   (11)     0
Net (decrease) increase  in cash   (46,110)     130,489
Cash, beginning of period   252,292     74,007
Cash, end of period $ 206,182   $ 204,496
             
Supplemental disclosure of noncash activities:          
             
  Cash paid during the period for interest   3,328     12
  Cash paid during the period for income taxes   732     84

 

Freight Brokerage
Summary Financial Table
(Unaudited)
(In thousands)
                     
  Three Months Ended March 31,
  2013     2012     $ Variance       Change %
                       
Revenue $ 78,230   $ 7,928   $ 70,302   886.8%
Direct expense                    
  Transportation services   67,957     6,905     61,052   884.2%
  Other direct expense   207     (6)     213   -3550.0%
Total direct expense   68,164     6,899     61,265   888.0%
    Gross margin   10,066     1,029     9,037   878.2%
SG&A expense                    
  Salaries & benefits   10,163     859     9,304   1083.1%
  Purchased services   814     62     752   1212.9%
  Other SG&A expense   1,895     174     1,721   989.1%
  Depreciation & amortization   1,014     20     994   4970.0%
Total SG&A expense   13,886     1,115     12,771   1145.4%
Operating loss $ (3,820)   $ (86)   $ (3,734)   4341.9%

 

Freight Brokerage
Key Employee Data
 
  March 31,   March 31,
  2013     2012
Freight Brokerage personnel 668     40

Note: Totals are as of period end, and primarily include the positions of shipper sales, carrier procurement and brokerage operations, and reflect the impact of recruitment and acquisitions.

Expedited Transportation
Summary Financial Table
(Unaudited)
(In thousands)
                     
  Three Months Ended March 31,
  2013     2012     $ Variance       Change %
                     
Revenue $ 23,875     $ 22,420   $ 1,455   6.5%
Direct expense                    
 Transportation services   19,152     17,362     1,790   10.3%
 Other direct expense   915     899     16   1.8%
Total direct expense   20,067     18,261     1,806   9.9%
    Gross margin   3,808     4,159     (351)   -8.4%
SG&A expense                    
 Salaries & benefits   1,945     1,660     285   17.2%
 Purchased services   289     197     92   46.7%
 Other SG&A expense   604     429     175   40.8%
 Depreciation & amortization   217     85     132   155.3%
Total SG&A expense   3,055     2,371     684   28.8%
Operating income $ 753   $ 1,788   $       (1,035)   -57.9%

Note: Total depreciation and amortization for the Expedited Transportation operating segment included in both direct expense and SG&A, was $268 and $137 for the three-months ended March 31, 2013 and 2012, respectively.

Freight Forwarding
Summary Financial Table
(Unaudited)
(In thousands)
                     
  Three Months Ended March 31,
  2013     2012     $ Variance       Change %
                     
Revenue $ 16,233   $ 15,457   $ 776   5.0%
Direct expense                    
 Transportation services   12,110     11,513     597   5.2%
 Station commissions   1,708     2,316     (608)   -26.3%
 Other direct expense   29     43     (14)   -32.6%
Total direct expense   13,847     13,872     (25)   -0.2%
   Gross margin   2,386     1,585     801   50.5%
SG&A expense                    
 Salaries & benefits   1,433     787     646   82.1%
 Purchased services   90     41     49   119.5%
 Other SG&A expense   403     372     31   8.3%
 Depreciation & amortization   88     144     (56)   -38.9%
Total SG&A expense   2,014     1,344     670   49.9%
Operating income $ 372   $ 241   $ 131   54.4%

 

XPO Corporate
Summary of Selling, General & Administrative Expense
(Unaudited)
(In thousands)
                     
  Three Months Ended March 31,
  2013   2012   $ Variance       Change %
SG&A expense                              
 Salaries & benefits $ 4,507   $ 3,043   $ 1,464   48.1%
 Purchased services   2,622     2,436     186   7.6%
 Other SG&A expense   1,359     671     688   102.5%
 Depreciation &
amortization
  184     17     167   982.4%
Total SG&A expense $ 8,672   $ 6,167   $ 2,505   40.6%

Note: Intercompany eliminations included revenue of $4.3 million and $1.2 million for the three-months ended March 31, 2013 and 2012, respectively.

Reconciliation of Non-GAAP Measures
XPO Logistics, Inc.
Consolidated Reconciliation of EBITDA to Net Income
(In thousands)
               
  Three Months Ended    
  March 31,    
  2013   2012      Change %
               
Net loss available to common shareholders $ (15,287)     $ (3,444)     343.9%
Preferred dividends   (743)     (750)   -0.9%
Net loss   (14,544)     (2,694)   439.87%
Interest expense   3,064     12   25433.3%
Income tax provision   222     (1,521)   -114.6%
Depreciation and amortization   1,502     317   373.8%
EBITDA $ (9,756)   $ (3,886)   151.1%

Note: Please refer to the "Non-GAAP Financial Measures" section of the press release.

XPO Logistics, Inc.
Consolidated Calculation of Diluted Weighted Shares Outstanding
       
  Three Months Ended
  March 31, 2013   March 31, 2012
Basic common stock outstanding 18,031,926   9,501,336
       
Potentially Dilutive Securities:      
Shares underlying the conversion 10,610,714   10,714,286
 of preferred stock to common stock      
Shares underlying the conversion 8,749,239   0
 of the convertible senior notes      
Shares underlying  warrants to 6,342,298   5,411,309
 purchase common stock      
Shares underlying  stock options 550,611   293,578
 to purchase common stock      
Shares underlying  restricted stock units 414,088   97,894
  26,666,950   16,517,067
       
Diluted weighted shares outstanding 44,698,876   26,018,403

 

Note: For dilution purposes, GAAP requires diluted shares to be reflected on a weighted average basis, which takes into account the portion of the period in which the diluted shares were outstanding. The table above reflects the weighted average diluted shares for the periods presented. The impact of this dilution was not reflected in the earnings per share calculations on the Condensed Consolidated Statements of Operations because the impact was anti-dilutive. The treasury method was used to determine the shares underlying the warrants to purchase common stock with an average closing market price of common stock of $17.15 per share and $14.14 per share for the three months ended March 31, 2013 and 2012, respectively.