Press Release

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XPO Logistics Announces Second Quarter 2018 Results

  • Reports second quarter records for revenue, net income, adjusted EBITDA, cash flow from operations and free cash flow
  • Grows net income by 178% and adjusted EBITDA by 18% year-over-year
  • Closes $2.1 billion of new business in the first six months

XPO Logistics, Inc. (NYSE: XPO) today announced financial results for the second quarter 2018. Revenue increased 16.0% year-over-year to $4.36 billion. Net income attributable to common shareholders was $137.5 million for the quarter, compared with net income attributable to common shareholders of $47.6 million for the same period in 2017. Earnings per diluted share was $1.03 for the quarter, compared with $0.38 for the same period in 2017.

Adjusted net income attributable to common shareholders, a non-GAAP financial measure, was $131.8 million for the quarter, compared with $75.0 million for the same period in 2017. Adjusted earnings per diluted share, a non-GAAP financial measure, was $0.98 for the quarter, compared with $0.60 for the same period in 2017. Adjusted net income attributable to common shareholders and adjusted earnings per diluted share for the second quarter 2018 exclude: a $15.7 million benefit, or $11.5 million after-tax, of non-cash unrealized gains on foreign currency contracts; and $7.8 million, or $5.8 million after-tax, of integration and rebranding costs. 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 $436.7 million for the second quarter 2018, excluding integration and rebranding costs of $7.8 million. This compared with $370.8 million of adjusted EBITDA for the same period in 2017.

For the second quarter 2018, the company generated $267.4 million of cash flow from operations and $192.9 million of free cash flow.

Reaffirms Financial Targets

The company reaffirmed its full year 2018 target for adjusted EBITDA of at least $1.6 billion, and 2017–2018 target for cumulative free cash flow of approximately $1 billion.

CEO Comments

Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said, “Our strong second quarter performance was highlighted by record results for revenue, net income, adjusted EBITDA, cash flow from operations and free cash flow. We grew profitability faster than revenue, with a 178% increase in net income and an 18% increase in adjusted EBITDA on organic revenue growth of 11%.

“In logistics, we implemented a record 37 customer start-ups in three months — and once again, the big driver was e-commerce. In transportation, we increased freight brokerage net revenue by 46% with a lower headcount. North American last mile and European transport were also standouts. In our North American less-than-truckload business, we achieved the best adjusted operating ratio in 30 years at 84.3%.”

Jacobs continued, “Our expanded sales force signed $2.1 billion of new business this year through June. We have innovations underway in every corner of the company. They include the ramp-up of our XPO Direct distribution network, the build-out of our digital freight marketplace, the expansion of our last mile footprint, and the deployment of dynamic analytics for workforce planning. These are secular growth drivers that create sustainable value for our customers and shareholders.”

Second Quarter 2018 Results by Segment

  • Transportation: The company's transportation segment generated revenue of $2.89 billion for the quarter, a 14.5% 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. A revenue benefit of 2.2% came from favorable foreign exchange rates.

Operating income for the transportation segment increased to $205.4 million in the quarter, compared with $165.0 million for the same period in 2017. Adjusted EBITDA for the segment improved to $335.1 million, an increase of 13.7% from a year ago. The increases in operating income and adjusted EBITDA primarily were due to revenue growth and were broad-based across the segment, led by improved profitability in freight brokerage and last mile in North America, and dedicated truckload and less-than-truckload in Europe. Within the North American less-than-truckload unit, the operating ratio was 85.9%. The adjusted operating ratio was 84.3%, an improvement from 84.6% for the same period in 2017.

  • Logistics: The company's logistics segment generated revenue of $1.51 billion for the quarter, a 19.1% increase from the same period in 2017. Segment revenue growth was led by growing demand for e-commerce logistics globally, as well as by the consumer packaged goods and technology sectors in North America and the fashion sector in Europe. A revenue benefit of 4.7% came from favorable foreign exchange rates.

Operating income for the logistics segment increased to $67.3 million, compared with $49.4 million for the same period in 2017. Adjusted EBITDA for the segment improved to $134.0 million, an increase of 20.6% from a year ago. The increases in operating income and adjusted EBITDA primarily were due to revenue growth and site productivity improvements, partially offset by higher direct operating costs related to a record number of quarterly contract startups: 19 in North America and 18 in Europe.

  • Corporate: Corporate operating expense was $44.7 million for the quarter, compared with $39.3 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.

Six Months 2018 Financial Results

For the six months ended June 30, 2018, the company reported total revenue of $8.56 billion, a 17.2% increase from the same period in 2017. Net income attributable to common shareholders was $204.4 million for the first six months of 2018, compared with $67.1 million for the same period in 2017. Earnings per diluted share was $1.53 for the first six months of 2018, compared with $0.54 for the same period in 2017.

Adjusted net income attributable to common shareholders, a non-GAAP measure, was $212.7 million for the first six months of 2018, compared with $112.6 million for the same period in 2017. Adjusted earnings per diluted share, a non-GAAP financial measure, was $1.59 for the first six months of 2018, compared with $0.90 for the same period in 2017. Adjusted net income attributable to common shareholders and adjusted earnings per diluted share for the first six months of 2018 exclude $15.0 million, or $11.0 million after-tax, of integration and rebranding costs; a benefit of $12.2 million, or $9.0 million after-tax, from non-cash unrealized gains on foreign currency contracts; and $10.3 million, or $7.5 million after-tax, of debt extinguishment costs related to the refinancing of an existing term loan.

Adjusted EBITDA for the first six months of 2018, a non-GAAP measure, improved to $766.9 million, compared with $660.8 million for the same period in 2017. Adjusted EBITDA for the first six months of 2018 excludes $15.0 million of integration and rebranding costs.

Conference Call

The company will hold a conference call on Thursday, August 2, 2018, at 8:30 a.m. Eastern Time. Participants can call toll-free (from U.S./Canada) 1-877-269-7756; international callers dial +1-201-689-7817. A live webcast of the conference will be available on the investor relations area of the company’s website, www.xpo.com/investors. The conference will be archived until September 2, 2018. To access the replay by phone, call toll-free (from U.S./Canada) 1-877-660-6853; international callers dial +1-201-612-7415. Use participant passcode 13681035.

Non-GAAP Financial Measures

As required by the rules of the Securities and Exchange Commission ("SEC"), we provide reconciliations of the non-GAAP financial measures contained in this press release to the most directly comparable measure under GAAP, which are set forth in the financial tables attached to this document. This document contains the following non-GAAP financial measures: earnings before interest, taxes, depreciation and amortization ("EBITDA") and adjusted EBITDA for the three and six-month periods ended June 30, 2018 and 2017, on a consolidated basis and for our transportation and logistics segments; free cash flow for the three and six-month periods ended June 30, 2018 and 2017; adjusted net income attributable to common shareholders and adjusted earnings per share (basic and diluted) ("adjusted EPS") for the three and six-month periods ended June 30, 2018 and 2017; net revenue for the three and six-month periods ended June 30, 2018 and 2017 for our transportation and logistics segments and corporate and intersegment eliminations; adjusted operating income for our North American less-than-truckload business for the three and six-month periods ended June 30, 2018 and 2017; and organic revenue for the three-month periods ended June 30, 2018 and 2017, on a consolidated basis.

We believe that the above adjusted financial measures facilitate analysis of our ongoing business operations because they exclude items that may not be reflective of, or are unrelated to, XPO and its business segments' core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses. Other companies may calculate these non-GAAP financial measures differently, and therefore our measures may not be comparable to similarly titled measures of other companies. Items excluded from such non-GAAP financial measures are significant and necessary components of the operations of our business, and, therefore, such measures should only be used as supplemental measures of our operating performance.

Adjusted EBITDA, adjusted net income attributable to common shareholders and adjusted EPS include adjustments for acquisition costs and related integration, transformation and rebranding initiatives. Transaction and integration adjustments are generally incremental costs that result from an actual or planned acquisition and include transaction costs, restructuring costs, acquisition and integration consulting fees, internal salaries and wages (to the extent the individuals are assigned full-time to integration and transformation activities) and certain costs related to integrating and converging IT systems. Rebranding adjustments primarily relate to the rebranding of the XPO Logistics name on our truck fleet and buildings. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and evaluating XPO's and each business segment's ongoing performance.

We believe that free cash flow is an important measure of our ability to repay maturing debt or fund other uses of capital that we believe will enhance stockholder value. We believe that EBITDA and adjusted EBITDA improve comparability from period to period by removing the impact of our capital structure (interest and financing expenses), asset base (depreciation and amortization), tax impacts and other adjustments as set out in the attached tables that management has determined are not reflective of normalized operating activities.

We believe that adjusted net income attributable to common shareholders and adjusted EPS improve the comparability of our operating results from period to period by removing the impact of certain costs and gains that management has determined are not reflective of our core operating activities.  We believe that net revenue improves the comparability of our operating results from period to period by removing the cost of transportation and services, in particular the cost of fuel, incurred in the reporting period as set out in the attached tables. We believe that adjusted operating income for our North American less-than-truckload business improves the comparability of our operating results from period to period by removing the impact of certain transaction, integration and rebranding costs and amortization and depreciation expenses incurred in the reporting period as set out in the attached tables. We believe that organic revenue is an important measure because it excludes the impact of the following items: foreign currency exchange rate fluctuations and fuel surcharges.

With respect to our 2018 financial target of adjusted EBITDA and our 2017-2018 cumulative target for free cash flow, each of which is a non-GAAP measure, a reconciliation of the non-GAAP measure to the corresponding GAAP measure is not available without unreasonable effort due to the variability and complexity of the reconciling items described below that we exclude from the non-GAAP target measure. The variability of these items may have a significant impact on our future GAAP financial results and, as a result, we are unable to prepare the forward-looking balance sheet, statement of income and statement of cash flow, prepared in accordance with GAAP that would be required to produce such a reconciliation.

Forward-looking Statements

This document 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 our financial targets for our consolidated adjusted EBITDA and free cash flow. 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," "trajectory" 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 the risks discussed in our filings with the SEC and the following: economic conditions generally; competition and pricing pressures; our ability to align our investments in capital assets, including equipment, service centers and warehouses, to our customers' demands; our ability to successfully integrate and realize anticipated synergies, cost savings and profit improvement opportunities with respect to acquired companies; our ability to develop and implement suitable information technology systems and prevent failures in or breaches of such systems; our substantial indebtedness; our ability to raise debt and equity capital; our ability to maintain positive relationships with our network of third-party transportation providers; our ability to attract and retain qualified drivers; litigation, including litigation related to alleged misclassification of independent contractors; labor matters, including our ability to manage our subcontractors, and risks associated with labor disputes at our customers and efforts by labor organizations to organize our employees; risks associated with our self-insured claims; risks associated with defined benefit plans for our current and former employees; fluctuations in currency exchange rates; fluctuations in fixed and floating interest rates; our ability to execute our growth strategy through acquisitions; fuel price and fuel surcharge changes; issues related to our intellectual property rights; governmental regulation, including trade compliance laws; and governmental or political actions, including the United Kingdom's likely exit from the European Union. All forward-looking statements set forth in this document 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 document 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, except to the extent required by law.

 

Condensed Consolidated Statements of Operations

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Cash Flows

Transportation Summary Financial Table

Transportation Key Data by Service Offering

NA LTL Summary Data Table

NA LTL Adjusted Operating Ratio

Logistics Summary Financial Table

Logistics Key Data by Geography

XPO Corporate Summary of Sales, General and Administrative Expenses

Intersegment Eliminations Summary Financial Table

Consolidated Reconciliation of Net Income to Adjusted EBITDA

Consolidated Reconciliation of GAAP Net Income and Net Income Per Share

Reconciliation of Cash Flows From Operating Activities to Free Cash Flow

Reconciliation of GAAP Revenue to Organic Revenue

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Media Contact

Erin Kurtz
+1 203-489-1586
erin.kurtz@xpo.com

Investor Contact

Tavio Headley
+1 203-930-1602
tavio.headley@xpo.com

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