XPO Posts Q2 Profit on Record Revenue
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Lifted by the highest revenue of any quarter in its history, XPO Logistics Inc. swung its second-quarter bottom line to a profit from a loss in the year-ago period.
The company also promoted Ravi Tulsyan to chief financial officer from treasurer.
The Greenwich, Conn.-based trucking and logistics company on July 27 reported net income attributable to common shareholders of $156 million, or $1.38 a diluted share, for the three months ending June 30. That compared with a loss of $132 million, $1.45, during the same quarter a year earlier.
Tulsyan
Total revenue increased by 42.9% to $5 billion from $3.5 billion. The second-quarter revenue total beat a previous record set in the first quarter of this year.
XPO reported the results just as it gets ready to spin off its logistics business into a separate company called GXO Logistics. GXO’s shares are expected to start trading Aug. 2 on the New York Stock Exchange, the company said earlier in July.
The separation will create two independent public companies with different investment identities and service offerings, XPO has said. At inception, GXO will rank as one of the largest contract logistics companies in the world. XPO will continue as a provider of transportation services, primarily less-than-truckload transportation and truck brokerage.
“Every area of the business is showing strength,” Brad Jacobs, XPO’s CEO, said in a July 29 conference call with industry analysts. “Customers are back, volumes are there.”
The financial performance for both XPO’s transportation and logistics segments provides “a strong springboard for the planned spinoff next week,” Jacobs said.
Pre-spinoff, however, for Q2 2021 the XPO transportation segment posted revenue of $3.2 billion compared with $2.1 billion for the same period in 2020. Operating income for the segment soared to $255 million from a $15 million operating loss a year earlier.
XPO Logistics announces second quarter 2021 results: https://t.co/LzkIcvtqgk #Q22021 #Q2 #earnings #results — XPO Logistics, Inc. (@XPOLogistics) July 28, 2021
XPO’s logistics segment generated revenue of $1.9 billion for Q2 compared with $1.4 billion a year earlier. Logistics segment operating income swung to a gain of $71 million from a $43 million operating loss.
Going forward XPO plans to focus on lowering its debt to achieve an investment grade credit rating, build its truck brokerage business and invest in technology to improve profit margins, Jacobs said.
That includes an eventual role for autonomous trucking but the timing remains a question mark, he said.
“The compelling economics of autonomous trucking are extreme. It will take a huge amount of costs down,” Jacobs said.
A large part of XPO’s current strategy is reducing its debt by leveraging the spinoff of GXO.
As part of the transaction, GXO completed an offering of $800 million of long-term debt at an average interest rate of 2.2%. All but $100 million of the cash will go to XPO.
XPO will use those funds and another $400 million from equity offerings and toss in cash on hand to repay $1.5 billion in debt that carried interest rates of more than 6%. That will reduce XPO’s annual interest expense by $100 million.
As it splits in two, the company provided full-year financial guidance for both XPO and GXO.
XPO is expected to have adjusted EBITDA — a measure of cash flow — of $1.2 billion to $1.24 billion. It expects adjusted diluted earnings per share of $4.00 to $4.30 and net capital expenditures of $250 million to $275 million for the year.
GXO is forecast to have revenue of $7.5 billion to $7.7 billion and to post adjusted EBITDA of $605 million to $635 million. It will have net capital expenditures of $240 million to $250 million.
Jacobs said he is encouraged by the prospects for both companies.
“We are outperforming the market, we are taking share,” Jacobs said. “We have to watch the whole delta virus thing goes and see how that affects the world but for the time being things are rip-roaringly back.”
Tulsyan will replace CFO David Wyshner, who is leaving the company Sept. 2. Before joining XPO, Tulsyan was treasurer and a senior vice president for ADT Corp.
XPO Logistics ranks No. 2 on the Transport Topics Top 50 list of the largest logistics companies in North America and No. 3 on the Transport Topics Top 100 list of the largest for-hire carriers.
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