XPO Logistics, Inc. (NYSE: XPO) today announced financial results for the third quarter of 2014. Total gross revenue increased 241.5% year-over-year to $662.5 million, and net revenue increased 402.7% to $175.1 million.  The company reported a net loss of $11.7 million for the quarter, compared with a net loss of $6.0 million for the same period in 2013. The net loss available to common shareholders was $12.4 million, or a loss of $0.23 per diluted share, compared with a net loss of $6.8 million, or a loss of $0.28 per diluted share, for the same period in 2013.  On an adjusted basis, the net loss available to common shareholders, a non-GAAP measure, was $7.3 million, or a loss of $0.13 per share for the quarter, excluding the items detailed below. This compares to an adjusted net loss available to common shareholders of $10.9 million, or a loss of $0.45 per share, in the third quarter of 2013. Adjusted net loss excludes a debt commitment fee of $9.8 million, or $6.1 million after-tax, related to the acquisition of New Breed, which closed on September 2, 2014; $10.0 million, or $7.1 million after-tax, of transaction and integration costs primarily related to the acquisitions of New Breed, Pacer and ACL; $846,000, or $524,000 after-tax, of charges related to the rebranding of the company's ground expedited and last mile businesses to XPO Express and XPO Last Mile, respectively; and a $8.6 million tax benefit related to the release of a valuation allowance against deferred tax assets. Reconciliations of adjusted net loss to common shareholders and adjusted EPS are provided in the attached financial tables. Adjusted earnings (loss) before interest, taxes, depreciation and amortization ("adjusted EBITDA"), a non-GAAP financial measure, improved to a gain of $24.2 million for the quarter, compared with a loss of $7.1 million for the same period in 2013. Adjusted EBITDA excludes $10.0 million of transaction and integration costs primarily related to the acquisitions of New Breed, Pacer and ACL, as well as $846,000 of rebranding costs; and includes 29 days of New Breed results, as well as $1.8 million of non-cash share-based compensation. A reconciliation of adjusted EBITDA to net income is provided in the attached financial table. The company had approximately $690 million of cash, including $10 million of restricted cash, as of September 30, 2014.
Reaffirms Full Year 2014 Financial Outlook
The company has reaffirmed its full year 2014 outlook for an annual revenue run rate of more than $3 billion by December 31, and an annual EBITDA run rate of at least $150 million by December 31.
CEO Comments
Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said, "The third quarter was transformational for us on many fronts. We raised $1.2 billion of capital to fund our growth. We generated a net revenue increase of more than 400%, reflecting the benefit of acquisitions and 48% organic growth. And we turned in our strongest adjusted EBITDA performance to date - $24 million - which reflects less than a month of owning New Breed, our largest acquisition so far. We delivered 58% organic growth in our freight brokerage business, and more than doubled the revenue run rate of our brokerage cold-starts in 12 months to $250 million. Most important, our entire organization is gelling into one integrated operation with a single-minded focus on customer service. "All of our acquisitions are on track and thriving. In September, we gained critical mass when we acquired New Breed. Our contract logistics business is off to a great start, ahead of plan in its first month out of the gate. In July, we acquired ACL, which recently had a big e-commerce customer win as part of XPO Last Mile. And in intermodal, our team is doing a very good job of meeting shipper requirements in a congested rail market. We've made significant gains in intermodal customer satisfaction and proprietary IT development, including our new Rail Optimizer system currently in beta test." Jacobs continued, "We've built a range of technology-based supply chain services that has grabbed the attention of shippers in North America. And we're currently in discussions with a number of attractive acquisition prospects in a very active pipeline. Our targets are primarily in our existing lines of business, including contract logistics, last mile and freight brokerage."
Third Quarter 2014 Results by Business Unit
  • Freight brokerage: The company's freight brokerage business generated total gross revenue of $518.7 million for the quarter, 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% organic revenue growth. Organic revenue growth included cold-starts, which are on an annualized revenue run rate of approximately $250 million, compared with $120 million a year ago. Excluding the margin benefit of the last mile and intermodal operations, freight brokerage net revenue margin improved year-over-year. Third quarter operating income improved to a gain of $2.0 million, compared with a loss of $3.4 million a year ago.
  • Contract logistics: The company's contract logistics business generated net revenue of $50.1 million and operating income of $4.5 million. The New Breed acquisition was completed on September 2, 2014.
  • Expedited transportation: The company's expedited transportation business generated total gross revenue of $36.5 million for the quarter, 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 recognizes revenue on a net basis. Third quarter operating income increased to $2.9 million, from $1.7 million a year ago.
  • Freight forwarding: The company's freight forwarding business generated total gross revenue of $59.7 million for the quarter, 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. Third quarter operating loss was $20,000, compared with a loss of $2.6 million a year ago.
  • Corporate: Corporate SG&A expense for the third quarter of 2014 was $23.0 million, compared with $14.2 million for the third quarter of 2013. Corporate SG&A for the third quarter of 2014 includes: $10.0 million, or $7.1 million after-tax, of transaction and integration costs related to acquisitions; $1.8 million, or $1.1 million after-tax, of non-cash share-based compensation; and $1.5 million, or $918,000 after-tax, of litigation costs.
Nine Months 2014 Financial Results
For the nine months ended September 30, 2014, the company reported total revenue of $1.5 billion, a 242.8% increase from the first nine months of 2013.  For the first nine months of 2014, net loss was $53.6 million, compared with net loss of $37.9 million for the same period last year. The net loss available to common shareholders was $55.8 million, or a loss of $1.13 per diluted share, compared with a net loss of $40.2 million, or a loss of $1.99 per diluted share, for the same period in 2013.  On an adjusted basis, the net loss available to common shareholders, a non-GAAP measure, was $28.7 million, or a loss of $0.58 per share for the first nine months of 2014, excluding the items detailed below. This compares to an adjusted net loss available to common shareholders of $32.6 million, or a loss of $1.61 per share, for the first nine months of 2013. Adjusted net loss for the first nine months of 2014 excludes $22.3 million, or $15.4 million after-tax, of transaction and integration costs related primarily to the acquisitions of New Breed, Pacer and ACL; debt commitment fees of $14.4 million, or $8.9 million after-tax, related to the acquisitions of New Breed and Pacer; $3.3 million, or $2.1 after-tax, of accelerated amortization of trade names; and $1.2 million, or $722,000 after-tax, of charges related to the rebranding of the company's ground expedited and last mile businesses. Reconciliations of adjusted net loss to common shareholders and adjusted EPS are provided in the attached financial tables. Adjusted EBITDA improved to a gain of $39.8 million for the first nine months of 2014, compared with a loss of $27.0 million for the same period in 2013. Adjusted EBITDA for the first nine months of 2014 excludes $22.3 million of transaction and integration costs related primarily to the acquisitions of New Breed, Pacer and ACL; $1.2 million of charges related to the rebranding of the company's ground expedited and last mile businesses; and includes $5.6 million and $3.4 million of non-cash share-based compensation for 2014 and 2013, respectively. A reconciliation of adjusted EBITDA to net income is provided in the attached financial table.
Expands Freight Brokerage Network with Cold-start and State Incentives
The company announced the further expansion of its freight brokerage network with the addition of a cold-start location in Denver, Colo., in the fourth quarter. The company also announced that it has been approved for tax incentives through the Kentucky Business Investment Program to create up to 88 jobs at its Newport, Ky., brokerage location; and has been approved by the Missouri Department of Economic Development for an economic incentive package to create up to 125 new jobs at its Kansas City, Mo., brokerage location.