XPO Logistics – Q&A with investors

About truck brokerage… all you need to need is here.

Margin

1. On brokerage, there was a 400-basis-point sequential contraction in net revenue margin. What would you attribute that to?

XPO: Some of that is related to seasonality — that typically results in some margin degradation from Q1 to Q2. Also, the cycle is maturing a bit. In Q1, we had tons of rail congestion, and freight that typically went by intermodal was moved by truckload instead. While the margin percentage was down, our total dollars are moving in the right direction.

We’re very focused on net revenue per load. Our net revenue per load was up versus last year, and last year was a good number. We had the best load growth we saw at any of the publicly reporting companies in brokerage, while generating very strong net revenue per load. Our load count was up 38%, and net revenue was up 47%. So, when you look at the combo of our volume and our profitability, we had a very good outcome. And that’s against what was actually a pretty good quarter for us in truck brokerage last year, despite all kinds of macro issues.

Market share

2. What is going on in brokerage? You guys are growing net revenue by nearly 50%. You’re doing well in the face of what is a tight gross margin profile situation. Are the incumbents losing?

XPO: The way the market is set up, if you have scale and technology, you’re going to do well. There are numerous, smaller players who don’t have the wherewithal to invest in tech. We’ve been able to leverage tech to procure capacity at good prices, and also drive more loads through the system without increasing heads at that same rate. Over the past five years, we’ve been able to grow loads at twice the rate of headcount.

Brokerage technology

3. You guys would put your brokerage technology platform up against any of these digital guys? Do you feel like you need any additional investment there?

XPO: We started investing heavily in brokerage tech in 2011 and we’ll continue to invest as we keep innovating. We have first-mover advantage, and our adoption rates validate that. Our customer usage nearly doubled year-over-year, and our 2 carrier usage is up 87%. The cumulative downloads of our Drive XPO app for truck drivers are at 475,000 right now, which is more than three times where it was a year ago.

Headcount

4. We’re very curious about revenue per employee in truck brokerage. How is that trending?

XPO: The best measure of brokerage productivity is loads per employee, which we improved year-over-year. Our headcount was up in Q2, and loads were up slightly more than headcount. Revenue per employee was up a lot, reflecting both productivity and higher market pricing. Importantly, net revenue per employee also rose, which reflects both the productivity of our salesforce and XPO Connect, and higher net revenue per load. Note that our year-over-year headcount growth will soon begin to moderate (…)

August 11, 2021

–> The full Q&A, including questions 5 to 42, can be downloaded here.