XPO Logistics, Inc. (NYSE: XPO), a leading provider of freight
transportation services, has released the following results in
advance of its third quarter 2022 earnings announcement and
conference call.
For the third quarter 2022, the company expects to report:
- Revenue of approximately $3.04 billion
- Operating income of $181 million to $185 million
- Earnings before interest, taxes, depreciation and amortization
(“adjusted EBITDA”), a non-GAAP financial measure, of $348 million
to $352 million
Pro forma for the planned spin-off of RXO, the company expects
net leverage, expressed as net debt divided by trailing 12-month
adjusted EBITDA, to be approximately 2.0X as of December 31,
2022.
For its North American less-than-truckload (LTL) segment, the
company expects third quarter 2022 results to include:
- A year-over-year increase in revenue per hundredweight,
excluding fuel, of approximately 7%
- A year-over-year decrease in weight per day of approximately
2.9% for the full quarter, with weight per day improving each month
and inflecting positive year-over-year in September
- An operating ratio of approximately 85.1%
- An adjusted operating ratio, a non-GAAP financial measure, of
82.9% or better, reflecting at least 150 basis points of
improvement from the prior year’s third quarter, excluding gains on
real estate sales in both periods; there were no gains on real
estate recorded in the third quarter of 2022
The company has reiterated its expectation that at least $1
billion of full year 2022 adjusted EBITDA will be generated by
North American LTL, including up to $50 million of gains on sales
of real estate in the fourth quarter.
The company now expects to achieve a year-over-year improvement
of 50 to 100 basis points in its North American LTL adjusted
operating ratio for full year 2022, excluding gains on sales of
real estate; this compares with its prior target of at least 100
basis points of improvement.
For its North American truck brokerage business, which is
reported within the Brokerage and Other Services segment, the
company expects third quarter 2022 results to include:
- A year-over-year increase in volume of approximately 9%
- A year-over-year decrease in revenue of approximately 2%
- A year-over-year increase in margin dollars, a non-GAAP
financial measure, of approximately 31%
Long-Term Targets for North American LTL and RXO
Spin-Off
In conjunction with upcoming investor meetings, and in
anticipation of XPO’s planned spin-off of its North American
brokered transportation platform on November 1, 2022, the company
issued the following long-term financial targets.
For its North American LTL business, encompassing the period
from 2021 (the most recent reported fiscal year) through 2027,
assuming gross capital expenditures of 8% to 12% of revenue, on
average, over the next several years:
- Revenue growth at a compound annual growth rate of 6% to
8%
- Adjusted EBITDA growth at a compound annual growth rate of 11%
to 13%
- Adjusted operating ratio improvement of at least 600 basis
points
A reconciliation of the 2021 pro forma base used in the
calculation of the LTL adjusted EBITDA growth target and adjusted
operating ratio improvement is provided in the attached financial
table.
For the RXO spin-off of the North American brokered
transportation platform, including its core truck brokerage
business:
- 2027 adjusted EBITDA of $475 million to $525 million
- Annual capital expenditures of approximately 1% of revenue,
2023-2027
- Annual depreciation and amortization of approximately 1% of
revenue, 2023-2027
- Annual interest expense of approximately $37 million,
2023-2027
Third Quarter 2022 Conference Call
As previously announced, XPO will hold its third quarter
conference call and webcast on Monday, October 31, at 8:30 a.m.
Eastern Time. The company's results will be released earlier that
morning and made available on www.xpo.com. Dial-in and webcast
access information can be found at www.xpo.com/investors.
About XPO Logistics and
RXO
XPO Logistics, Inc. (NYSE: XPO) is a leading provider of
freight transportation services, primarily less-than-truckload
(LTL) and truck brokerage. XPO uses its proprietary technology to
move goods efficiently through supply chains. The company’s global
network serves 50,000 shippers with approximately 749 locations and
43,000 employees, and is headquartered in Greenwich, Conn.,
USA. Visit xpo.com for more information, and connect with XPO on
Facebook, Twitter, LinkedIn, Instagram and YouTube.
About the spin-offXPO intends to spin off its tech-enabled
brokered transportation platform in North America as an independent
publicly traded company under the ticker symbol RXO November 1,
2022, with a proprietary digital freight marketplace, access to
vast truckload capacity and complementary brokered services for
managed transportation, last mile and freight forwarding. Visit
rxo.com for more information.
Non-GAAP Financial Measures
As required by the rules of the Securities and Exchange
Commission (“SEC”), we provide reconciliations of the non-GAAP
financial measures contained in this press release to the most
directly comparable measure under GAAP, which are set forth in the
financial tables attached to this press release.
XPO’s non-GAAP financial measures in this press release include:
net debt and net leverage for the trailing twelve months ended
December 31, 2022; adjusted earnings before interest, taxes,
depreciation and amortization (“adjusted EBITDA”) and adjusted
operating ratio excluding gains on sales of real estate for our
North American LTL segment for the three months ended September 30,
2022; and margin dollars for our North American truck brokerage
business for the three months ended September 30, 2022.
We believe that the above adjusted financial measures facilitate
analysis of our ongoing business operations because they exclude
items that may not be reflective of, or are unrelated to, XPO and
its business segments’ core operating performance, and may assist
investors with comparisons to prior periods and assessing trends in
our underlying businesses. Other companies may calculate these
non-GAAP financial measures differently, and therefore our measures
may not be comparable to similarly titled measures of other
companies. These non-GAAP financial measures should only be used as
supplemental measures of our operating performance.
Adjusted EBITDA includes adjustments for transaction and
integration costs, as well as restructuring costs and other
adjustments as set forth in the attached tables. Transaction and
integration adjustments are generally incremental costs that result
from an actual or planned acquisition, divestiture or spin-off and
may include transaction costs, consulting fees, retention awards,
and internal salaries and wages (to the extent the individuals are
assigned full-time to integration and transformation activities)
and certain costs related to integrating and converging IT systems.
Restructuring costs primarily relate to severance costs associated
with business optimization initiatives. Management uses these
non-GAAP financial measures in making financial, operating and
planning decisions and evaluating XPO’s and each business segment’s
ongoing performance.
We believe that adjusted EBITDA improves comparability from
period to period by removing the impact of our capital structure
(interest and financing expenses), asset base (depreciation and
amortization), litigation settlements, tax impacts and other
adjustments as set out in the attached tables that management has
determined are not reflective of core operating activities and
thereby assist investors with assessing trends in our underlying
businesses. We believe that net leverage and net debt are important
measures of our overall liquidity position and are calculated by
removing cash and cash equivalents from our reported total debt and
reporting net debt as a ratio of our trailing twelve-month reported
adjusted EBITDA. We believe that adjusted operating ratio improves
the comparability of our operating results from period to period
by: (i) removing the impact of certain transaction, integration and
rebranding costs and restructuring costs, as well as amortization
expenses and (ii) including the impact of pension income incurred
in the reporting period as set out in the attached tables. We
believe that margin dollars (revenue less cost of transportation
and services, exclusive of depreciation and amortization) improves
the comparability of our operating results from period to period by
removing the cost of transportation and services, in particular the
cost of fuel, incurred in the reporting period as set out in the
attached tables.
With respect to our preliminary third quarter 2022 results for
adjusted EBITDA and adjusted operating ratio for our North American
LTL business, and margin dollars for our truck brokerage business,
and with respect to our financial targets for adjusted EBITDA for
full year 2022, net leverage and net debt as of year-end 2022, and
adjusted EBITDA CAGR and adjusted operating ratio improvement for
the period 2021 to 2027 for our North American LTL business, and
full year 2027 adjusted EBITDA for our RXO spin-off businesses,
reconciliations of these non-GAAP measures to the corresponding
GAAP measures are not available without unreasonable effort due to
the variability and complexity of the reconciling items described
above that we exclude from these non-GAAP target measures.
Specifically, certain key items, including our income tax provision
and transaction and integration costs for the third quarter 2022,
are impacted by the future completion of our quarter-end closing
processes and are not currently determinable. The variability of
these items may have a significant impact on our future GAAP
financial results and, as a result, we are unable to prepare the
forward-looking statement of income and statement of cash flows
prepared in accordance with GAAP that would be required to produce
such a reconciliation.
Forward-looking Statements
This release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934, including statements
relating to the planned spin-off, the expected timing of the
spin-off, the anticipated benefits of the spin-off and the
long-term targets for our North American LTL business and the RXO
spin-off businesses. All statements other than statements of
historical fact are, or may be deemed to be, forward-looking
statements. In some cases, forward-looking statements can be
identified by the use of forward-looking terms such as
“anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,”
“may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,”
“objective,” “projection,” “forecast,” “goal,” “guidance,”
“outlook,” “effort,” “target,” “trajectory” or the negative of
these terms or other comparable terms. However, the absence of
these words does not mean that the statements are not
forward-looking. These forward-looking statements are based on
certain assumptions and analyses made by the company in light of
its experience and its perception of historical trends, current
conditions and expected future developments, as well as other
factors the company believes are appropriate in the
circumstances.
These forward-looking statements are subject to known and
unknown risks, uncertainties and assumptions that may cause actual
results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity,
performance or achievements expressed or implied by such
forward-looking statements. Factors that might cause or contribute
to a material difference include our ability to effect the spin-off
of our tech-enabled brokered transportation platform and meet the
related conditions of the spin-off, the expected timing of the
completion of the spin-off and the terms of the spin-off, our
ability to achieve the expected benefits of the spin-off, our
ability to retain and attract key personnel for the separate
businesses, the risks discussed in our filings with the SEC, and
the following: economic conditions generally; the severity,
magnitude, duration and aftereffects of the COVID-19 pandemic,
including supply chain disruptions due to plant and port shutdowns
and transportation delays, the global shortage of certain
components such as semiconductor chips, strains on production or
extraction of raw materials, cost inflation and labor and equipment
shortages, which may lower levels of service, including the
timeliness, productivity and quality of service, and government
responses to these factors; our ability to align our investments in
capital assets, including equipment, service centers and
warehouses, to our customers’ demands; our ability to implement our
cost and revenue initiatives; our ability to benefit from the
proposed spin-off; our ability to successfully integrate and
realize anticipated synergies, cost savings and profit improvement
opportunities with respect to acquired companies; goodwill
impairment, including in connection with the proposed spin-off;
matters related to our intellectual property rights; fluctuations
in currency exchange rates; fuel price and fuel surcharge changes;
natural disasters, terrorist attacks, wars or similar incidents,
including the conflict between Russia and Ukraine and increased
tensions between Taiwan and China; risks and uncertainties
regarding the potential timing and expected benefits of the
proposed spin-off of our tech-enabled brokered transportation
platform, including the risk that the spin-off may not be completed
on the terms or timeline currently contemplated, if at all; the
impact of the proposed spin-off of our tech-enabled brokered
transportation platform on the size and business diversity of our
company; the ability of the proposed spin-off of our tech-enabled
brokered transportation platform to qualify for tax-free treatment
for U.S. federal income tax purposes; our ability to develop and
implement suitable information technology systems and prevent
failures in or breaches of such systems; our indebtedness; our
ability to raise debt and equity capital; fluctuations in fixed and
floating interest rates; our ability to maintain positive
relationships with our network of third-party transportation
providers; our ability to attract and retain qualified drivers;
labor matters, including our ability to manage our subcontractors,
and risks associated with labor disputes at our customers and
efforts by labor organizations to organize our employees and
independent contractors; litigation, including litigation related
to alleged misclassification of independent contractors and
securities class actions; risks associated with our self-insured
claims; risks associated with defined benefit plans for our current
and former employees; the impact of potential sales of common stock
by our chairman; governmental regulation, including trade
compliance laws, as well as changes in international trade
policies, sanctions and tax regimes; governmental or political
actions, including the United Kingdom’s exit from the European
Union; and competition and pricing pressures.
All forward-looking statements set forth in this release are
qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by us
will be realized or, even if substantially realized, that they will
have the expected consequences to or effects on us or our business
or operations. Forward-looking statements set forth in this release
speak only as of the date hereof, and we do not undertake any
obligation to update forward-looking statements to reflect
subsequent events or circumstances, changes in expectations or the
occurrence of unanticipated events, except to the extent required
by law.
Investor Contacts
Tavio Headley+1-203-413-4006tavio.headley@xpo.com
Jared Weisfeld +1-475-299-7355 jared.weisfeld@rxo.com
Media Contacts
Karina Frayter+1-203-484-8303karina.frayter@xpo.com
Nina Reinhardt+1-980-408-1594nina.reinhardt@rxo.com
North American Less-Than-Truckload Segment |
|
Summary Financial Table |
|
(Unaudited) |
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
Adjusted Year Ended December 31, |
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2021 (1) |
|
2021 |
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
4,118 |
|
$ |
4,118 |
|
|
|
|
|
|
|
|
|
Operating income (1) |
|
|
538 |
|
|
618 |
|
Operating ratio (2) |
|
|
86.9% |
|
|
85.0% |
|
Other income
(3) |
|
|
58 |
|
|
58 |
|
Amortization
expense |
|
|
33 |
|
|
33 |
|
Transaction,
integration and rebranding costs |
|
|
1 |
|
|
1 |
|
Restructuring
costs |
|
|
- |
|
|
- |
|
Adjusted operating income |
|
$ |
630 |
|
$ |
710 |
|
Adjusted operating ratio (4) (5) |
|
|
84.7% |
|
|
82.7% |
|
Depreciation
expense |
|
|
193 |
|
|
193 |
|
Other |
|
|
1 |
|
|
1 |
|
Adjusted EBITDA (6) |
|
$ |
824 |
|
$ |
904 |
|
Gains on real
estate transactions |
|
|
(62) |
|
|
(62) |
|
Adjusted EBITDA, excluding gains on real estate
transactions (4) |
|
$ |
762 |
|
$ |
842 |
|
Adjusted operating income, excluding gains on real estate
transactions (4) |
|
$ |
568 |
|
$ |
648 |
|
Adjusted operating ratio, excluding gains on real estate
transactions (4) (5) |
|
|
86.2% |
|
|
84.3% |
|
Pension
income |
|
|
(58) |
|
|
|
|
Adjusted operating income, excluding gains on real estate
transactions and pension income (4) |
|
$ |
510 |
|
|
|
|
Adjusted operating ratio, excluding gains on real estate
transactions and pension income (4) (5) |
|
|
87.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 XPO
anticipates allocating incremental Corporate costs of $80 million
beginning in the first quarter of 2023. Adjusted year ended
December 31, 2021 Operating income of $538 reflects these
incremental Corporate costs. |
|
2
Operating ratio is calculated as (1 - (operating income divided by
revenue)). |
|
3 Other
income primarily consists of pension income. |
|
4 See
the “Non-GAAP Financial Measures” section of the press
release. |
|
5
Adjusted operating ratio is calculated as (1 - (adjusted operating
income divided by revenue)); adjusted operating margin is the
inverse of adjusted operating ratio. |
|
6
Adjusted EBITDA is used by our chief operating decision maker to
evaluate segment profit (loss) in accordance with ASC 280. |
|
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