XPO CEO Jacobs Talks Up Profits, Acquisition Plans

August 03, 2017 by Jerry Hirsch, @Jerryhirsch

After digesting $6.5 billion of large trucking and logistics company acquisitions over the past two years, Bradley Jacobs, chief executive of XPO Logistics, said he’s ready to gobble up more businesses.

Brad Jacobs Headshot

Brad Jacobs. (Photo: XPO Logistics)

The Greenwich, Conn.-based company, which on Wednesday said second quarter net income rose 12 percent to $47.6 million compared with the same period a year ago, is on the hunt with $7 billion to $8 billion targeted for more acquisitions.

Jacobs talked with Trucks.com about XPO’s improved financial results, why he wants to buy more companies and where he thinks trucking technology is headed. Here is an edited version of the conversation.

Why is this a good time to be purchasing trucking assets?

Between 2011 and 2015 we made 17 acquisitions and then stayed out of the market for a couple of years while we optimized those businesses to become one highly integrated XPO internationally.

We now have more time as a management team and we will explore acquisitions that can deliver more benefit to our customers and create significant shareholder value for the owners of the company. It is a good time. The economy is improving in the U.S. It is an industrial led recovery and that is helping our LTL, or less-than-truckload business.

How much can you spend?

We have the financial capacity to buy a company in the many billions of dollars. We could do a couple of larger deals like that and at the same time we are working on smaller deals that are in the hundreds of millions of dollars.

As you evaluate acquisitions, how big is the market you are going after and what portion of do you have now?

We see a $500 billion addressable market in North America and about the same Europe, that’s a $1 trillion opportunity in just the services that we provide. We have built ourselves up to about $15 billion in revenue this year. So when you step back and think about it, it is only 1.5 percent of the market. There is a big opportunity to expand. We will grow organically and by acquisition.

Your income grew faster than revenue in the quarter. Where are you getting efficiencies?

It is across the board from things like global procurement. We buy a lot of tractors, trailers, tires and fuel. We are purchasing all of that on a global basis now and at lower prices. We have achieved $90 million in annual savings buying less expensively trucks, materials handling, temp labor, temporary workers and securities.

We have on-going initiatives in procurement, real estate, the back office and asset utilization. Now moving into trailer rentals, maintenance and repair, small parcel shipments, uniforms and a host of items that have previously been purchased separately. We see $160 million of annual procurement savings as this is phased in.

Where do you see XPO’s fastest growth? 

Our e-commerce customers are growing the fastest in our entire business and we are growing with them. We are also seeing fast growth in industrials, but that is cyclical. Our industrial customers were very soft for several years ago and started to show a rebound three quarters ago.

The trucking industry is talking a lot about advanced technology such as platooning, where groups of digitally tethered trucks travel together. Is that practical?

We have the largest full truck load fleet in Europe. We have a group of people studying platooning and talking to the [trucks manufacturers) and we have to get the regulatory approvals to do it. We go through several different countries in the course of the week and there are many different governmental regulations.

Platooning will happen because it is more efficient and it saves money. It is inevitable evolution in trucking but I don’t know that it is right around the corner.

How do you feel about XPO’s latest financial results?

It was another fantastic quarter. Business is trending very well. We have had nice beats and records on a slew of metrics. Our 3.76 billion for the quarter was a record for any quarter. The $371 million of adjusted EBITDA (a measure of cash flow) also was a high-water mark.

Read Next: Truck Manufacturer Paccar Posts $373 Million Second Quarter Profit

2 Responses

  1. Randy

    So why have they cut pay on owner/ operators. In they drayage division.

  2. Jesse cooley

    I became a o/p after 21 months with Jacobson and since I went o/p my miles have dropped and my bills are getting behind! If this keepsupi will lease my truck to another company!


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