Dive Brief:

• XPO Logistics missed its earnings estimates for the third quarter, saw a year-over-year decline in revenue and lowered its earnings guidance for the remainder of the year, saying it expects "softness in the macro environment" to continue, according to a press release the company released this week before its earnings.
• "We have been in an industrial recession for the last year, and I say that just based on the objective fact that not only us but the entire LTL industry has seen negative tonnage growth in each of the last four quarters," XPO CEO Brad Jacobs said on the earnings call.
• Revenue for the company's transportation segment declined nearly 6% as XPO continues to navigate the effects from the loss of Amazon as a customer, and low truck broker rates are favoring shippers rather than carriers.

Dive Insight:

"Our freight brokerage top line declined by 14% year-over-year, which mirrors Q2," XPO Chief Strategy Officer Matt Fassler said on the call. "Excluding the reduction in our brokerage business with our largest customer, our underlying freight brokerage revenue declined by just 3%."

The company has started reporting multiple numbers this way on its earnings call, including and excluding the loss of Amazon's business.

"We believe that the exclusion of these items more accurately frames the underlying growth in our logistics business," Fassler ​explained on the call.

The 3PL did see profit growth in its LTL business driven by 4% price increases on contract renewals, Fassler said.

But XPO has felt the blow of the current freight market with its LTL tonnage dropping by 3.1% year-over-year. Jacobs said this was the fourth quarter tonnage has slid.

"I think to some extent you're already seeing how these businesses act in a downturn," Jacobs said. "We've been in a downturn in general for quite a while, about a year in industrial. Consumer is still strong, but the rest of the economy has not been so hot for quite a while."

XPO highlighted the use of XPO Connect, the company's digital freight marketplace, for helping to procure truckload capacity at rates lower than market benchmarks.

Connect had "37,000 downloads in the third quarter, which was double what it was over the second quarter. And we're on track to be 100,000 downloads by the end of the year," Jacobs said.

XPO continues to focus on its technology investment, which includes Connect and XPO Smart, a labor productivity system. XPO Smart has been deployed in 100 of the company's logistics warehouses and has resulted in a 5% increase in labor efficiency and 10% increase in motor moves per hour from LTL dock pilots, the company said in a release.

Before this week's earnings, it was announced the company was adding a ninth board seat and it would be filled by Aris Kekedjian, a former GE executive who "advises global companies on finance and M&A strategies," XPO explained in a press release.

XPO told Morgan Stanley analysts this year it had again begun focusing on M&A. Jacobs has since confirmed these plans in multiple interviews and on this week's earnings call.

"We are in very early stages of conversations with potential sellers," Jacobs said on the call. "We are very disciplined in general and specifically with respect to M&A. In M&A, we have a very methodical process. We've begun that process, and there's no time frame."