XPO Logistics announces fourth quarter and full year 2020 results

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

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

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

For the fourth quarter 2020, the company generated $193 million of cash flow from operations and $91 million of free cash flow, a non-GAAP financial measure. For the full year 2020, the company generated cash flow from operations of $885 million and free cash flow of $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:
With respect to 2021 cash flows, the company issued the following targets:
* 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 $145 million.

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

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

CEO Comments

Brad Jacobs, chairman and chief executive officer of XPO Logistics, 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 $1.725 billion to $1.8 billion, reflecting year-over-year growth of 24% to 29% in each of our segments.”

Liquidity

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

Fourth Quarter 2020 Results by Segment

• Transportation: The company’s transportation segment generated revenue of $2.94 billion for the fourth quarter 2020, compared with $2.60 billion for the same period in 2019.
• Operating income for the transportation segment was $200 million for the fourth quarter 2020, compared with $173 million for the same period in 2019. Adjusted EBITDA for the segment was $331 million for the quarter, compared with $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 $6 million impact from COVID-related costs.
• In North American less-than-truckload (LTL), the fourth quarter operating ratio was 84.9% and the adjusted operating ratio was 83.0%, both of which include the impact of $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%.
• In North American truck brokerage, revenue increased by 75.5% year-over-year to $616 million for the fourth quarter 2020, compared with $351 million for the same period in 2019. Net revenue increased 110.0% year-over-year to $115 million for the quarter, compared with $54 million for the same period in 2019.
• Logistics: The company’s logistics segment generated revenue of $1.76 billion for the fourth quarter 2020, compared with $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 $68 million for the fourth quarter 2020, compared with $73 million for the same period in 2019. Adjusted EBITDA was $152 million for the quarter, compared with $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 $4 million impact from COVID-related costs.
• Corporate: Corporate expense was $40 million for the fourth quarter 2020, compared with $44 million for the same period in 2019. Adjusted EBITDA was an expense of $34 million for the fourth quarter, compared with an expense of $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 $1.2 billion of Senior Notes due 2022, using available cash, at a price of 100% 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 $16.25 billion, compared with $16.65 billion for 2019. Net income attributable to common shareholders was $79 million for 2020, compared with $379 million for 2019. Operating income was $391 million for 2020, compared with $821 million for 2019. Diluted earnings per share was $0.78 for 2020, compared with $3.57 for 2019. Adjusted EBITDA for the full year 2020 was $1.4 billion, compared with $1.7 billion for 2019.

Fourth quarter and full-year 2020 net income attributable to common shareholders and diluted EPS include a charge of $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.