November 1, 2017 4:15 PM, EDT

E-Commerce Powers XPO’s Rise to Record Revenue, Profits in Third Quarter

Bradl JacobsJacobs by Christopher Goodney/Bloomberg News

XPO Logistics’ net income skyrocketed a record 316% in the third quarter on sales that also surged on the strength of its e-commerce business.

The gains marked the eighth consecutive quarter of year-over-year earnings growth for the Greenwich, Conn.-based company.

Net income was $57.5 million, 44 cents per share. That compared with $13.8 million, or 11 cents, a year ago.

Revenue increased 4.9% to $3.89 billion.

“E-commerce continues to be a major driver to our strong growth. E-commerce helped us grow our last-mile deliveries by 14% and logistics revenue by 8%. So a lot of good things went on in the quarter,” CEO Brad Jacobs told Transport Topics. “E-commerce is not the only thing that’s going on, but it’s a strong tailwind.”

XPO has capitalized on the comfort among consumers to purchase larger items, such as appliances and electronics, online rather than in a brick-and-mortar location.

The company’s transportation segment, consisting of freight brokerage, less-than-truckload and last mile, increased revenue to $2.47 billion from $2.41 billion last year. Operating income increased 16% to $145.2 million.

Less-than-truckload, the largest unit in the transportation division, recorded a 5.1% jump in revenue to $928.5 million. Shipments per day increased 1.8% to 55,798, weight per shipment rose 3.7% to 1,371 pounds and revenue per 100 pounds of freight, excluding fuel surcharges, went up 32 cents to $17.72.

“We grew volume at the same time as we increased yield. It’s always nice to do both at the same time,” Jacobs said. “Tonnage per day was up 5.6%, our pricing on contract renewals was up 5.1%, so lots of good metrics in LTL. We’ve had a great year in LTL; it’s a good market.”

Freight brokerage revenue increased 15% year-over-year to $628.6 million and 6.4% to $94.4 million when transportation costs are deducted from the top line.

“The aftermath of the hurricanes created a tailwind for all our North America asset-light operations. Spot rates have reached three-year highs. The West Coast is extremely tight right now,” Jacobs said, referring to the storms in Texas in August and in Florida in September.

“Last quarter, we were 80% contractual, 20% spot, but now we’re 50-50, so the spot market is very helpful to our brokerage business,” he said.

XPO Logistics

Last-mile business, a main benefactor of the e-commerce boom, saw a 14% spike in revenue to $242.1 million, which Jacobs said was impressive because the service disruption from the hurricanes. He also highlighted the 53 last-mile service hubs, a goal he wanted to achieve before Black Friday, with two more before the end of the year and an additional 30 next year.

The company’s logistics division generated revenue of $1.46 billion in the third quarter, up 8.2% from last year. Operating income increased 2.8% to $77.4 million. The North American portion of the top line edged up 1.2% to $657.4 million.

XPO’s logistics division handles e-fulfillment, reverse logistics, warehousing, managed transportation and supply chain optimization.

Jacobs said that demand for reverse logistics continues to grow as more consumers become comfortable with testing or trying on products and then returning the unwanted merchandise to the e-retailer.

He also believes evolution in the warehousing market, particularly through automation, will lure business to XPO as the machines improve accuracy and optimize the speed of the supply chain.

“In advanced automation, we’re constantly testing and implementing the latest technology. We have robots picking side-by-side with our people and employees wearing smart glasses," Jacobs said. "We’re also investing in big data. We have over 100 big-data scientists working on things like advanced pricing algorithms, workforce planning tools and route management for pickups and deliveries. This is a big part of our Internet of Things initiative.”