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Xpo Logistics Announces Third Quarter 2015 Results

The following excerpt is from the company's SEC filing.

Reports $166 million of adjusted EBITDA, significantly exceeding target

Achieves organic margin improvement across all businesses

Exceeds expectations in Europe with adjusted EBITDA growth of more than 26% for

transport and 17% for logistics

Expects over $30 million of annualized savings from actions already taken with

Con-way integration

Appoints Tony Brooks as president of less-than-truckload business

Issues full year targets for adjusted EBITDA of at least $1.25 billion in 2016, and at

least $1.7 billion in 2018

GREENWICH, Conn. November 4, 2015

XPO Logistics, Inc. (NYSE: XPO) today announced financial results for the third quarter of 2015. Total gross revenue increased 256.5% year-over-year to $2.4 billion, and net revenue increased 542.4% to $1.1 billion.

On a GAAP basis, the company reported a net loss of $35.4 million for the quarter, compared with a net loss of $11.6 million for the same period in 2014. The net loss attributable to common shareholders was $93.1 million, or a loss of $0.94 per diluted share, compared with a net loss attributable to common shareholders of $12.3 million, or a loss of $0.23 per diluted share, for the same period in 2014. The third quarter 2015 GAAP net loss includes $52.0 million of non-cash accounting charges related to the beneficial conversion features of the previously announced June 2015 $1.26 billion equity private placement; a $31.6 million non-cash after-tax amortization charge; and $25.3 million of one-time after-tax transaction and integration costs net of noncontrolling interests.

On an adjusted basis, the net loss attributable to common shareholders, a non-GAAP measure, was $15.2 million, or a loss of $0.15 per share for the quarter, excluding the items detailed below. This compares with an adjusted net loss attributable to common shareholders of $7.3 million, or a loss of $0.13 per share, for the third quarter of 2014.

Adjusted net loss attributable to common shareholders for the third quarter of 2015 excludes: a $52.0 million non-cash accounting charge as referenced above; $34.8 million, or $25.3 million after-tax, of one-time transaction and integration costs net of noncontrolling interests; $1.1 million, or $0.9 million after-tax, of costs related to the conversion of the companys convertible senior notes; and a $0.4 million benefit, or $0.3 million after-tax, related to the gain on sale of intermodal equipment. Reconciliations of adjusted net loss attributable to common shareholders and adjusted EPS are provided in the attached financial tables.

Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA), a non-GAAP financial measure, improved to $166.1 million for the quarter, compared with $24.2 million for the same period in 2014. Adjusted EBITDA in the third quarter of 2015 excludes $36.4 million of one-time transaction and integration costs; and a $0.4 million benefit related to the gain on sale of intermodal equipment assets. Adjusted EBITDA in the quarter includes $2.7 million of non-cash share-based compensation. A reconciliation of adjusted EBITDA to net loss is provided in the attached financial tables.

As of November 3, 2015, the company had approximately $530 million of cash, and an undrawn $1 billion asset-backed revolver.

Financial Targets

Prior to the acquisition of Con-way Inc., XPOs target EBITDA run rate was $625 million at year-end a goal the company significantly exceeded three months early with its generation of $166 million of adjusted EBITDA in the third quarter.

The company has annual revenue of $15 billion and adjusted EBITDA of $1.1 billion. The company has issued the following new financial targets:

For 2016, full year adjusted EBITDA of at least $1.25 billion based on existing operations.

For 2018, full year adjusted EBITDA of approximately $1.7 billion based on existing operations, an increase from the $1.5 billion previously targeted for 2019.

Appoints Tony Brooks to Lead Less-Than-Truckload Business

As previously announced, the company has appointed Tony Brooks as president of its less-than-truckload (LTL) business in North America, effective November 11, 2015. Mr. Brooks is a 30-year industry veteran with significant executive experience in LTL operations, transportation and distribution networks and fleet management. He has held senior positions in transportation and logistics with Sysco Corporation, Dean Foods, Sears Holdings Corporation, PepsiCo/Frito-Lay and Roadway Express, Inc.

CEO Comments

Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said, In our first full quarter of global results, we drove adjusted EBITDA to $166 million, significantly exceeding our target. In our transportation segment, we improved margins year-over-year by optimizing our pricing and lowering our cost of purchased transportation in truck brokerage and intermodal, last mile, expedite and global forwarding. Were operating our logistics segment more profitably worldwide, and were executing on an exciting pipeline of cross-selling opportunities. Our European operations overall are performing well ahead of expectations adjusted EBITDA in Europe was up over 26% year-over-year for transport and 17% for logistics.

Jacobs continued, Im very pleased to welcome Tony Brooks, who will join us next week as the president of our less-than-truckload business in North America. We have an outstanding team of

employees in LTL, and Tony is a veteran supply chain leader who has run three of the largest transportation fleets in North America. He has deep roots in LTL and a strong record of transforming large transportation networks. Were excited that Tony will be leading our LTL platform to its full potential as part of our larger service offering.

Were in our strongest position yet to create value through the optimization of our operations. Although we completed the purchase of Con-way just last Friday, weve already taken out over $30 million of excess costs on an annualized basis. Were targeting full year adjusted EBITDA of at least $1.25 billion next year. And looking forward to 2018, were targeting EBITDA of at least $1.7 billion $200 million higher and a year earlier than originally planned.

Third Quarter 2015 Results by Segment

Transportation:

The companys transportation segment generated total gross revenue of $1.4 billion for the quarter, a 128.1% increase from the same period in 2014. The year-over-year increase in segment revenue was primarily due to the acquisitions of Norbert Dentressangle, Bridge Terminal Transport, Atlantic Central Logistics and UX Specialized Logistics. Organic revenue decreased 2.7% for the quarter, but increased an estimated 3.4% excluding the impact of lower fuel prices. Excluding fuel and results from intermodal which had lower revenue but higher profitability organic revenue increased an estimated 10.2%.

Net revenue margin for the third quarter improved to 22.6%, compared with 20.4% in 2014. The increase in net revenue margin was primarily due to price optimization, lower purchased transportation costs, and the shedding of unprofitable business. The company improved its margin percentages in all of its transportation businesses from a year ago, including truck brokerage and intermodal, last mile, expedite and global forwarding.

Third quarter adjusted EBITDA for the segment improved to $93.1 million, compared with $28.1 million a year ago. Operating income improved to $30.9 million, compared with $4.9 million a year ago. The increases in adjusted EBITDA and operating income reflect the impact of acquisitions as well as organic adjusted EBITDA growth of 77%. The organic EBITDA growth was largely driven by the truck brokerage and last mile businesses. A reconciliation of adjusted EBITDA to operating income for the transportation segment is provided in the attached financial tables.

Logistics:

The companys logistics segment generated gross revenue of $993.3 million, compared with $50.1 million from the same period in 2014. Net revenue was $810.0 million, up from $50.1 million a year ago. Adjusted EBITDA was $88.1 million, up from $8.0 million a year ago. Operating income was $36.0 million, versus $4.5 million a year ago. EBITDA and operating income in the segment exceeded expectations, primarily due to new contracts, the shedding of unprofitable business, and operational improvements.

Revenue and profitability for the logistics segment for the third quarter of 2014 reflect a partial contribution from XPOs acquisition of New Breed on September 2, 2014, and do not include XPOs European operations, which were acquired on June 8, 2015. A reconciliation of adjusted EBITDA to operating income for the logistics segment is provided in the attached financial tables.

Corporate:

Corporate SG&A expense was...


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