XPO Logistics posts record-breaking revenue for Q1

Greenwich, Conn.-based freight transportation and global logistics services provider XPO Logistics posted its best-ever revenue number, in its first quarter earnings results, which were issued late yesterday.

Quarterly revenue—at $4.77 billion—was up 24% annually over the $3.86 billion, for the first quarter of 2020, and marked the highest revenue for any quarter in the company’s history. EBITDA was up 33%, to $433 million, topping estimates of $388 million, marking the third consecutive quarter it set an EBITDA record. Quarterly operating income—at $202 million—was more than double the $81 million recorded a year ago.

XPO said that the quarter’s gains were due largely to gains in technology, continued strength in e-commerce, and a faster-than-expected rebound in the industrial economy.

Quarterly XPO performance metrics:

total transportation revenue, at $2.99 billion, was up 17% annually, and the North American LTL group’s adjusted operating ratio was up 220 basis points to 84.3. North American truck brokerage revenue headed up 83% to $589 million, with net revenue up 132% to $110 million; and logistics revenue came in at $1.82 billion was up more than 20% annually, which XPO said was mainly due to 13% organic revenue growth, the acquisition of contract logistics operations in the U.K and Ireland, and a benefit from foreign currency conversion, with operating income, at $68 million, far ahead of last year’s $38 million   

“In the first quarter, we reported the highest revenue of any quarter in our history, appreciably outpacing a macro that’s recovering faster than expected,” said Brad Jacobs, chairman and chief executive officer of XPO Logistics, in a statement. “Our net income and adjusted EBITDA were both first quarter records, and we grew adjusted EPS by 112% year-over-year. Our truck brokerage business is continuing to outperform the market, powered by the growth of our XPO Connect digital platform. Our LTL business has strong momentum: our technology is expanding margin, and the recovery in the industrial economy is stimulating demand for our services.

In logistics, our record first quarter revenue of $1.82 billion was propelled by the ‘big three’ logistics tailwinds: e-commerce, outsourcing and warehouse automation. We’ve won a tremendous amount of logistics business in the first four months of this year, including a $1.8 billion contract with a longstanding customer that extends and expands our relationship through 2032. This is the largest contract in our company’s history.”

Jacobs said that XPO now expects to grow its 2021 adjusted EBITDA by 31% to 35% year-over-year to a range of $1.825 billion to $1.875 billion, with strong contributions from both of its business segments.

XPO also said things remain firmly on track with its plan to spin off its logistics segment in the second half of this year, with the segment to be named GXO Logistics and a tagline of “Logistics at full potential.”

In March, Jacobs said that the three letters that stand for the game-changing opportunities XPO is bringing to the table for customers, employees and shareholders, with a nod to its XPO heritage.

XPO officials pointed to how, with years of technology-focused investments being a core principle of its growth trajectory, the new GXO will be able to leverage various aspects of what it called the logistics industry’s predominant secular tailwinds, including: the growth in e-commerce and omnichannel retail; fast-growing customer demand for automation and digital capabilities; and a shift toward outsourcing supply chain services.

GXO Logistics will be led by Malcolm Wilson, XPO, CEO, Europe, whom will serve as CEO. Wilson previously said that the new company’s brand identity captures the qualities that make XPO an industry leader, pointing to the company's ability to deliver faster, leaner, smarter logistics for customers at lower cost, using advanced automation and data science. 

XPO also said in March that it filed an initial Form 10 registration statement confidentially with the Securities and Exchange Commission. The filing marks a significant milestone in the process of launching GXO as a publicly traded standalone company on the New York Stock Exchange, according to the company.

GXO will have around 93,000 employees and 885 locations in 27 countries, and the spokesman said staffing levels come down to how demand plays out.

“The reason for that—at [GXO]—is that we have a ton of e-commerce exposure, and that is what we do from a financial perspective,” he said. “One of the trends that we are noticing, in terms of secular tailwinds, is that large customers are coming to us more and more for our expertise in contract logistics, and the pandemic brought that to their attention, because they are seeing how crazy things can get and they need more visibility into their supply chains. And they are coming to us because they know we have leading positions and critical expertise. The other secular tailwind is that we are seeing increased demand for supply chain automation, and with so much macro uncertainty, our customers are looking to do more with less and as they optimize their cost structure, they are also seeing the additional benefits within our warehouses, with our staff practicing social distancing on both the forward and reverse logistics sides.”

What’s more, on the technology side, XPO said its plan is for (GXO) to have what it called a “perpetual license” for all of XPO’s software and technology that is has been building over the years, which would be purpose-built for its logistics business.

An XPO spokesman told LM that XPO is approaching GXO from a position of unprecedented strength in both its transportation business (XPO) and logistics business (GXO).

“In logistics (GXO), we won approximately $4 billion in new business during the first four months of the year, including the largest contract in the history of our logistics business (GXO) and the company as a whole from one of our long-standing customers, as well as an exciting new partnership with Apple in Indiana,” he said.