William B. Cassidy, Senior Editor | May 10, 2012 12:07PM EDT
XPO Logistics is willing to absorb a little pain for future gain. While the former Express-1 Expedited Solutions reported a $2.7 million net loss for the first quarter, XPO acquired Continental Freight Services, a freight brokerage, for $3.4 million.
The acquisition of Columbia, S.C.-based Continental Freight is the first of a series of acquisitions planned this year by XPO worth approximately $250 million in annual revenue, Chairman and CEO Bradley S. Jacobs said in an interview Thursday.
The $177 million Buchanan, Mich.-based logistics operator increased revenue 7.4 percent year-over-year to $44.6 million, with strong revenue growth in two of its three business divisions, expedited transportation and freight brokerage.
The first quarter loss — XPO’s second consecutive quarterly loss — wasn’t unexpected, Jacobs said. The company has been spending a significant amount of money on organic expansion, acquisitions, a new executive team and technology.
“The business plan from the start has been to have many quarters in a row in the beginning of losses as we invest in infrastructure,” said Jacobs, who envisions turning XPO into a multi-billion dollar business like his previous ventures.
Jacobs implemented a similar growth strategy at United Rentals and United Waste.
“We’re doing a long term business plan that involves cold starts and acquisitions,” he said. “We’re ramping up all these entities with additional sales people.”
XPO operates three subsidiaries — Express-1, an $87.6 million expedited transportation company; Concert Group Logistics, a $65.1 million international freight forwarder; and Bounce Logistics, a $29.2 million truck freight broker.
Express-1 increased revenue 8.1 percent from a year ago to $22.4 million and reported a $1.6 million operating profit. Freight brokerage revenue shot up 32.5 percent to $7.9 million, though the unit had a $154,000 quarterly loss.
“In freight brokerage, we’re growing like a weed,” said Jacobs, who became chairman and CEO of XPO Logistics after investing $150 million in the company in 2011. XPO raised an additional $137 million in a stock sale in the first quarter.
Freight forwarding operating revenue fell 1.8 percent to $15.5 million at Concert Group Logistics, while the unit’s operating income dropped 66 percent to $162,000, thanks partly to weak demand and partly to costs related to expansion.
“International air and ocean freight demand is down, and we can’t change the world,” said Jacobs. Expedited demand is mixed, he said, with higher cross-border business with Mexico but softer demand from some core shipper customers.
The unusually mild winter weather, which helped many trucking companies boost volume and revenue, wasn’t good freight weather for Express-1, which handles emergency shipments when severe weather snaps supply chains.
“This year we had a warm winter and there weren’t as many supply chain disruptions. The expedited business really counts on that,” said Bradley.
Contact William B. Cassidy at wcassidy@joc.com. Follow him on Twitter @wbcassidy_joc.