GXO Logistics (GXO) 10 May 232023 Q1 Earnings call transcript

Company Profile

Participants

Malcolm Wilson	Chief Executive Officer
Baris Oran	Chief Financial Officer
Bill Fraine	Chief Commercial Officer
Mark Manduca	Chief Investment Officer
Stephanie Moore	Jeffries
Chris Wetherbee	Citigroup
Scott Schneeberger	Oppenheimer
Bascome Majors	Susquehanna
Ben Moore	Deutsche Bank
Brian Ossenbeck	JP Morgan
Allison Poliniak	Wells Fargo
Ravi Shanker	Morgan Stanley
David Zazula	Barclays
Bruce Chan	Stifel

Call transcript

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Operator

Welcome to the GXO, First Quarter 2023 Earnings Conference Call and Webcast. My name is Sherry, and I will be your operator for today's call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions]. conference recorded. this that note is being Please

company Before statement regarding on begins, let and forward-looking a brief me read the measures behalf financial the of the use call statements, non-GAAP guidance. of the company

factors During their statements applicable the forward-looking make within other a involve the number this which and meanings by factors uncertainties, company and call laws, be statements. that certain differ will securities materially nature of cause from projected of A actual risks that discussion differ cause forward-looking of filings. to in results to results could contained the could SEC in actual those is the materially company's

The forward-looking update these by forward-looking as release only of made statements today, the law. statements, and except any on of to has earnings extent to are this the required call obligation made the in are company company's no

certain company are on release of call. financial related are non-GAAP its measures refer in as reported non-GAAP this financial otherwise all on reported and most website. such dollars. GAAP results may financial United the The call under during this company's stated, Reconciliations tables earnings SEC in to the are comparable also States rules to the applicable Unless defined contained measures measures

be business may remind materially that also inherently The affected assumptions. will today SEC. conditions global in many company global including detailed and consumer in with The various to appropriate supply and and its pressures by trends guidance fluctuations you inflationary economic and filings and constraints, what incorporates the to-date be spending, believes are it its exchange in changes market the company's unpredictable chain factors, rates, demand labor and foreign factors results

and for results company predict demand therefore differ from for to possible materially the its not is guidance. actual It could actually services,

section contains information in Investors additional You company's a forward-looking release, non-GAAP and measures of the regarding the the important financial company's of statements copy which earnings can find website.

you may Officer, Chief begin. the Wilson, Wilson. over to Malcolm turn Mr. now will GXO's call Executive I

Malcolm Wilson

you, today me everyone. quarter Thanks for Chief Bill our Thank us call. Officer. morning With Greenwich our operator, Chief in Baris Officer; joining and our first Oran, our Fraine, earnings Officer; Financial Commercial for are good Mark Manduca, and Investment XXXX Chief

quarter. of We've on We've started delivered our laid strong integration XXXX schedule great progressing Clipper business we've ahead in of shape. a XXXX the strong delivering for We're targets. the off and our foundations

full first was year-over-year. XX% billion, Our at Organic quarter range. X% the was revenue our growing revenue year in $X.X the midpoint growth guidance of

was the and up $XXX adjusted expectations. Our in quarter, million year-over-year EBITDA of our ahead

EBITDA we full by to result, $XX adjusted are the of midpoint million, our raising guidance year $XXX bringing As range a million. our

new a relationships for signing fantastic Unilever It's our group and of signing and Kellogg's, secured XXXX, of the of more Vivienne end than incremental Westwood. business and April including with worth across revenue solutions exciting and customers, automated for been implementing multiple verticals of new we million Through customers. Google, great $XXX expanding markets quarter partnerships a

our scale, Bill about we will stellar These tech deep unique our for value a bring detail talk business wins solutions customers. new proposition this in to Sainsbury's, particular, grocery is April of nearly in GXO's the we U.K. history. highlight the a in retailer. billion, lifetime project annual want new awarded I a with $X announced In contract largest revenue With this enabled in our more just bear value leading to demonstrate moment. as global expertise,

meet implementations adaptive up for the forward, tech existing going XX% the new of total deployment make of the demand our tech, increase we automation and XX% our will revenue, or operations enormous year-over-year. set increasing retrofitting operations. solutions and automated again record a In nearly Today new both utilizing for operational quarter only of a number tech by for that to

of top our fully artificial our enablement and confidence services our also and news teams intelligence, of In capitalize tech customers years significantly guidance deployment XXXX the benefits for involving demand profitability, tech have area, short, strengthening solutions targets. this We’ll of to initiatives drive next We To significant we're the our warehouse our and XXXX in growth both growth from unprecedented on learning in machine also seeing these for boosts the demand accelerating come. and while support to on in underpinning of leadership the are on space which our our our itself. this more quarter. to productivity continues

first the user across rollout this GXO in Direct the best the planned our the expansion Clipper both were create GXO and through shared we into of later pleased to Direct, the capabilities with continental and expertise, to Europe This announce the comes a Legacy blending U.K. differentiated global. has quarter, launched for Also solution We’ve that gone offering. year. of

for finally, annual our we've and on highlighted our to worldwide. members two report. ago, And weeks reductions just published progress our from initiatives we the development second it team In ESG emissions belonging ESG,

sustainability including daily ESG our is their for our business expand to a our the decision We saw in was as where win, the also goals, enablement factor targets. new operations our safety outlined of in customers, Sainsbury's ESG in we important relationship. significant key

We've the targets. had We've guidance XXXX the and achieve wins, pipeline have foundations sales strong year. set a to a we've our raising great and confidence. looking We're delivered we're forward robust to start our we with

Baris, that, to on the With over to Baris financials. ask comment I'll you.

Baris Oran

you, and Thank good Malcolm, morning everyone.

of both our of We robust and this business as showcase deliver continue our and our promise the growth on results predictability resilient to are proud of strength quarter, to margins. and they

logistics billion Xx the organic revenue was revenue X% In As organically and the which particular, for our group organic. at nearly Malcolm delivered business rate of revenue mentioned, XX% XXXX, generated grew reverse first our $X.X of growth. quarter we of growth, of

above we've U.S. across our Geographically, verticals Europe demand. our consumer technology particular balancing business has performed in in strength the and seen and airspace expectations

EBITDA the execution. in solid $XXX strength million, growing of and and Our quarter was model business year-over-year our adjusted our the reflecting

million. $XX was GXO to attributable income net Our

and the seasonality. normal million, diluted per was share adjusted our $X.XX, $XX earnings cash Our reflecting quarter outflow was for free

initiatives faster, investment our adjusted our EBITDA accelerated have in grow to automated particularly the facilities. We

am efficiencies Day, to both our Investor tell pleased integration you running we I our of of Clipper At discussed that ahead and the plan. program. are central

contributing First, performing expected ahead strongly organizations results us Clipper and in The the expectations. Direct higher the above first gave business to of two our schedule, in of foundation quarter. than progressing strength is The launch is also GXO the U.K. integration a Clipper driving of

as central the quarter. supplier the These continue we We technology to organization first benefits making execute projects infrastructure, include initiative. Second, well network, our into as and our accelerated leaner, real-estate. these our optimizing of efficiencies

won consorts will for and maintained rigorous writing operating remained a of great this far the in billion year above quality return on contracts $X.X more moment. high We So grew we've contract you capital just visibility quarter sales XX% our in so Bill give XXXX our lifetime and investments performance far target. well year-over-year value. our in first

best X.Xx revenue balance continue XX%, the leverage full for both, organic which With X%, of our our the well of will of to M&A. the year continuously our will shareholders by drive end including and capital cash our around reiterating in to are level guidance down as to net leveraging buybacks We year. free growth our as respect conversion of sheet, deploy interest X% approximately to flow we

raise for full pleased EPS. year also our are to and guidance EBITDA We

synergies full range early due is We efficiencies $XXX our accelerated to year to half million. to the year. expected trading of $XXX are This combination million the raising better integration on in initiatives our adjusted bringing million, of of EBITDA a central and delivery our from by $XX first Clipper, than

year per range share $X.XX. diluted operating adjusted earnings are increase by raising $X.XX We to also to our in reflecting our an bringing full $X.XX, profitability,

In continue growth targets summary, years the we to progress propel wins our solid We in we quarters our secured on and will quarter. and new growth major made that business delivered ahead. this excellent long-term

These our of to This blue how are reflect results tailwinds with from our and customers we cycles. automation, e-commerce, inflation, where in infrastructure-like global GXO prices serving returns. through outsourcing hallmark is and yet all extraordinary is chip and GXO guidance business, deliver enabling of escalated line benefit the upgraded resilient again

to our talk to-date about you And with our and wins I'll what to customers. that, hearing we're hand over from Bill

Bill Fraine

Thanks in Combined did GXO. quarter year we wins Baris million and and through April $XXX in everyone. exciting morning first for in very $XXX nearly April. million wins the we've additional we is banked of business. good business looking an a like new year-to-date won $XXX XXXX In million

of of of end the incremental of had first the quarter this April over growth year-to-date. secured $XXX By end to X% $XXX million equals the revenue we revenue. year-over-year increased By million. This has XXXX

stage we which us puts top ahead locked at for have of we were further a XXXX, last in revenue of that, year. of million where $XXX XX% this On

forget, Don't after the Sainsbury's this through billion this pipeline as pipeline Our our has and risen in opportunities first quarter the of of further April. of $X.X end increase significant win. is is the

is into up over look we pipeline, no doubled in customers makes our greater wins to, weighting usual a our and the as and our increased of are what a invest viable opportunities, our speak around longer and and demand we're an partnerships. which strategy. year-over-year, third towards opportunities from As has record the outsourcing that a pre-pipeline more on reflecting to recognizing larger, more business that customers holistic seeing What business, world seeing is ground, we more first-time are

and redesign growing to As companies them global help of large lower is chains, number accelerating. improve the service cost coming a quality their to result, GXO supply their

a through of couple you examples. walk me Let

a review include on One conversation product other network. America progressed Coast world's across on optimize companies solutions their North now entire started our realized on on largest an the of And has based a consumer customers, off their to and to asking West we of the company called the how regional food for to two expanding value who U.S. company operation and asking help bid service e-commerce them holistic proposals, the Europe. of network and an initially can us

much mind companies our to called us with GXO say solution a larger and with customers transformative deals now recently What big of changes it. trying are large I'm working one These as on is or one in come are that bold scale. to

grows, As GXO's asked of position the scale partner choice. a to as of being what do does we're trusted so

strategic expansion existing partnerships seeing customers, our relationships the of first-time world. to also with addition In our continued new outsourcing customers long-term around we're with

their to we've outsourced our just partnership now in DNA. we Building logistics one in food beverage record through based centers. We're This words, with win of and Sainsbury's. key April them own as distribution status these the logistics sector. competitive a from partnering announced This long-term future. in drive, relationships running is for frozen project noted, cornerstone of new Malcolm a deep with that fresh setting leader operating As Sainsbury's their long-term in all advantages and to reverse partnership is a the grown a our now value in cementing developed

number of including are Kellogg's our blue just a ninth with first companies. won consumer largest examples grew the existing chip action. with difference In We've of also world's great quarter, one we site packaged and These in the Google. GXO customers, the of all good

Finally, we forward U.K., to the network serving about brands expansion are Direct growing very Spencer. GXO even direct & further. XX has and Direct U.K. excited to direct To-date in the L'Oreal Customers’ been of we Marks to ASOS, about strong have sites and a such look as of response the we

will year. opportunities. expand later This growth We Continental launch Europe this our will

to With Mark. that, yours All over you I'll Mark. turn

Mark Manduca

is our start to to value a XXXX create share as that through scale, Thanks that we for predictability Indeed Bill. combines our is its This tremendous and tech and leadership GXO business the take great a at our bedrock. off growth continues customers. global

already where volume our inflation protection pricing are and on contractual Unlike by thresholds structures touching demand term them. upon as within growing record that our pipeline Bill is with driven XX% this long industry, by supply minimum embedded surprise in combined the dictated term secured year. short his pricing over it transactional holistic and And visibility agreements which a shouldn't with for revenue we've and transportation well First, touched predictability. conditions, our comments, diversified our pre-pipeline come

$X billion. growth will of equivalent pipeline gross our were our revenue XXXX coming our we've of through XXXX we we've growth contracts million of base worth Secondly, next April on inevitably $X.X growth the in And won that ahead by, the secure X% this where we're incremental go if last side, revenue as our wins of we end XX% propel will the anything accelerate This that to months of at us see is revenue of of additional the further. given puts revenue year. and pipeline year, in for point Moreover, $XXX secured confident we'll billion, buoyant XXXX already April. even on growth

confident about can this CAGR you XXXX without to to on broader low X% quarters team our as seven a a team hit Altogether, growth environment, X% to is delivered beat. inflationary firing attrition track for and business that in cylinders. organic our XX% We're an considering range see our rate on we're why on our management and year, promises. We've our is This missing a all XXXX. through delivers its X% targets

to we'll turn with that, Q&A. And

Operator

Thank Stephanie Please from you. first Moore [Operator Instructions] with is Our proceed. question Jeffries.

Stephanie Moore

maybe Malcolm. Hi! kind seeing from Good My rather of pipeline of and much just in Thanks morning one's elongated customers customers quarter. And comfort what hear kind Bill. hearing this as so Europe the and hesitations from as you a you and your not is U.S. to and you that and strong perspective verticals. so guidance for second one this What much. in from I'd are congrats on the you a macro you're year be both any as your can give then and for a best across first converted good one full macro potential love on that industry really well probably customers.

Malcolm Wilson

Hi! talk Good the and it me morning, ground to about on hand the over Bill to and as I'll explain Stephanie on going what's macro were. let

across delivered quarter. in last every we've the organic good So growth region

our on that our that aerospace We've for well Investor in very see really in we softer equally. or related some didn't business, got regions, weren't as are Day. nothing parts very expect sharing consumer seeing back of very, they January nothing compensating we industrial fact what we're particular. we are verticals our technology, of These example, strong verticals, All an can doing and in

in Baris management with seen our we're I shaping saw nicely few feeling softer last really seeing, our ago. that note, to of what on We've of half mentions year. What markets, on it is touched the probably from do a we up teams, performance make the environment second we're is worst markets. customers. a a particular our European for really of us XXXX strong the moment all those want really very talking of business, those

of contract customer other In really our model that we trading, softer forget profitability. our is areas shouldn't protecting

this right environment do well. So that in now, it certain in macro will pretty we're actually less

topics we're of is broadly operate interest, catching up, and wage are What news region in so definitely inflation mid-single we that sort consumer. actually every good is other wage news digits the that's for good across is wages seeing Some of moderating. inflation, the

standout quarter going are forward, final point And seeing and standout on really a what the the our I we're want pipeline. make, it's in to sales They levels. near record

of strong runway and time to about more kind demand of we and more sites, we're expected, so automation really sites, drive very that ‘XX, less feeling sites, long for new we're good because existing those put overall it. outsourcing, existing confident ‘XX, retrofitting feeling into As across visibility, into of

can touch detail. more maybe a you Bill, But on bit

Bill Fraine

morning. Thank you, is Malcolm. Hey! good This Bill,

quarters, very engaged great are one forward. the things, of show for two or today sign we've direct pipeline. simple. So that's $X.X explain talked directly with. we These last we two and given them has coming a pre-pipeline. in folks about Actually pre-pipeline call To what so few is down we've proposal doubled the a and been negotiations see these contract, as a in we're or the what we're accounts is to We've to shortlisted pipeline is which and billion, the lot pipeline pipeline a

solutions have quantified, at, them. analyzed, we now that we've accounts are and for Pre-pipeline we've we're working looked

they So the we'll into be will writing pricing pipeline. and move

So two. excited what that's breaking lately, That's towards talked wave we're very the it's beach. about. a we those great when And about

the inside million And the a pipeline deals. of the return seeing $XXX is things, what we're few

customer they we earlier. few large from happens that and at world. they what thing, a look to or to U.S., returns quite that it said capabilities and Europe that expand and to us bring the A to are thing, ask we around I one see have us we as comes the that So first the bring

our we makes really targets improving the excited of of we them of last year have the is sales focus sure And me in already things was we you then after that customers. tell industry. processes the And two-thirds going achievable, thing don't team as XXXX the we much is, a and lot making on those spent I'll are our do our final to the ones is one This industry focused the as are in that non-outsourced that ready. see time on

our of One-third that pipeline today group. comes from

now go improve that we then same ‘well, future.’ That's and what available set bring site three we're market. this monetizing answer take really have because worst And thing; them those seeing see of result, automated why sites, We That's that site don't one or two the a site, why take us the So when over GXO the new the industry of we do the into the their two-thirds and it for market. customers come they really comes And life. with and more we been after in we difference you to for that's hasn't come of that's they'll them. a and site. combine an where given we and we're our in the

Stephanie Moore

helpful, Really you. thank

Malcolm Wilson

Thank you.

Operator

Our with next from question is Chris proceed. Please Citigroup. Wetherbee

Chris Wetherbee

Hey! morning, guys. Thanks. Good

guys I an central expectation move maybe we improvement hit wanted my of the know, that the the are key running. guess back that's synergies of for you opinion, of the a somewhat as Clipper and as guess I through the raised in of the year. to you've margin year You and guidance, rest on half efficiencies there's

we progress maybe efficiencies year. of to of you're cadence the of some rest think So making delivery how talk through this those the maybe and of you the could about

Baris Oran

Hi Baris here. Chris, it's

that driving also initiatives our our planned key around XXXX progressed EBITDA we into mentioned expectation, I have targets. confidence of our of two and XXXX part As earlier, we upgrade fast the ahead

into of done they the a are and job have GXO one, bringing accelerating our of and Our combined business. Clipper focusing growth fantastic on teams

this these the to Two-thirds already from expect of million spend of $XX benefit spent, left. next accelerates We expected deliver initiatives. XXXX which in roughly year year, is in both one-third into is cost

spend quarters. in So drop coming the our significantly will

these period initiatives payback Our less years. for two than is

in in scale remember, processes to and you these Investor review are to uplift we were take into back our our about adjusted programs. we of Accenture, As EBITDA global targeting XXXX first size from these We Day, and action. million advantage $XXX that putting with

streamlining you, savings, it programs activities. included is remind outsourcing customers, in to what So non-core procurement hardware, including these IT includes infrastructure efficiencies

sense on a and we program give To one gives large program, the our of already. already a of facing lot to years a us of non-operational, two non-customer part reduced people, this payback XXXX. about enacted of program XX% And efficiency looking is this entire and you confidence XXX headcount, into

Chris Wetherbee

maybe helpful and Okay, sort more is of my and I into question, about about less next ‘XX. which that's color, ‘XX guess leads

FX I in some working do which So numbers of think we dynamics the are include the in that understand through, ‘XX.

is year. a ‘XX very terms are had think of building Bill next book talked guys I Obviously that revenue in new for interesting. you about

up think the what into run from revenue pipeline of when I for of those the the the rate pretty combination get the think pipeline efficiencies, ‘XX but of or and it's delivery you like have that maybe then the about EPS down the ‘XX, looks have about the sort and of So higher and central put to how synergies big opportunity we a to payment I a growth early to you potential mean, shaping an ‘XX? EBITDA targets. towards on for know, basis do sort

So conceptually how about think do ‘XX? we

Baris Oran

having to rate from as around run to we're million. going ‘XX a rate be $XX the for ‘XX, go run efficiencies, the far we as As

integration increasing entire of will XXXX. be benefit over and program to XXXX the the So the efficiencies

million As in I highlighted, $XX it that's thing. one XXXX; was

tailwind to positive in coming going ‘XX. are from we see some Secondly, FX

as million, in $XX $X seeing to QX of we a go so the benefit tailwind be But you'll only into are see going We XXXX. XXXX, that's that. million of around

the billion into top As have we you line. about look top though, of line $X.X

plus top of that. turns than pipeline line go today. and the RFPs of more end at As billion gives to opportunities year, QX, that or new sometimes Malcolm $X.X us mentioned, us of for roughly record That a as business after twice almost

say that $X term into If billion comfortable our trajectory. us what we makes of feel share, that, new so our us quarter about win opportunity business and over long of fair let's gives XXXX, that's growth

going XXXX our margin. XX% all through higher the are we line, is with come top targets. driving If and that to efficiencies, to technology we're to a deployment, ‘XX from EBITDA in in And we from roughly going going achieve CAGR the right other revenue, be our we're ‘XX things on our and

Chris Wetherbee

Okay, that's color. I you. the Thank time. helpful appreciate

Baris Oran

you. Thank

Operator

Our with next question is Oppenheimer. Schneeberger proceed. Please Scott from

Scott Schneeberger

I guess like to very in hear automation; I'm around start there. appreciate curious, Sainsbury's that, a by be. I XX% numbers automated I I a development thought lot much, thrown part asking now that know did your Thanks about then don't a just misheard was that of a I so lot I'd your that. and you could are of I win across automated XXXX and maybe facility? like Malcolm how target,

developed in automation relative delve where in you how you it and some just and quarter on could the prior? had you been that's to around So Thanks. maybe color what want put on

Malcolm Wilson

Scott. It's Absolutely, Malcolm.

right. with quite We're I accelerating can demand you’re automation deployment. inundated for mean, I this. customers say really from we're So

Bill projects of refers that levels automation higher New requirement. to,

years it's automation, combination making a more obviously past increased, the over much wage few attractive. tech it's of have think levels I so enablement

of building. to well we're sites, possible us the well maybe we're site, lending fully placing is tech on increasingly itself but [ph], lot also not enablement. highly with in number where the It's target existing over automate starting an now, it's taking Right automated what we're because very seeing of a increasing for we're to sitcho

even really ourselves, across automation. sheer mindful demand that deal automation incorporated seeing it's we're big for of I things very of that So we're getting earlier, as a – a at we're mentioned sheer that just of surprised being just here little one customer the now about them. And now our the really is into well what capturing is the are volume sites really base

too as of and but teams in want strengthening And definitely come in will for earnings quarter It one. quarter call. it this greater I our a quarter seen doing edge, year. us what that, we've even existing into those are we're But eco, automation, and remarkable earlier, some I to every just great we across on more more intelligence. our using say efficiency, more just mentioned it, don't examples play with automation. our two artificial helping we're our big it's and much not automation, cutting for It's to So putting recently business. be It's

on So the thing. overall very, very positive

Scott Schneeberger

good. to in went like quarter, Sounds reverse first it's well. on sounds helping it's It relevant like touch It you run the logistics. want sounds since very a business. I quite that

quarters you momentum. sounds So reverse but forward, year-over-year about if see like you're a which could particularly as and of your just you area upcoming that strong, be talk I wouldn't guess what logistics, seasonally building in development the going in lot for

curious year. I'm how balance these the some of the we that's into new So playing Thanks. maybe what see wins over of and should

Bill Fraine

because gaining key couple they where us a mentioned of bring to that the come the our around – this automation the we to A Customers Markets that of see the the We are to It's Very Day returns here. from is customers people world live, automation; just things. driver. incubators sites and automation. but we Bill good. not get are Capital that have definitely at

for But had automation. growing also question Sainsbury. is mentioned business And you current our you is portfolio. It's request our percentage our of pipeline; a our XX% about significant across reverse pipeline the of organically

That's they That's that wanted why what the working the abilities costs drive in with board clearly the the what and and could is us Sainsbury was towards that's to performance. to automation. meeting their So them sites their really team the a from benefit would our with been their showed, table, in a take really and time bring automation bring long was resulting over. we

big marketplace would just people us. for the sites us really bellwether a And it's a I what is that us that's that makes prove say to at today having automate look ability to for in and difference. the So

Scott Schneeberger

much. Thanks very

Bill Fraine

you. Thank

Operator

from proceed. Bascome question is Please Susquehanna. Majors next Our with

Bascome Majors

revenue growth and rising deliver into Earlier you've of was could some XXXX, ultimately little you into about you you the for into does manage top a bottom view? that with more Thank quantitative the talked a line about you've this the visibility significant business how and and I goals XXXX four-year on change bit sales How and visibility you. qualitatively shared XXXX. your the gained investors and hoping can that. talk pipeline

Bill Fraine

you. answer is This and a give Bill Baris. I'll Thank you over short you to again. turn

For the me pipeline hit. pre-pipeline we're have and returns we our the what we size helps hitting is, it ROIC, it that really does sure want having have, the all size to make us we

– We accounts understand selective we are in not more us. work front We can through the the be pipeline. in the we're bringing of

means to the to everything making talk line. bottom what we've Baris have hit about we're is So over it sure you committed And it to going our we that returns to for ‘XX. then to turn I'll

Baris Oran

Sure.

growing quite robustly. is We're business. new business Our selling

example XX%. Our increased automated quarter this has revenues for

from was reverse, of higher revenue the margin Our business, organic growth the business. the triple is rest also which

that up angle. going from all it's So

of a and integration million at incremental have to central this When this $XX number about of year, highlighted. you look of program. into beyond our business, end of from generating are the going The – be run we're rate things there efficiencies benefits I

as go $XX now. million and as be XXXX should to right You there's XXXX take somewhat around of That's going million $XX those. coming in That's going FX our the incremental from That's to going to be well. benefit. tailwind we be into from calculation

our So margins. improve that's to going further

us into also our initiatives improve also will these but improve to going is mix margins our margins, XXXX. Our help

Bascome Majors

Thank time. you the for

Bill Fraine

Thank you.

Operator

Mehrotra question next Amit from Our with is Deutsche Bank. Please proceed.

Ben Moore

Amit Deutsche Yes, at behalf on this Bank. Ben Moore Hi! of is

over to there direct operating you SG&A cost as on on costs costs outlook also expansion, your a And actions? the see it side quarters? hold the the payback your on can what's your And Focusing think even or restructuring drive outlook on bring margin do next your what's down? you few you line

Baris Oran

This Thank is you. Baris here.

Our in of business, operating we our go costs will what that's line expect. the with growth

we pensions, FX into were margins excluding steady. our QX, our fact, you when expect and In look

of somewhat a into look we we headwinds rest expansion the of QX, margin As in year. these excluding QX QX, expected the and

than business, So to costs, in our the growing operating of somewhat that's the slower reflected be rest one. going that's

over a much, higher percentage On the took than sales SG&A much when side, the was of SG&A we Clipper, as GXO.

So measures. we took a lot of

XXXX. As team I facing, SG&A to in you'll see rest our the quarters non-customer our more reduce around XX% of of the of and eliminated highlighted, we QX, that in benefit have for non-operational

So both in to of rest sides should year. margins help mildly improve our the the us

Ben Moore

it's return And Great, mostly we're or about you going Sainsbury talk given it’s accretive, from margins? to to dilutive your it's you assuming be profile that if the on business book of in new contract neutral all the thanks. open the and won, And can Sainsbury U.K.

Bill Fraine

Yes, it you we That I'll give to have the on is the and is then numbers account. turn book. to over the open it Baris business

Baris Oran

Sure.

We business. are we invested where high for expectations we have and capital write return for quality contracts on writing

contracts from has capital business As invested year-over-year. on And write you increased see book our our results, we'll operating our quality and X% continue high return to reflecting that. of is

create work for in in our we We pretty are who we value with shareholders. and picky how

Ben Moore

much. so thanks Okay,

Baris Oran

Thank you.

Operator

next with is Our Morgan. proceed. Ossenbeck Brian JP from question Please

Brian Ossenbeck

taking for the Thanks morning. question. Good Hey!

some you and investments managers the people or execute next pipeline that know new the with headcount could are Because, obviously Malcolm, are I you So terms like. those sense the to in just of designers to us the in perhaps broad initiatives program talked of opportunities I wanted coming, give this the what and see in to of need quarter. if about teams. one perhaps some you field on the deliver all are strengthening thing

sense of some to So team can maybe add. looking and looks you give what broad currently to just view just a like how you're as us that

Malcolm Wilson

Yeah, question. well for that Brian, thanks

how that we've our of terms One been did teams we're as moment, at of we've the that technology doing our organization what it's deploy of redesigning the and and operate earlier Bill we sales mentioned, in the how field been the and in mirroring we learning. things part across

Baris evolution, all us Our not the to situation going a as And age XXXX streamlining tech we've our mentioned. Accenture early our two revolution. company and now areas important thing the our helped the of approaching It's we're same That's in had now, some that's office most just into way. We just across learned greatly we're of in incorporating say. of along organization. and back on plan. years That's terms

other at a we I we gain. And of for GXO It’s a inundated can tight the of. industry. work say one with great hearing people GXO. part for they to we're talent. doors company perspective, be making that it's new graduate in with industry, quality the still I our important a often benchmark this the We of market think issue place when us wanting from hard are is, see benefits high a programs, that we the the people, best employees, to open work employees, as the talent to it's

to us metrics. make increasingly is just to So can it's our want we business, that getting all and sure tidal all get good a seeing customers, And key wave strengthening of It'll of for just ready actually what with we're our tech XXXX really, that'll we're the our we help pace our of that plan. demand. we keep fuel have

Brian Ossenbeck

follow allocation. for a up bit just on down Baris, just is This paying sparse, debt. some little a capital Okay,

already, its investment most think grade. I of fixed

but context be broadly give that, just deal, interest. this more obviously one M&A does did you for of opportunities some speaking, maybe capital At How others that there's can might point, like? So deployment. I'm the sure in look

So on light give some recent in Thanks. updated the thoughts of that paydowns?

Baris Oran

Brian. Sure

us around is balance of XXXX. return strong of of a financial maintain a to cash generate and sheet grade advantage end Our flow priority gives term by the and investment flexibility free X.Xx to to net expect we take the opportunities. lot This short to leverage

will create shareholders. value potential take a we'll That returning back look capital through the opportunities a to in and includes on shareholders buyback. for long term, to all bolt our accretive we this at to continue evaluate M&A Beyond

We have to them. weigh

the our marketplace, for It grow trading Therefore, be M&A. accretive creating a the are we and in or companies investing of a best the the in accretive are we costs whatever value, and create is has to take where and share M&A buyback at. trading Currently our we'll balancing those interest we shareholder pipeline company shareholders. on companies private available focused public sure are companies opportunities to lot in are a justify to in to do our lot through or keenly M&A of these faster for make have than higher we

Brian Ossenbeck

Baris. Thank Okay. you,

Baris Oran

you. Thank

Operator

Poliniak Allison from Please is Wells question next with proceed. Our Fargo.

Allison Poliniak

Good Hi. morning.

Just want to ask about GXO Direct.

EBITDA sites to targets of how openings? obviously thinking rolling of looking amount on really Europe you for color but U.K. from think later had year. year sites GXO the those regions? – mentioned into any and new you're open Any in those this on any Thanks. contribution the I you're in XX the that Direct thoughts this on And

Mark Manduca

Hey here. Allison, Mark it's

rightly as about rollout. very excited say, So you the we're

we at you billion. addressable $XXX the of the back total around remember Day, If talked market Investor about

of about roughly think SME half. you that, If it's the portion

in So that's talking were about we back what January.

pleased we perspective. did margin. the In QX that at attractive to know. you'll of that be that outgrew quarter we you'll about terms we it's Direct, note market from And Last a also business, mentioned very margins of you'll a last the XX.X% GXO base a year, note

So that to excited the thick very business. perspective and that terms it's a in GXO be going names we're about pipeline the are number in in a forward business, good us growth of from of with going working Direct

Allison Poliniak

think back Great! penetration look target to and can be existing customer talk Thanks. just that end? what if penetration terms going you those by at And are reverse you of accounts you utilize where could that that year logistics, there? Any could then or your of the service, in you to base color

Mark Manduca

tell returns we're latest the of Most I form business, of especially What newer automation, have obviously you the processes. that latest our the on e-commerce you. that customers, some thank is of bringing with Yes, we're in the would customers, on. them working the side

that. customers, back get we show go and them existing to On the

returns have we a bringing And we're pipeline to. customers already so long in-house that have of we that

to. coming industries. returns - focus then come and on make the for this grow EBITDA, to new really all want of And to and finally, They one they right want items they they manage across sure onboard, that's the the they their hit goes main customers want revenue, to

pipeline in each year. our we XX% that it's It's of well opportunity huge why area. have So, a and why it grows

So learning’s benefits very, years and had the be the to the we've of leader this. very excited a about returns in over

Allison Poliniak

Great. Thank you.

Operator

question with from next Morgan proceed. is Shanker Stanley. Please Our Ravi

Ravi Shanker

you Can on what you like? I think is everyone. there's France. the I in with of know consult environment morning you guys ball? been give there's do also sizable on if there. what And you European some a but your more headlines know macro little trusty protests Europe consumer happens a the focus crystal on U.S. operation retirement us color a consumer, Good the Thanks. lot have in these

at any you impact and tell XQ how of can there if proceeding you was all us on that kind So going forward? see

Malcolm Wilson

Ravi, hi Malcolm. it's Yeah,

So across Europe we're landscape, is resurgence. what as a actually I seeing mentioned,

that in I our softest customers, think we of the it's lower economy. of the probably point was all more was the XXXX what becoming uncertainty was high in cooling saw second part clear energy to what the a And that I playing of into and the of half fact think on but a effect have prices, across market. the dynamics, did it very of different of lot the different geographies us, macro,

our lower but model, contracting but business to our nevertheless in very you business, point. was obviously model, saw our was business our the it's testament a actually resilient, Now that again,

And through now are We're established two, across doing is actually those we've what European year forward business. steadily quarter way all in looking decent the in very think really they're from seen year actually our we're now, recovery the a well. markets. pretty of to trends the part fact I and so start a

might of very of transformational transformational changes. one lot obviously projects. working that's we big the so on ground; huge broadly Sainsbury’s what be is strong, the what a to big sales or to And in pipeline project, make we're little press, a a And were I but the pleased business lot than we seeing customers that on strategic very be what broadly with of feel we bit know choosing different see very

that's U.K., we're Shouldn’t sight. lose Europe, what Continental seeing.

be, previous year where have did they thought be, performing got North we where them are did very acknowledge call this our we bit remembered be in we've to at customers some is back same business, was all to got would way business, well of we thought going January, verticals. When we consumer to like doing record years. our in America, a but tightness Here that play to have softer to that for we than out us. I very, was the We've of bit star Investor Across some it's a time that we Day absolute a than got alignment year like would you'll but the have all in it's going our all bit mean to a out. that some and performing softer there customers we

coast, customers, if we're of approach is we to dissipate that the what of the in way be to universally the would right were on gulf they When we as fairway we expect start our now, XXXX. the and say, along speak end the year, to I hearing the we'd softness middle to

Ravi Shanker

That’s helpful color. it. Got

XQ protests Just to impact France no clarity, from the so and in quantifiable beyond.

Malcolm Wilson

yes. Absolutely Oh!

that Paris Paris. we for one that answer on in get one nearly no. was It's fact of and impact No, has collected. team. business the lived mean, no, things. our view recently I the and good And see didn't city you a very been testify I what from with on all any point, didn't it sometimes I everyone. but a can those in my whatsoever Paris I coming can again, thoroughly Sorry, trash those. XX happens in to I management thing to of you it's is, years I and beautiful recommend the

Ravi Shanker

your Very Thank but like good. to you. really to responses, two Malcolm. Thanks Talk]. right do feel I now, going play I'll maybe Between Paris golf [Cross

Operator

Zazula Please next question David Barclays. proceed. from is with Our

David Zazula

taking for Hey! my Thanks question.

composition bucket could kind and you pipeline, e-com, from you the composition if and the reverse it the how of wondered it omni-channel, are to business? I on that comment the existing logistics. What be of seeing So compare traditional pipeline specifically does

Bill Fraine

about e-com represents is That's in mentioned This the XX%, XX% being industrial pipeline. you. on thank pipeline also the now, as The is imagine, but the very sector, in could Bill, fire. thank right you growing aerospace well. I Yes, reverse you. the

You see the coming there. are orders of amount that in

that. push before You made available coming the also big in the weren't customers addressable on we've and of a really the new have market two-thirds that that's outsourced

has to their outsourcing been action other of the show sites have to showing this obviously, benefits seeing. is them focus them what in take what to, on And financial business looks are and we customers to like. Our it real the

first of that's give it selling a worst great those you products. Once the over We earlier, and masses a We them. automation. return one $X.X their tech, seeing then place. We on, of their give to site. a they we were kind They one than a to into. tech I going all I'll now Maryland an their said and a get we a with that better win We it it company took taken went call we're non-automated foot once down and takeover XX% run site over, we of are them in home of get the building example million here. And sat brands were combine a before to showed site them for it able square in that we

exciting. and see we growth we that's see So that's why of kind so what the

would all I because and powerful across value all market equally across company is bringing composition any to regions the out we're So verticals, there. it's say is of the what to the

David Zazula

whoever follow-up just a to or Bill take it. Malcolm, as wants Maybe That's for very helpful.

guess, earlier to play volume and some commentary does as your there commitments seeing. minimum a that think minimum compare and and you're softness coming cycles? part being I I executed how of how that into prior some on frequently commitment contracts was of little bit mentioned volume of is You in what

Baris Oran

Baris here. is This Hi!

We very have a well-structured contract.

business As plus. of open about is book XX% you would recall, business our cost

really So don't whatever the escalation, volumes cost matter.

that on business. our about percentage We on so management of of well, our top cost of are charging half a top and that's fee a as

requirements. closed volume productivity inflation escalators, of to higher hybrid business, minimum the gains reap also benefits the have our margin potential we this In of is where book and

go on minimum are that to levels, down prior There and year requirements during contract The based the there in and customer. volume very some our literally customers doubled the vary business. have peak steady some customers are

protection them tailor we those not seen that has on that on trigger give time-to-time and but we lot that volume commitments. of have it, basically steady, the of the a many customer those been somewhat collect customers condition and collecting too differences demand from downside. we So triggering based us demand It and are they we

David Zazula

at what or could guess, I ‘XX, or less? that all compare cycles, seen had more prior in ‘XX you maybe you to

Baris Oran

is business structured, pretty how high benefit we you lot the contracts quality and on It have been this is a our time look of similar. When spend of into writing contracts it.

separate We teams, comes have we to pricing have have a people, it sales separate teams, solutioning finance. of we our lot comes to it legal,

business infrastructure really on – of an time a lot is contracts this. an spend core that’s and like this and at So like this are of the we

David Zazula

Baris. Thanks,

Baris Oran

you. Thank

Operator

question Chan from next Stifel. Our is Bruce with Please proceed.

Bruce Chan

about this thanks recently. Hey, whether your bit as quarter. inventory think macro, inventories but a all here. wanted you structurally, you little everyone here push result de-stocking, then and from for post-pandemic Nice good the that, bottomed for Do follow-up time morning supply more seeing have lot talking for been a structurally I a that you we are something near-shoring your higher around more on customers and about strategy on and and sense to a have trends, we the levels? chain specifically inventory obviously have

Malcolm Wilson

Bruce! Hi Malcolm. It's

majority I see inventories. a level. they've in with is our normalized to the If of Eduardo, we're our majority whether They and So normal North when or with warehouses, of Paul with Richard back customers, Gavin in the were Europe what have or I here America think in we're we field across field, are definitely seeing the in or it's inventory a levels normalized. warehouses our

chain, the where the elevated disruptive XXXX So we certain I with all really of the of half normalized in have all levels out. second business, that's pandemic, influencing inventory in did And parts gone. supply it's think disruptions of our the

in learning fact, of normal what been has the that at quite to that I largely think everybody's more environment past environment. from the three that's come years disruptive accept become have the – is learning

consumer, as last shoring, increases they're is that were customers in they customers, seen continuity, to or caught of can where just sure for Bill maybe seeing moving potential we've come also that's disruption years. further maybe the planning make the all on few manufacturing in just not around bit what just-in-time. balancing to we're us. it. to And the really they're levels, inventory of business closer little past touch Businesses, the and seeing in We're a and in seen we've actively near positive

the just-in-time work While if always you don't doesn't have inventory.

of we've a bit So seen little normalizing.

now, and on go I bit mean, detail. ’XX. a ‘XX Bill, expect projects we're this of in now, a actively nearer few right in we of and state think manufacturing a involved talk in getting And into consumer. just you're as rest customer to we right Maybe But through I can to you environment would activity the very continue normal and

Bill Fraine

really but is what of is I you, your the Thank inventory past. they have if dealing some part not What that, they still see they question first I up, out Malcolm. Yeah, would it's problems may inventory say so – less are to with that's any not an customers of issue. moving that load the are the still in coming

need more they What is be focused $XXX and their deals, customers the a kind want are. larger they really million and and of that's detailed to triggering volumes out where right on really system are the customers these They that to are it have provides of customers to the get level inventory thing the want information.

the the this ability have need network, volume or where it improve I fits is, the past, bullwhip U.S. process. and available, the to one through the you're it or happening as what they having things having in can more than sites see data. may the of a how providing the figure a and inventories we inventory, in in all and So and not that I starts maybe generated able to out the push. smooth more react quickly. Those automation, Think these a means five you're of what be think problems in AI inventory three is the we demand To as comes then and AI that sure call that and process are make to four having on happened because it

Bruce Chan

you. all Thank Thank That's much. very great color. you

Bill Fraine

Thank you.

Operator

we for have that hand over to to for remarks. any would call like I closing today. is Malcolm the Ladies all time the questions gentlemen, back and

Malcolm Wilson

and Sherry thanks that. our We call today. for Thank you, again all hosting appreciate

Just and foundations setting for and we we're true truly contracts, locations winning we're raising across explained deploying I that's think to our a call. it's have. summary of strong of and seeing near guidance, EPS XXX,XXX of what a targets. the pipeline the started different our We're We're importantly, gaining we're and really more everyone, a our more Look, that and share, operating customer in further we've growth manner record the opportunities. exciting on XXXX sized XXXX seeing technology adjusted and also we've the XXXX sales delivering EBITDA market

our I focused We stakeholders. benchmark for think DNA. now integration has do is delivering got of the value what it Clipper and it's and on M&A that's very all all a company where a we've our been but great and do our deal in of well. can complete shareholders indeed we on it This business. We're

like I'd that great with summary, and thanks for joining everybody wish morning. of a So to rest us this day the

Operator

does today's you, for and Thank participation. gentlemen. ladies you conclude conference. Thank This your

your You lines wonderful disconnect day! may and time a at have this

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