XPO Logistics posts record-breaking fourth quarter earnings results

Another strong quarter brought another set of new company records, for Greenwich, Conn.-based truckload and less-than-truckload (LTL) services provider XPO Logistics in its fourth quarter earnings, which were issued this today.

Quarterly revenue—at $3.4 billion—increased 14% annually and was up 30% compared to 2010, representing the fourth straight quarter XPO’s revenue has set a new record, topping Wall Street estimates, of $3.269 billion. Adjusted earnings per share also set a new company record, at $1.34, and adjusted EBITDA, at $323 million, represented its highest fourth quarter level in company history, while posting a 15% annual gain, beating analysts’ estimates of $302 million, and setting a quarterly EBITDA record for the sixth quarter in a row. Full-year 2022 EBITDA guidance issued by XPO now stands at $1.36 billion-to-$1.4 billion.  

Quarterly XPO Logistics performance metrics:

• Brokerage and other services revenue, at $2.41 billion, was up 14.5% annually, with XPO pointing to the gain being driven by s significant increase in North American truck loads per day, paced by its XPO Connect digital platform, and also strength in its other brokerage services; and
• North American less-than-truckload (LTL) revenue, at $1.0 billion, topped the $914 million recorded for the same quarter last year by 10%, with the annual gain reflecting an increase in gross revenue per hundredweight, which XPO said was partially offset by a decline in average weight per day

“Our company delivered a strong fourth quarter finish to a year of solid growth,” said XPO Logistics Chairman and CEO Brad Jacobs in a statement. “We reported the highest revenue of any quarter in our history, and generated adjusted EBITDA that exceeded our guidance for both the quarter and the year. In North American LTL, the operating ratio degradation we saw last quarter bottomed out in October with the launch of our action plan. This created immediate momentum—we reduced the year-over-year operating ratio erosion throughout the quarter and significantly improved our service metrics. We also grew yield by a record 11% ex fuel, and yield remained strong in January. Given our traction with LTL volume and yield, we expect our 2022 adjusted operating ratio to inflect to year-over-year improvement mid-year.”

Jacobs added that XPO’s North American truck brokerage business is well ahead of industry growth levels, due to the aforementioned XPO Connect digital brokerage platform.

“This technology was a major tailwind behind the 29% load growth we achieved in 2021 year-over-year, including 35% load growth from our top 20 customers,” he said. “In the fourth quarter, 70% of our brokerage orders were created or covered digitally. We expect to continue to deliver double-digit volume growth in North American truck brokerage in 2022 and going forward.”

XPO’s Chief Investor Relations Officer Tavio Headley told LM that in looking back at the fourth quarter, coupled with XPO beating expectations and issuing strong 2022 guidance, he observed that the company’s truck brokerage business performed extremely well, as it has for several quarters. And on the LTL side, he said that the company’s LTL five-point action plan has also been working very well.

“What we saw from an operational standpoint is as we went through the quarter, we gained momentum on a slew of metrics and that momentum carried over into January,” he said.

Addressing LTL, Headley observed that quarterly yield, excluding fuel, was up 11% annually, representing its highest annual quarterly growth rate, going back to when it acquired Con-way Freight in 2015, to launch its LTL operations, nearly doubling the previous record set in the third quarter. The fourth quarter LTL operating ratio, excluding real estate, came in at 87.5%, a degradation of 300 basis points annually.

“When you look at our [LTL] OR performance year-over-year, it got better each month through the quarter,” he said. “The October year-over-year change marked the low point and then December marked the best month in the quarter for year-over-year OR. When I think about how that translates into 2022, we will still see some degradation in the first quarter, but we expect to inflect to year-over-year OR improvement by mid-year. On a full-year basis, we expect year-over-year operating ratio improvement of more than 100 basis points for the full year. We are clearly turning that corner.”

When XPO implemented its five-point LTL action plan in October 2021, within weeks of the implementation, Headley said XPO saw significant improvements in network fluidity, on-time transit, yield, employee satisfaction, and customer satisfaction. And, in terms of additional capacity, he said XPO is on track to add about 900 net new doors by the end of 2023, a 6% increase over current levels.

Looking at truckload brokerage, XPO saw loads rise 22% annually, with net revenue up 10%, topping a very strong fourth quarter of 2020.

“Part of [the growth] is the capacity environment is still extremely tight,” said Headley. “What that ultimately means is our customers are desperate for capacity. They know from working with us over the past few years that we have access to massive capacity. When you go on to our XPO Connect platform, we have about 98,000 carriers on it. It is not just that we have thousands and thousands of carriers signing up to do business on the platform and leaving. These are carriers that are coming back again and again to use the platform, because they are finding what they want, and what the carriers want is freight.”

Citing an XPO internal statistic, he said that 79% of carriers that do business on XPO Connect come back and within 30 days, the carriers are again doing business on the platform. And he added that in the fourth quarter, 70% of XPO’s brokerage loads were created or covered digitally, speaking to the tool’s automation capabilities, setting another record, up from the third quarter’s 67% rate.

“We like seeing those adoption trends and how they are helping our salespeople be more productive,” he said. “We are covering a lot more volume with fewer people than we were, say, five years ago. The outlook for this year is also extremely strong.”

When asked about the impact of inflation as it related to XPO’s customers, Headley described it as significant, not just in the U.S. but also in Europe.

“As a result of that, our customers are coming to us and asking for help, because we have access to these digital tools…both on the truckload brokerage side and on the LTL side as well,” he said. “For LTL, with customers coming to us, we moved 18 billion tons of freight for more than 25,000 LTL customers. By being able to do that digitally and much faster, that is helping them offset pressure in their organizations. Inflation can actually be a positive for companies that are in industries that have that pricing power. What we are seeing across our business lines and geographies we are in is that, in our business, we are seeing extremely strong pricing.”