XPO announces Q4 and full-year 2022 results

Achieves fourth quarter tonnage growth year-over-year in North American LTL

The company reported a net loss from continuing operations attributable to common shareholders of $36 million for the fourth quarter 2022, or a diluted loss from continuing operations per share of $0.31, compared with net income from continuing operations attributable to common shareholders of $47 million, or diluted earnings from continuing operations per share of $0.40, for the same period in 2021. The fourth quarter 2022 net loss includes three impacts primarily related to the RXO spin-off completed in November: i) a $64 million non-cash goodwill impairment charge related to European Transportation, which became a new segment of XPO, requiring goodwill to be evaluated on a disaggregated basis; ii) $42 million of transaction and integration costs; and iii) $35 million of restructuring charges.

Adjusted net income from continuing operations attributable to common shareholders, a non-GAAP financial measure, increased to $113 million for the fourth quarter, compared with $74 million for the same period in 2021. Adjusted diluted earnings from continuing operations per share (“adjusted EPS”), a non-GAAP financial measure, was $0.98 for the fourth quarter, compared with $0.64 for the same period in 2021.

Adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”), a non-GAAP financial measure, increased to $262 million for the fourth quarter, compared with $190 million for the same period in 2021.

For the fourth quarter 2022, the company generated $196 million of cash flow from operating activities and $107 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.

CEO Comments

Mario Harik, chief executive officer of XPO, said, “In the fourth quarter, we reported solid revenue growth and strong year-over-year increases in adjusted EBITDA, adjusted EPS and free cash flow. Our North American LTL business achieved a 26% increase in operating income and a 20% increase in adjusted EBITDA. We’re pleased that we delivered over $1 billion of LTL adjusted EBITDA for our shareholders in 2022, exceeding our target.

“Our growth plan for LTL is to invest in capacity ahead of demand and earn market share by providing best-in-class service. In the fourth quarter, we grew tonnage and shipment count year-over-year at a time when the industry saw these metrics decline. Yield came in at the low end of our outlook, reflecting a strategic change in channel mix that we believe will be a tailwind for both volume and yield as freight demand improves. In January, our tonnage was up year-over-year and trended better than typical seasonality.”

Harik continued, “We’re excited by the strong trajectory we’ve created, and the tangible ways we’re strengthening our positioning. In LTL, our employee satisfaction was up sharply to the highest rating in more than a decade. In Europe, the business is continuing to perform above expectations. We’re confident that we’ll achieve our long-term LTL outlook and deliver superior shareholder value.”

Results by Business Segment

• North American Less-Than-Truckload (LTL): The segment generated revenue of $1.09 billion for the fourth quarter 2022, compared with $1.01 billion for the same period in 2021. Yield, excluding fuel, increased by 1.4% year-over-year, reflecting a strategic change in channel mix; and tonnage increased by 0.9%, driven by a 1.5% increase in shipment count.

Operating income for the segment was $172 million for the fourth quarter 2022, compared with $137 million for the same period in 2021. Adjusted EBITDA for the fourth quarter 2022 was $252 million, compared with $210 million for the same period in 2021. Adjusted EBITDA reflects a $55 million gain on the sale of real estate in the fourth quarter 2022, compared with a $35 million gain for the same period in 2021. Excluding real estate sales in both periods, LTL adjusted EBITDA grew year-over-year by 13%.

The fourth quarter 2022 operating ratio for North American LTL was 84.2%. Excluding real estate sales, the adjusted operating ratio improved by 60 basis points to 87.1%.

• European Transportation: Revenue for the segment was $738 million for the fourth quarter 2022, compared with $766 million for the same period in 2021. The year-over-year decrease in revenue was due to unfavorable foreign currency exchange. In constant currency, revenue in the quarter increased year-over-year by 9%.

Fourth quarter 2022 operating loss for the segment was $60 million, compared with an operating loss of $3 million for the same period in 2021. Adjusted EBITDA was $39 million for the fourth quarters in both 2022 and 2021. The fourth quarter operating loss includes a $64 million non-cash goodwill impairment charge related to a change in the company’s segment structure following the RXO spin-off. Prior to the spin-off, the European transportation business was a single reporting unit and goodwill was evaluated for impairment at that level. Following the spin-off, the European transportation business is comprised of four reporting units and impairment testing is required to be performed on a disaggregated basis for each of the new reporting units.

• Corporate: Corporate expense was $108 million for the fourth quarter 2022, compared with $68 million for the same period in 2021. Corporate adjusted EBITDA was an expense of $29 million for the fourth quarter 2022, compared with an expense of $59 million for the same period in 2021. The decrease in corporate adjusted EBITDA expense was due primarily to a $32 million reduction in SG&A expense as the company continued to rationalize overhead following the RXO spin-off.

Full Year 2022 Financial Results

For the full year 2022, the company reported total revenue of $7.7 billion, compared with $7.2 billion for 2021. Net income from continuing operations attributable to common shareholders was $184 million for 2022, compared with $96 million for 2021. Operating income was $377 million for 2022, compared with $312 million for 2021. Diluted earnings from continuing operations per share was $1.59 for 2022, compared with $0.83 for 2021.

Adjusted EBITDA for 2022 was $997 million, compared with $812 million for 2021. Adjusted net income from continuing operations attributable to common shareholders for the full year 2022 was $408 million, compared with $222 million for 2021. Adjusted EPS was $3.53 for 2022, compared with $1.94 for 2021.

Liquidity

As of December 31, 2022, the company had $930 million of total liquidity, including $460 million of cash and cash equivalents and approximately $470 million of borrowing capacity. On February 6, 2023, the company extended the maturity of its ABL facility by two years to April 2026.