XPO Logistics grows revenue 5% in 2018

Greenwich, Connecticut, USA: For the full year 2018, the company reported revenue of $17.28bn, a 12.3% increase from $15.38bn for 2017. Organic revenue growth, which excludes the impacts of fuel and foreign exchange, was 9.3% year-over-year.

Net income attributable to common shareholders was $390m for 2018, compared with $312m for 2017. Diluted earnings per share was $2.88 for 2018, compared with $2.45 for 2017.The company missed its fourth quarter forecast for adjusted EBITDA, primarily due to headwinds in France and the UK and a loss of profit in the postal injection business with its largest customer.
 
“In the fourth quarter, we generated 12.4% organic revenue growth in our logistics segment, driven by global demand for e-commerce.@ Bradley Jacobs, chief executive, XPO Logistics, said.

“In North American transportation, we improved our less-than-truckload adjusted operating ratio by 260 basis points to a fourth quarter best of 87.3%. Better working capital management allowed us to outperform on cash in the quarter and surpass our cumulative 2017-2018 free cash flow target of $1bn,@ Jacobs said.

“We expect that our adjusted EBITDA growth this year will be in the range of 6% to 10%. This anticipates the impact of our largest customer substantially downsizing its business portfolio with us starting in the first quarter, as well as our more cautious view of Europe. We updated our target for free cash flow to align with our adjusted EBITDA forecast and our expectation of higher interest expense associated with our new share repurchase authorization. As we look ahead, we’re confident in our ability to create meaningful shareholder value.”
 
Fourth quarter revenue increased to $4.39bn, compared with $4.19bn for the same period in 2017. Net income attributable to common shareholders was $84m for the quarter, compared with $189m for the same period in 2017, which included a $173m net benefit primarily related to the enactment of US tax reform. Diluted earnings per share was $0.62 for the quarter, compared with $1.42 for the same period in 2017.
 
Adjusted net income attributable to common shareholders, a non-GAAP financial measure, was $98 million for the fourth quarter 2018, compared with $59 million for the same period in 2017. Adjusted diluted earnings per share, a non-GAAP financial measure, was $0.72 for the quarter, compared with $0.45 for the same period in 2017.
 
Adjusted net income attributable to common shareholders and adjusted diluted earnings per share for the fourth quarter 2018 exclude: $26 million, or $19 million after-tax, of litigation costs for independent contractor matters; a benefit of $24 million, or $18 million after-tax, related to a gain on the sale of an equity investment; $19 million, or $14 million after-tax, of restructuring costs, primarily severance; $8 million, or $6 million after-tax, of transaction, integration and rebranding costs; and a benefit of $7 million, or $5 million after-tax, of non-cash unrealized gains on foreign currency contracts. Reconciliations of non-GAAP financial measures used in this release are provided in the attached financial tables.
 
Adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”), a non-GAAP financial measure, increased to $380 million for the fourth quarter 2018, compared with $337 million for the same period in 2017. Adjusted EBITDA for the quarter excludes: $26 million of litigation costs for independent contractor matters; a $24 million benefit related to a gain on the sale of an equity investment; $19 million of restructuring costs, primarily severance; and $8 million of transaction, integration and rebranding costs.
 
For the fourth quarter 2018, the company generated cash flow from operations of $566 million and free cash flow, a non-GAAP financial measure, of $479 million. For full year 2018, the company generated cash flow from operations of $1.1 billion and free cash flow of $694 million, including an incremental benefit of approximately $200 million from trade receivables programs.
 
Logistics: The company’s logistics segment generated revenue of $1.59 billion for the quarter, a 10.0% increase from the same period in 2017. Organic revenue growth, which excludes the impacts of fuel and foreign exchange, was 12.4% year-over-year.

Segment revenue growth was led by rising demand for e-commerce logistics globally, and by the consumer packaged goods and food and beverage sectors in North America and the fashion sector in Europe.Operating income for the logistics segment decreased to $42 million, compared with $52 million for the same period in 2017. Adjusted EBITDA for the segment was $127 million, an increase of 11.4% from a year ago.

The decrease in operating income primarily reflects higher depreciation expense from prior capital investments associated with new business wins and higher restructuring costs to improve future profitability. The increase in adjusted EBITDA reflects the impact of a record 118 contract start-ups in 2018, including 28 in the fourth quarter.

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