XPO Reports It Is on Course to Hit $500 Million in Revenue
This story appears in the Aug. 13 print edition of Transport Topics. Click here to subscribe today.
XPO Logistics is on course to reach $500 million in annual revenue by year-end, buoyed by the recent purchase of Kelron Logistics, which will add more than $100 million annually to sales, said Bradley Jacobs, XPO’s chief executive officer.
XPO intends to generate $250 million of that annual revenue rate through acquisitions and an equal amount from its existing businesses and new office locations, Jacobs told Transport Topics on Aug. 6.
Jacobs, who has targeted a multibillion dollar freight brokerage business, said that XPO’s $8 million purchase of Kelron, Mississauga, Ontario, added a company that could be “extremely lucrative” when its profit margins are improved.
“We need to purchase transportation [at Kelron] more efficiently,” Jacobs said.
“They are going to be able to price their freight more effectively,” he said, by using technology that maximizes margins instead of relying on what he termed a “seat of the pants approach” that many brokers use.
The Kelron acquisition, the second this year by XPO, generates 40% of its business on U.S.-Canada freight, 40% within the United States and the balance in Canada.
Earlier this year, XPO purchased Continental Freight Services, a Columbia, S.C., company, for $3.4 million. The combined revenue of the two purchased companies is $122 million annually, taking XPO about halfway to its revenue increase through acquisitions.
Jacobs, who founded the equipment supply firm United Rentals and left that business in 2007, made his entry into brokerage by purchasing Express-1 Expedited Solutions and infusing $150 million into the company to support the expansion effort.
XPO last week also reported second-quarter loss of $5.2 million, or 34 cents per share, compared with a profit of $914,000, or 11 cents, a year earlier. Revenue rose 24% to $54.5 million.
The results were hurt by an increase in selling and administrative costs to $11.8 million from $5.5 million as the company adds employees at an operations center in North Carolina and opens new offices.
During the quarter, new locations opened in Alabama, California, Florida, Illinois and New Jersey.
“While our investments in infrastructure affect our earnings in the short term, they are critical to our plan for growth,” Jacobs said. “We’re transforming the company to create significant value over time.”
During the quarter, the gross margin, which reflects revenue less the cost of purchased transportation, was 15.5% of revenue, compared with 16.2% in the year-earlier quarter.
XPO’s statement said the gross margin declined in part because of lower-profit freight moved at newly opened offices.
“We are starting to see a strong improvement in operations,” Jacobs said, noting that revenue at the truck brokerage unit more than doubled to $13.9 million and rose more than 10% at the expedited freight business to $25.7 million.
The international freight forwarding subsidiary also improved, he said, posting 4.7% higher revenue of $16.5 million. It was the first year-over-year revenue growth in more than a year at the freight forwarding unit, he said.
