No sooner had fast-growing freight broker XPO Logistics hit its first ambitious annual revenue run rate target of $500 million than CEO Bradley S. Jacobs raised the level for 2013 to $1 billion.
“We're continuing to scale up the company,” said Jacobs, the entrepreneur who became chairman and CEO of XPO after investing $150 million in the business, then Express-1 Expedited Solutions.
Jacobs and his team expanded the renamed XPO Logistics from a $177 million company in 2011 to a $279 million business in 2012, increasing revenue more than 57 percent year-over-year.
His goal is to transform XPO into a multi-billion-dollar enterprise through an aggressive acquisition strategy along with organic expansion of its brokerage, expedited and forwarding operations.
“We're on track or ahead of every part of the plan,” Jacobs said. “We're building this company like a tank. We've invested in systems and technology and people in all parts of the operation.”
The $500 million annual revenue “run rate” — the level of annual revenue the company would be projected to hit based on results of multiple acquisitions in 2012, “is a nice milestone,” Jacobs said.
“But we're still a small company in relation to the opportunity,” Jacobs told The Journal of Commerce, referring to a U.S. truck freight brokerage market he said is valued at about $50 billion a year.
“We're not greedy, we only want 10 percent,” of that revenue, he said. “We'd like to see our business be a $5 billion business. We feel that's a reasonable goal to set over the next few years.”
That's not an outrageous goal for Jacobs. He used similar growth strategies in the 1990s and 2000s to build United Waste System and United Rentals into multibillion-dollar businesses.
Starting with an initial investment of $3 million in 1989, Jacobs turned United Waste System into a $2.2 billion company, completing more than 200 acquisitions before selling the company in 1997.
He then co-founded United Rentals, an equipment rental company. By the time Jacobs stepped down as chairman of United Rentals in 2007, the business had grown to $3.7 billion in annual revenue.
This year, Jacobs said XPO Logistics will purchase companies worth $300 million in annual revenue, cold start at least three freight brokerage offices and add 400 sales people across the country.
Over the course of 2012, XPO purchased Turbo Logistics, Kelron Logistics, Continental Freight Services and BirdDog Logistics and opened eight “cold-start” brokerage locations.
So far this year, XPO has acquired Covered Logistics & Transportation, a $27 million Chicago-area truck broker, and East Coast Air Charter, a $43 million non-asset air freight broker.
The last benefit in particular will benefit XPO's Express-1 expedited transportation division, and XPO plans to increase acquisitions in the expedited arena as well as truck brokerage, Jacobs said.
“We're looking at a few acquisitions in expedited but the business is trickier because its an owner-operator model, and when you buy a company you've got to make sure those operators stay.”
XPO's expedited services division increased revenue 8.7 percent in the fourth quarter to $22.1 million. Freight brokerage revenue, in comparison, shot up 760.3 percent year-over-year to $71 million.
Freight forwarding revenue rose 10.1 percent in the quarter to $18.5 million. XPO's total revenue for the fourth quarter was $108.5 million, a 146.1 percent increase from the same period in 2011.
“Our freight forwarding group has been growing rapidly but that's because we're so small,” said Jacobs. “We've opened up new locations and we're growing revenue by taking market share.”