XPO Logistics has announced financial results for the fourth quarter and full year 2016. For the fourth quarter of 2016, revenue increased 10.0% year-over-year to $3.68 billion. Net income attributable to common shareholders was $27.3 million for the quarter, or earnings of $0.22 per diluted share, compared with a net loss attributable to common shareholders of $62.8 million, or a loss of $0.58 per diluted share, for the same period in 2015.   

Adjusted net income attributable to common shareholders, a non-GAAP financial measure, was $29.8 million, or adjusted earnings of $0.24 per diluted share for the fourth quarter of 2016, excluding the items detailed below. This compares with an adjusted net loss attributable to common shareholders of $23.1 million, or an adjusted loss of $0.21 per diluted share, for the same period in 2015. Reconciliations of non-GAAP financial measures used in this release are provided in the attached financial tables.   

The adjusted net income attributable to common shareholders for the quarter excludes: $34.9 million, or $21.8 million after-tax, of integration and rebranding costs; $16.5 million, or $10.1 million after-tax, of non-cash debt extinguishment costs related to the sale of the truckload unit; a benefit of $33.0 million, or $20.0 million after-tax, from unrealized gains on foreign exchange; and a $9.6 million benefit to our tax liability due to lower tax rates enacted in France.

Adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"), a non-GAAP financial measure, improved to $291.1 million for the quarter, excluding $34.9 million of transaction, integration and rebranding costs. This compares with $217.6 million for the same period in 2015.

For the full year 2016, the company generated $625.4 million of cash flow from operations and $210.9 million of free cash flow, a non-GAAP financial measure. 

Financial Targets

The company reaffirmed its full year targets for adjusted EBITDA of at least $1.350 billion for 2017 and $1.575 billion for 2018.

It also issued a 2017-2018 cumulative free cash flow target of approximately $900 million, including at least $350 million of free cash flow generated in 2017. 

Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said: "I'm pleased that we delivered record fourth quarter results for net income, cash flow from operations, adjusted EBITDA and free cash flow. We generated the strongest growth in last mile and contract logistics, driven primarily by e-commerce, more than offsetting a weak intermodal environment. Our less-than-truckload operations in North America capped an outstanding year with a 40% increase in fourth quarter adjusted operating income.

"Our focus remains on further enhancing customer service while realizing the significant profit improvement opportunities embedded in our business. This year, we'll get the full 12-month benefit of numerous efficiencies we implemented throughout 2016 in procurement, real estate, back office operations and workplace technologies. We have more savings to realize in each of these areas, along with cross dock and warehouse automation, labor productivity and the global adoption of best practices. In addition, we're marketing our services with a high caliber sales organization that draws on our total supply chain offering to help customers operate more productively." 

Jacobs continued: "We're continuing to execute our strategy for high growth and high returns. We have a concrete bridge to an EBITDA margin of more than 10% in 2018 - an increase of approximately 200 basis points over two years. We expect to grow free cash flow at an even faster rate than EBITDA, with a cumulative, two-year target of approximately $900 million of free cash flow by year-end 2018, including at least $350 million in 2017."

Full Year 2016 Financial Results

For the full year 2016, the company reported total revenue of $14.62 billion, a 91.8% increase from 2015. Net income attributable to common shareholders was $63.1 million, or $0.53 per diluted share, compared with a net loss of $245.9 million, or a loss of $2.65 per diluted share, for 2015.

The adjusted net income attributable to common shareholders for 2016 was $121.5 million, or adjusted earnings of $1.00 per diluted share, excluding the items detailed below. This reflects a substantial improvement from the adjusted net loss attributable to common shareholders of $36.9 million, or an adjusted loss of $0.40 per diluted share, for 2015.

Adjusted net income for 2016 excludes: $103.2 million, or $65.3 million after-tax, of transaction, integration and rebranding costs; $69.9 million, or $42.9 million after-tax, of debt extinguishment and conversion costs; a benefit of $36.0 million, or $23.1 million after-tax, from unrealized gains on foreign exchange; discrete tax benefits of $15.7 million; and a benefit to depreciation and amortization of $5.8 million, or $3.6 million after-tax, related to the purchase price allocation of acquired assets.

Adjusted EBITDA for full year 2016 improved significantly to $1.25 billion, compared with $493.1 million for 2015. Adjusted EBITDA for 2016 excludes $103.2 million of transaction, integration and rebranding costs.