XPO Pursues Acquisitions
This story appears in the May 12 print edition of Transport Topics.
XPO Logistics continues to pursue acquisitions in its core brokerage and expedited freight businesses, and may branch out to contract logistics, as well, CEO Bradley Jacobs told Transport Topics.
“There are plenty of brokerage targets,” he said. “There are a few intermodal marketing companies that we are having conversations with. There are a lot of contract logistics companies for sale. We haven’t decided whether we want to get into that line of business.”
Jacobs spoke with TT after the company released first-quarter results showing a net loss that nearly doubled to $28.1 million, or 70 cents per share, from $14.5 million, or 85 cents. The company also reported $700,000 in earnings before interest, taxes, depreciation and amortization, or EBITDA, excluding one-time costs.
Revenue more than doubled to $282.4 million from $114 million as the Greenwich, Connecticut-based brokerage and third-party logistics company continued to build out its service network.
Its brokerage business had a loss before interest and taxes that rose slightly to $3.96 million, while revenue nearly tripled to $231.7 million.
The brokerage net revenue — after purchased transportation costs are subtracted — jumped to $44.4 million from $10 million. Margins improved to 13.8% from 12.9%, running counter to downward industry trends.
Jacobs also said that market conditions have loosened in the past three or four weeks from the extremely tight market that pushed up rates at the end of the first quarter.
“It is an interesting market after a pretty boring 2013,” he said. “It is unsure how this is going to play out for the rest of the year.”
The smaller expedited and freight forwarding units combined to boost revenue 33% to $53.3 million, and net revenue more than doubled to $14.1 million.
One-time first-quarter costs were related to factors such as expenses tied to the acquisition of Pacer International as well as depreciation, amortization and conversion of debt into stock. Corporate costs and interest expense totaled more than $31 million.
Costs associated with making the acquisition were incurred during the quarter, but the deal didn’t close until March 31, so there were no Pacer financial results included in the XPO release.
“There are significant opportunities for XPO to improve Pacer’s operations via cost and revenue synergies,” analyst Arthur Hatfield said in a report from Raymond James & Associates Inc. He noted XPO’s estimate that $15 million in costs could be reduced after the acquisition.
Hatfield also said XPO could save $30 million more if Pacer could reduce its percentage of empty intermodal moves to the industry average of about 25%.
Jacobs also outlined growth targets for XPO on a May 2 conference call, including $100 million in EBITDA this year and annual revenue of $7.5 billion by 2017, with $425 million in EBITDA.
