CORPORATE FORTUNES

XPO Logistics Announces Fourth Quarter And Full Year 2020 Results

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By Godson Umejiego, Correspondent USA

XPO Logistics, Inc. has announced its financial results for the fourth quarter 2020. Revenue increased to US$4.67 billion, compared with US$4.14 billion for the fourth quarter 2019. Net income attributable to common shareholders was US$93 million, compared with US$96 million for the fourth quarter 2019. Operating income was US$228 million, compared with US$202 million for the fourth quarter 2019. Diluted earnings per share was US$0.91, compared with US$0.93 for the fourth quarter 2019.

Adjusted net income attributable to common shareholders, a non-GAAP financial measure, was US$121 million for the fourth quarter 2020, compared with US$115 million for the same period in 2019. Adjusted diluted earnings per share, a non-GAAP financial measure, was US$1.19 for the fourth quarter 2020, compared with US$1.12 for the same period in 2019.

Adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”), a non-GAAP financial measure, was US$449 million for the fourth quarter 2020, compared with US$432 million for the same period in 2019.

For the fourth quarter 2020, the company generated US$193 million of cash flow from operations and US$91 million of free cash flow, a non-GAAP financial measure. For the full year 2020, the company generated cash flow from operations of US$885 million and free cash flow of US$554 million.

Reconciliations of non-GAAP financial measures used in this release are provided in the attached financial tables.

2021 Guidance

The company issued the following full-year 2021 targets:

  • Adjusted EBITDA of US$1.725 billion to US$1.8 billion, an increase of 24 per cent to 29 per cent year-over-year;
  • Depreciation and amortization of US$780 million to US$800 million;
  • Interest expense of US$275 million to US$285 million;
  • Effective tax rate of 24 per cent to 26 per cent; and
  • Adjusted diluted EPS of $5.10 to $5.85, excluding amortization of acquisition-related intangible assets.*

With respect to 2021 cash flows, the company issued the following targets:

  • Gross capital expenditures of US$625 million to US$675 million;
  • Net capital expenditures of US$475 million to US$525 million; and
  • Free cash flow of US$600 million to US$700 million.

* The company will present adjusted net income and adjusted diluted EPS excluding the amortization of acquisition-related intangible assets, starting with 2021 reporting. In 2021, amortization of acquisition-related intangible assets is estimated to be US$145 million.

The company’s 2021 guidance excludes impacts associated with the planned spin-off of the logistics segment previously announced; and assumes 113 million diluted shares outstanding.

Chairman and chief executive officer of XPO Logistics, Brad Jacobs said, “Our fourth quarter revenue, earnings and free cash flow were all much better than expected. The investments we made in our people and technology in 2020 helped us to generate the highest revenue of any quarter in our history. We also doubled our truck brokerage net revenue year-over-year, and we improved our fourth quarter LTL adjusted operating ratio, excluding real estate gains, for the sixth straight year. The industry’s biggest tailwinds are at our back in 2021 — e-commerce fulfillment and returns, supply chain outsourcing and fast-growing customer demand for our digital capabilities.”

Jacobs continued, “Our 2021 guidance anticipates adjusted EBITDA of US$1.725 billion to US$1.8 billion, reflecting year-over-year growth of 24 per cent to 29 per cent in each of our segments.”

Liquidity

As of December 31, 2020, the company had access to approximately US$3.1 billion of total liquidity, including US$2.1 billion of cash and cash equivalents and US$1.0 billion of available borrowing capacity.

Fourth Quarter 2020 Results by Segment

Transportation: The company’s transportation segment generated revenue of US$2.94 billion for the fourth quarter 2020, compared with US$2.60 billion for the same period in 2019.

Operating income for the transportation segment was US$200 million for the fourth quarter 2020, compared with US$173 million for the same period in 2019. Adjusted EBITDA for the segment was US$331 million for the quarter, compared with US$306 million for the same period in 2019. The increases in operating income and adjusted EBITDA were related primarily to higher profitability in truck brokerage and in LTL, with gains from LTL real estate sales excluded. Segment operating income and adjusted EBITDA for the quarter include a US$6 million impact from COVID-related costs.

In North American less-than-truckload (LTL), the fourth quarter operating ratio was 84.9 per cent and the adjusted operating ratio was 83.0 per cent, both of which include the impact of US$5 million of COVID-related costs. Excluding gains from sales of real estate, LTL adjusted operating ratio improved 130 basis points year-over-year to 84.5 per cent.

In North American truck brokerage, revenue increased by 75.5 per cent year-over-year to US$616 million for the fourth quarter 2020, compared with US$351 million for the same period in 2019. Net revenue increased 110.0 per cent year-over-year to US$115 million for the quarter, compared with US$54 million for the same period in 2019.

Logistics: The company’s logistics segment generated revenue of US$1.76 billion for the fourth quarter 2020, compared with US$1.56 billion for the same period in 2019. Segment revenue growth was led by strong demand from e-commerce and other consumer-related verticals, partially offset by COVID-related impacts.

Logistics segment operating income was US$68 million for the fourth quarter 2020, compared with US$73 million for the same period in 2019. Adjusted EBITDA was US$152 million for the quarter, compared with US$163 million for the same period in 2019. The decreases in operating income and adjusted EBITDA were primarily related to a spike in labor costs due to record e-commerce peak demand, as well as start-up costs for new contracts won, partially offset by higher revenue from contracts won in prior periods. Segment operating income and adjusted EBITDA for the fourth quarter 2020 include a US$4 million impact from COVID-related costs.

Corporate: Corporate expense was US$40 million for the fourth quarter 2020, compared with US$44 million for the same period in 2019. Adjusted EBITDA was an expense of US$34 million for the fourth quarter, compared with an expense of US$37 million for the same period in 2019.

Recent Developments

In December 2020, the company announced that it plans to pursue a spin-off of its logistics segment as a separate publicly traded company. If the transaction is completed as planned, it will create two, pure-play industry leaders: the spun-off company will be the second largest contract logistics provider in the world, and the remaining company will be a global provider of less-than-truckload and truck brokerage transportation services. There can be no assurance that a spin-off will occur or, if one does occur, of its terms or timing.

In January 2021, the company completed the previously announced acquisition of the majority of the contract logistics operations of Kuehne + Nagel in the UK and Ireland. The transaction expanded XPO’s logistics network in the UK and Ireland to 248 locations and approximately 31,000 employees.

In January 2021, the company redeemed US$1.2 billion of Senior Notes due 2022, using available cash, at a price of 100 per cent of the principal amount plus accrued and unpaid interest.

Full Year 2020 Financial Results

For the full year 2020, the company reported total revenue of US$16.25 billion, compared with US$16.65 billion for 2019. Net income attributable to common shareholders was US$79 million for 2020, compared with US$379 million for 2019. Operating income was US$391 million for 2020, compared with US$821 million for 2019. Diluted earnings per share was US$0.78 for 2020, compared with US$3.57 for 2019. Adjusted EBITDA for the full year 2020 was US$1.4 billion, compared with US$1.7 billion for 2019.

Fourth quarter and full-year 2020 net income attributable to common shareholders and diluted EPS include a charge of US$22 million related to the conversion of 69,445 shares of the company’s outstanding Series A preferred stock into common stock in the fourth quarter. The conversion charge reduces net income attributable to common shareholders for EPS purposes but does not affect net income.

Conference Call

The company will hold a conference call on Thursday, February 11, 2021, at 8:30 a.m. Eastern Time. Participants can call toll-free (from US/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, xpo.com/investors.

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