Ouch! XPO plunges in after-hour trade post-Q3 21 results

PRESS RELEASE 

XPO Logistics Announces Third Quarter 2021 Results

Reports highest revenue of any quarter in company history

Updates full year 2021 guidance based on higher-than-expected growth

Announces LTL network expansion of terminal capacity, trailer fleet and driver training in 2022

GREENWICH, Conn. — November 2, 2021 — XPO Logistics, Inc. (NYSE: XPO) today announced its financial results for the third quarter 2021. Revenue increased to $3.27 billion for the third quarter, compared with $2.68 billion for the same period in 2020. Net income from continuing operations attributable to common shareholders was $21 million for the third quarter, compared with $28 million for the same period in 2020. Operating income was $112 million for the third quarter, compared with $138 million for the same period in 2020. Income from continuing operations was $21 million, compared with $37 million in prior year quarter. Diluted earnings from continuing operations per share was $0.19 for the third quarter, compared with $0.27 for the same period in 2020.

Adjusted net income from continuing operations attributable to common shareholders, a non-GAAP financial measure, was $109 million for the third quarter, compared with $44 million for the same period in 2020. Adjusted diluted earnings from continuing operations per share, a non-GAAP financial measure, was $0.94 for the third quarter, compared with $0.42 for the same period in 2020.

Adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”), a nonGAAP financial measure, increased to $307 million for the third quarter, compared with $268 million for the same period in 2020.

For the third quarter 2021, the company generated $250 million of cash flow from operating activities of continuing operations and $185 million of free cash flow, a non-GAAP financial measure.

Reconciliations of non-GAAP financial measures used in this release are provided in the attached financial tables.

2021 Updated Guidance

On November 2, 2021, the company updated its full year 2021 financial targets(1), including a raise in fourth quarter adjusted EBITDA:

– Adjusted EBITDA of $300 million to $305 million generated in the fourth quarter, implying $1.228 billion to $1.233 billion of adjusted EBITDA for the full year, which increases the midpoint of the updated full year guidance to $1.231 billion — $16 million higher than the prior midpoint;

– Depreciation and amortization of $390 million to $395 million, excluding approximately $95 million of acquisition-related amortization expense, from a prior target of $385 million to $395 million;

– Interest expense(2) of approximately $200 million, unchanged; • Effective tax rate of 24% to 26%, from a prior target of 23% to 25%;

– Adjusted diluted EPS(3) of $4.15 to $4.25, from a prior target of $4.00 to $4.30; • Net capital expenditures of $250 million to $275 million, unchanged; and

– Free cash flow of $425 million to $475 million, from a prior target of $400 million to $450 million.

1 The company’s full year 2021 pro forma financial targets have been calculated as if the August 2021 spin-off of the logistics segment had been completed on January 1, 2021. Guidance assumes 116 million diluted shares outstanding at year-end, and assumes current macroeconomic trends continue and labor and equipment shortages don’t worsen.

2 Interest expense is presented on a pro forma basis; 2021 reported interest expense is expected to be approximately $230 million.

3 Adjusted diluted EPS, assuming reported interest expense of approximately $230 million, would be a range of $4.00 to $4.05.

CEO Comments Brad Jacobs, chairman and chief executive officer of XPO Logistics, said, “Company-wide we had an excellent third quarter, with record revenue and a solid beat on the bottom line. Our truck brokerage business had another phenomenal quarter, while our less-than-truckload results were mixed.

“In North American truck brokerage, every major metric was up year-over-year by large doubledigits. We grew third quarter gross and net revenue in truck brokerage by 62%, on a 37% increase in load count per day. Our top 20 customers increased their total volume with us by 45%, and our share of wallet is trending up with key customers. These gains are being driven by our massive brokered capacity, robust digital capabilities and customer trust in our experienced brokerage leaders. We’ve tripled the number of customers on our XPO Connect digital platform from a year ago, and carrier usage is up over 100%. More than 550,000 drivers have downloaded the app to date.

“In North American LTL, we had our strongest yield growth yet, up 6% excluding fuel year-over-year. However, our operating ratio was negatively impacted by our decision to continue insourcing purchased transportation in the midst of driver and equipment constraints. We took actions that are gaining rapid traction — our yield growth accelerated again in October, and our network is more balanced now than it was a few weeks ago. We’re still targeting at least $1 billion of adjusted EBITDA in LTL in 2022. And over the next 12 to 24 months, we plan to invest more capital to expand our North American LTL door count by approximately 6% in key metros, following the 264-door Chicago Heights terminal we just opened.”

Jacobs concluded, “We raised our 2021 guidance for full year adjusted EBITDA to $1.228 billion to $1.233 billion, including a fourth quarter adjusted EBITDA increase to $300 million to $305 million. 3 This reflects our third quarter results and our confidence in delivering a strong finish to the year across our business.”

– The full release can be read here.

– Other supporting material can be dowloaded here.

– The conference call with analysts will take place today at 8:30 AM EDT.

– Stock down 8% below $80 in after-hour trade; now read this: “XPO Logistics trades lower after EPS guidance falls short” (free reg.required).

– And this: “XPO’s Earnings Were Strong. The Stock Dropped Anyway.“