UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40470

GXO Logistics, Inc.

(Exact name of registrant as specified in its charter)


Delaware						86-2098312
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)
Two American Lane
Greenwich, Connecticut						06831
(Address of principal executive offices)						(Zip Code)

(203) 489-1287

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

GXO

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August 1,~~November 6, 2023, there were ~~118,935,831~~118,954,910 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GXO Logistics, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions, shares in thousands, except per share amounts)	(Dollars in millions, shares in thousands, except per share amounts)	2023		2022		2023		2022		(Dollars in millions, shares in thousands, except per share amounts)	2023		2022		2023		2022
Revenue	Revenue	$	2,394	$	2,156	$	4,717	$	4,239	Revenue	$	2,471	$	2,287	$	7,188	$	6,526
Direct operating expense	Direct operating expense	1,957		1,775		3,863		3,523		Direct operating expense	2,012		1,885		5,875		5,408
Selling, general and administrative expense	Selling, general and administrative expense	245		220		503		410		Selling, general and administrative expense	258		227		761		637
Depreciation and amortization expense	Depreciation and amortization expense	84		77		167		153		Depreciation and amortization expense	101		89		268		242
Transaction and integration costs	Transaction and integration costs	6		24		19		43		Transaction and integration costs	3		14		22		57
Restructuring costs and other	Restructuring costs and other	3		1		24		14		Restructuring costs and other	7		—		31		14
Operating income	Operating income	99		59		141		96		Operating income	90		72		231		168
Other income, net	Other income, net	1		23		1		39		Other income, net	7		17		8		56
Interest expense, net	Interest expense, net	(14)		(9)		(27)		(13)		Interest expense, net	(14)		(6)		(41)		(19)
Income before income taxes	Income before income taxes	86		73		115		122		Income before income taxes	83		83		198		205
Income tax expense	Income tax expense	(20)		(21)		(23)		(32)		Income tax expense	(15)		(19)		(38)		(51)
Net income	Net income	66		52		92		90		Net income	68		64		160		154
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(1)		(1)		(2)		(2)		Net income attributable to noncontrolling interests	(2)		(1)		(4)		(3)
Net income attributable to GXO	Net income attributable to GXO	$	65	$	51	$	90	$	88	Net income attributable to GXO	$	66	$	63	$	156	$	151

Earnings per share	Earnings per share									Earnings per share
Basic	Basic	$	0.55	$	0.44	$	0.76	$	0.76	Basic	$	0.55	$	0.53	$	1.31	$	1.30
Diluted	Diluted	$	0.54	$	0.44	$	0.75	$	0.76	Diluted	$	0.55	$	0.53	$	1.31	$	1.29
Weighted-average common shares outstanding	Weighted-average common shares outstanding									Weighted-average common shares outstanding
Basic	Basic	118,927		116,131		118,854		115,435		Basic	118,941		118,621		118,883		116,508
Diluted	Diluted	119,415		116,646		119,323		116,111		Diluted	119,645		119,065		119,430		117,107

See accompanying Notes to Condensed Consolidated Financial Statements.

GXO Logistics, Inc.

Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	(In millions)	2023		2022		2023		2022		(In millions)	2023		2022		2023		2022
Net income	Net income	$	66	$	52	$	92	$	90	Net income	$	68	$	64	$	160	$	154
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax									Other comprehensive income (loss), net of tax
Foreign currency translation gain (loss), net of tax (expense) benefit of $6, $(10), $9 and $(10)		17		(75)		30		(120)
Net unrealized gain on cash flow hedges, net of tax (expense) of $(1), $0, $0 and $0		4		—		1		—
Foreign currency translation loss, net of tax expense of $(9), $(22), $0 and $(32)										Foreign currency translation loss, net of tax expense of $(9), $(22), $0 and $(32)	(69)		(43)		(39)		(163)
Net unrealized gain on cash flow hedges, net of tax expense of $(1), $(2), $(1) and $(2)										Net unrealized gain on cash flow hedges, net of tax expense of $(1), $(2), $(1) and $(2)	—		9		1		9
Defined benefit plans, amortization of net loss, net of tax of $0, $0, $0 and $0	Defined benefit plans, amortization of net loss, net of tax of $0, $0, $0 and $0	1		—		1		—		Defined benefit plans, amortization of net loss, net of tax of $0, $0, $0 and $0	1		—		2		—
Other comprehensive income (loss), net of tax		22		(75)		32		(120)
Comprehensive income (loss)		88		(23)		124		(30)
Less: Comprehensive income attributable to noncontrolling interest		2		—		3		—
Comprehensive income (loss) attributable to GXO		$	86	$	(23)	$	121	$	(30)
Other comprehensive loss, net of tax										Other comprehensive loss, net of tax	(68)		(34)		(36)		(154)
Comprehensive income										Comprehensive income	—		30		124		—
Less: Comprehensive income (loss) attributable to noncontrolling interest										Less: Comprehensive income (loss) attributable to noncontrolling interest	—		(1)		3		(1)
Comprehensive income attributable to GXO										Comprehensive income attributable to GXO	$	—	$	31	$	121	$	1

See accompanying Notes to Condensed Consolidated Financial Statements.

GXO Logistics, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)


		June 30,		December 31,			September 30,		December 31,
(Dollars in millions, shares in thousands, except per share amounts)	(Dollars in millions, shares in thousands, except per share amounts)	2023		2022		(Dollars in millions, shares in thousands, except per share amounts)	2023		2022
ASSETS	ASSETS					ASSETS
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	305	$	495	Cash and cash equivalents	$	473	$	495
Accounts receivable, net of allowance of $12 and $12		1,719		1,647
Accounts receivable, net of allowance of $18 and $12						Accounts receivable, net of allowance of $18 and $12	1,661		1,647
Other current assets	Other current assets	282		286		Other current assets	332		286
Total current assets	Total current assets	2,306		2,428		Total current assets	2,466		2,428
Long-term assets	Long-term assets					Long-term assets
Property and equipment, net of accumulated depreciation of $1,428 and $1,297		965		960
Property and equipment, net of accumulated depreciation of $1,463 and $1,297						Property and equipment, net of accumulated depreciation of $1,463 and $1,297	923		960
Operating lease assets	Operating lease assets	2,194		2,227		Operating lease assets	2,133		2,227
Goodwill	Goodwill	2,802		2,728		Goodwill	2,734		2,728
Intangible assets, net of accumulated amortization of $500 and $456		544		570
Intangible assets, net of accumulated amortization of $507 and $456						Intangible assets, net of accumulated amortization of $507 and $456	507		570
Other long-term assets	Other long-term assets	315		306		Other long-term assets	328		306
Total long-term assets	Total long-term assets	6,820		6,791		Total long-term assets	6,625		6,791
Total assets	Total assets	$	9,126	$	9,219	Total assets	$	9,091	$	9,219
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	566	$	717	Accounts payable	$	597	$	717
Accrued expenses	Accrued expenses	950		995		Accrued expenses	975		995
Current debt	Current debt	35		67		Current debt	26		67
Current operating lease liabilities	Current operating lease liabilities	568		560		Current operating lease liabilities	561		560
Other current liabilities	Other current liabilities	284		193		Other current liabilities	275		193
Total current liabilities	Total current liabilities	2,403		2,532		Total current liabilities	2,434		2,532
Long-term liabilities	Long-term liabilities					Long-term liabilities
Long-term debt	Long-term debt	1,625		1,739		Long-term debt	1,621		1,739
Long-term operating lease liabilities	Long-term operating lease liabilities	1,838		1,853		Long-term operating lease liabilities	1,800		1,853
Other long-term liabilities	Other long-term liabilities	449		417		Other long-term liabilities	419		417
Total long-term liabilities	Total long-term liabilities	3,912		4,009		Total long-term liabilities	3,840		4,009
Commitments and contingencies (Note 12)	Commitments and contingencies (Note 12)					Commitments and contingencies (Note 12)
Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity
Common Stock, $0.01 par value per share; 300,000 shares authorized, 118,932 and 118,728 issued and outstanding		1		1
Common Stock, $0.01 par value per share; 300,000 shares authorized, 118,951 and 118,728 issued and outstanding						Common Stock, $0.01 par value per share; 300,000 shares authorized, 118,951 and 118,728 issued and outstanding	1		1
Preferred Stock, $0.01 par value per share; 10,000 shares authorized, none issued and outstanding	Preferred Stock, $0.01 par value per share; 10,000 shares authorized, none issued and outstanding	—		—		Preferred Stock, $0.01 par value per share; 10,000 shares authorized, none issued and outstanding	—		—
Additional paid-in capital	Additional paid-in capital	2,587		2,575		Additional paid-in capital	2,593		2,575
Retained earnings	Retained earnings	413		323		Retained earnings	479		323
Accumulated other comprehensive loss		(223)		(254)
Accumulated Other Comprehensive Income (Loss) (“AOCIL”)						Accumulated Other Comprehensive Income (Loss) (“AOCIL”)	(289)		(254)
Total stockholders’ equity before noncontrolling interests	Total stockholders’ equity before noncontrolling interests	2,778		2,645		Total stockholders’ equity before noncontrolling interests	2,784		2,645
Noncontrolling interests	Noncontrolling interests	33		33		Noncontrolling interests	33		33
Total equity	Total equity	2,811		2,678		Total equity	2,817		2,678
Total liabilities and equity	Total liabilities and equity	$	9,126	$	9,219	Total liabilities and equity	$	9,091	$	9,219

See accompanying Notes to Condensed Consolidated Financial Statements.

GXO Logistics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


		Six Months Ended June 30,					Nine Months Ended September 30,
(In millions)	(In millions)	2023		2022		(In millions)	2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	92	$	90	Net income	$	160	$	154
Adjustments to reconcile net income to net cash provided by operating activities	Adjustments to reconcile net income to net cash provided by operating activities					Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization expense	Depreciation and amortization expense	167		153		Depreciation and amortization expense	268		242
Stock-based compensation expense	Stock-based compensation expense	18		16		Stock-based compensation expense	25		24
Deferred tax expense (benefit)	Deferred tax expense (benefit)	(17)		3		Deferred tax expense (benefit)	(29)		—
Other	Other	10		1		Other	16		(4)
Changes in operating assets and liabilities	Changes in operating assets and liabilities					Changes in operating assets and liabilities
Accounts receivable	Accounts receivable	(29)		(20)		Accounts receivable	(23)		(22)
Other assets	Other assets	18		(30)		Other assets	(39)		(28)
Accounts payable	Accounts payable	(107)		(56)		Accounts payable	(69)		(68)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	(52)		43		Accrued expenses and other liabilities	34		18
Net cash provided by operating activities	Net cash provided by operating activities	100		200		Net cash provided by operating activities	343		316
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(150)		(154)		Capital expenditures	(205)		(239)
Proceeds from sales of property and equipment	Proceeds from sales of property and equipment	10		6		Proceeds from sales of property and equipment	13		22
Acquisition of businesses, net of cash acquired	Acquisition of businesses, net of cash acquired	—		(874)		Acquisition of businesses, net of cash acquired	—		(874)
Net proceeds from cross-currency swap agreements	Net proceeds from cross-currency swap agreements	—		10		Net proceeds from cross-currency swap agreements	—		26
Other	Other	—		9		Other	—		9
Net cash used in investing activities	Net cash used in investing activities	(140)		(1,003)		Net cash used in investing activities	(192)		(1,056)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from issuance of debt, net	Proceeds from issuance of debt, net	—		898		Proceeds from issuance of debt, net	—		898
Repayments of debt, net	Repayments of debt, net	(138)		—		Repayments of debt, net	(139)		—
Repayments of finance lease obligations	Repayments of finance lease obligations	(16)		(15)		Repayments of finance lease obligations	(24)		(23)
Taxes paid related to stock-based compensation awards	Taxes paid related to stock-based compensation awards	(6)		(12)		Taxes paid related to stock-based compensation awards	(7)		(12)
Other		5		(2)

Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(155)		869		Net cash provided by (used in) financing activities	(170)		863
Effect of exchange rates on cash and cash equivalents		5		(15)
Net (decrease) increase in cash and cash equivalents		(190)		51
Cash and cash equivalents, beginning of period		495		333
Cash and cash equivalents, end of period		$	305	$	384
Effect of exchange rates on cash, restricted cash and cash equivalents						Effect of exchange rates on cash, restricted cash and cash equivalents	(2)		(22)
Net (decrease) increase in cash, restricted cash and cash equivalents						Net (decrease) increase in cash, restricted cash and cash equivalents	(21)		101
Cash, restricted cash and cash equivalents, beginning of period						Cash, restricted cash and cash equivalents, beginning of period	495		333
Cash, restricted cash and cash equivalents, end of period						Cash, restricted cash and cash equivalents, end of period	$	474	$	434

Supplemental disclosure of non-cash activities:
Cash and cash equivalents						Cash and cash equivalents	$	473	$	434
Restricted Cash (included in Other long-term assets)						Restricted Cash (included in Other long-term assets)	1		—
Total cash, restricted cash and cash equivalents						Total cash, restricted cash and cash equivalents	$	474	$	434

Non-cash investing activities:						Non-cash investing activities:
Common stock issued for acquisition	Common stock issued for acquisition	$	—	$	203	Common stock issued for acquisition	$	—	$	203

See accompanying Notes to Condensed Consolidated Financial Statements.

GXO Logistics, Inc.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)


		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Equity Before Noncontrolling Interests		Noncontrolling Interests		Total Equity			Common Stock			Additional Paid-In Capital		Retained Earnings		AOCIL		Equity Before Noncontrolling Interests		Noncontrolling Interests		Total Equity
(Shares in thousands, dollars in millions)	(Shares in thousands, dollars in millions)	Shares	Amount														(Shares in thousands, dollars in millions)	Shares	Amount
Balance as of March 31, 2023		118,889	$	1	$	2,580	$	348	$	(244)	$	2,685	$	34	$	2,719
Balance as of June 30, 2023																	Balance as of June 30, 2023	118,932	$	1	$	2,587	$	413	$	(223)	$	2,778	$	33	$	2,811
Net income	Net income	—	—		—		65		—		65		1		66		Net income	—	—		—		66		—		66		2		68
Other comprehensive income		—	—		—		—		21		21		1		22
Other comprehensive loss																	Other comprehensive loss	—	—		—		—		(66)		(66)		(2)		(68)
Stock-based compensation	Stock-based compensation	—	—		9		—		—		9		—		9		Stock-based compensation	—	—		7		—		—		7		—		7
Vesting of stock-based compensation awards	Vesting of stock-based compensation awards	71	—		—		—		—		—		—		—		Vesting of stock-based compensation awards	30	—		—		—		—		—		—		—
Tax withholding on vesting of stock-based compensation awards	Tax withholding on vesting of stock-based compensation awards	(28)	—		(2)		—		—		(2)		—		(2)		Tax withholding on vesting of stock-based compensation awards	(11)	—		(1)		—		—		(1)		—		(1)
Dividends		—	—		—		—		—		—		(3)		(3)
Balance as of June 30, 2023		118,932	$	1	$	2,587	$	413	$	(223)	$	2,778	$	33	$	2,811
Balance as of September 30, 2023																	Balance as of September 30, 2023	118,951	$	1	$	2,593	$	479	$	(289)	$	2,784	$	33	$	2,817


(Shares in thousands, dollars in millions)	(Shares in thousands, dollars in millions)	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Equity Before Noncontrolling Interests		Noncontrolling Interests		Total Equity		(Shares in thousands, dollars in millions)	Common Stock			Additional Paid-In Capital		Retained Earnings		AOCIL		Equity Before Noncontrolling Interests		Noncontrolling Interests		Total Equity
		Shares	Amount															Shares	Amount
Balance as of December 31, 2022	Balance as of December 31, 2022	118,728	$	1	$	2,575	$	323	$	(254)	$	2,645	$	33	$	2,678	Balance as of December 31, 2022	118,728	$	1	$	2,575	$	323	$	(254)	$	2,645	$	33	$	2,678
Net income	Net income	—	—		—		90		—		90		2		92		Net income	—	—		—		156		—		156		4		160
Other comprehensive income		—	—		—		—		31		31		1		32
Other comprehensive loss																	Other comprehensive loss	—	—		—		—		(35)		(35)		(1)		(36)
Stock-based compensation	Stock-based compensation	—	—		18		—		—		18		—		18		Stock-based compensation	—	—		25		—		—		25		—		25
Vesting of stock-based compensation awards	Vesting of stock-based compensation awards	336	—		—		—		—		—		—		—		Vesting of stock-based compensation awards	366	—		—		—		—		—		—		—
Tax withholding on vesting of stock-based compensation awards	Tax withholding on vesting of stock-based compensation awards	(132)	—		(6)		—		—		(6)		—		(6)		Tax withholding on vesting of stock-based compensation awards	(143)	—		(7)		—		—		(7)		—		(7)
Dividends	Dividends	—	—		—		—		—		—		(3)		(3)		Dividends	—	—		—		—		—		—		(3)		(3)
Balance as of June 30, 2023		118,932	$	1	$	2,587	$	413	$	(223)	$	2,778	$	33	$	2,811
Balance as of September 30, 2023																	Balance as of September 30, 2023	118,951	$	1	$	2,593	$	479	$	(289)	$	2,784	$	33	$	2,817

See accompanying Notes to Condensed Consolidated Financial Statements.

GXO Logistics, Inc.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)


		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Equity Before Noncontrolling Interests		Noncontrolling Interests		Total Equity			Common Stock			Additional Paid-In Capital		Retained Earnings		AOCIL		Equity Before Noncontrolling Interests		Noncontrolling Interests		Total Equity
(Shares in thousands, dollars in millions)	(Shares in thousands, dollars in millions)	Shares	Amount														(Shares in thousands, dollars in millions)	Shares	Amount
Balance as of March 31, 2022		114,840	$	1	$	2,349	$	163	$	(172)	$	2,341	$	34	$	2,375
Balance as of June 30, 2022																	Balance as of June 30, 2022	118,610	$	1	$	2,561	$	214	$	(246)	$	2,530	$	31	$	2,561
Net income	Net income	—	—		—		51		—		51		1		52		Net income	—	—		—		63		—		63		1		64
Other comprehensive loss	Other comprehensive loss	—			—		—		(74)		(74)		(1)		(75)		Other comprehensive loss	—	—		—		—		(32)		(32)		(2)		(34)
Stock-based compensation	Stock-based compensation	—	—		10		—		—		10		—		10		Stock-based compensation	—	—		8		—		—		8		—		8
Vesting of stock compensation awards	Vesting of stock compensation awards	23	—		—		—		—		—		—		—		Vesting of stock compensation awards	33	—		—		—		—		—		—		—
Tax withholding on vesting of stock compensation awards	Tax withholding on vesting of stock compensation awards	(2)	—		(1)		—		—		(1)		—		(1)		Tax withholding on vesting of stock compensation awards	(14)	—		—		—		—		—		—		—
Common stock issued for acquisition		3,749	—		203		—		—		203		—		203
Dividends		—	—		—		—		—		—		(3)		(3)
Balance as of June 30, 2022		118,610	$	1	$	2,561	$	214	$	(246)	$	2,530	$	31	$	2,561
Balance as of September 30, 2022																	Balance as of September 30, 2022	118,629	$	1	$	2,569	$	277	$	(278)	$	2,569	$	30	$	2,599


		Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Equity Before Noncontrolling Interests		Noncontrolling Interests		Total Equity			Common Stock			Additional Paid-In Capital		Retained Earnings		AOCIL		Equity Before Noncontrolling Interests		Noncontrolling Interests		Total Equity
(Shares in thousands, dollars in millions)	(Shares in thousands, dollars in millions)	Shares	Amount														(Shares in thousands, dollars in millions)	Shares	Amount
Balance as of December 31, 2021	Balance as of December 31, 2021	114,659	$	1	$	2,354	$	126	$	(130)	$	2,351	$	39	$	2,390	Balance as of December 31, 2021	114,659	$	1	$	2,354	$	126	$	(130)	$	2,351	$	39	$	2,390
Net income	Net income	—	—		—		88		—		88		2		90		Net income	—	—		—		151		—		151		3		154
Other comprehensive loss	Other comprehensive loss	—	—		—		—		(118)		(118)		(2)		(120)		Other comprehensive loss	—	—		—		—		(150)		(150)		(4)		(154)
Stock-based compensation	Stock-based compensation	—	—		16		—		—		16		—		16		Stock-based compensation	—	—		24		—		—		24		—		24
Vesting of stock compensation awards	Vesting of stock compensation awards	341	—		—		—		—		—		—		—		Vesting of stock compensation awards	374	—		—		—		—		—		—		—
Tax withholding on vesting of stock compensation awards	Tax withholding on vesting of stock compensation awards	(139)	—		(12)		—		—		(12)		—		(12)		Tax withholding on vesting of stock compensation awards	(153)	—		(12)		—		—		(12)		—		(12)
Common stock issued for acquisition	Common stock issued for acquisition	3,749	—		203		—		—		203		—		203		Common stock issued for acquisition	3,749	—		203		—		—		203		—		203
Deconsolidation of variable interest entity	Deconsolidation of variable interest entity	—	—		—		—		2		2		(5)		(3)		Deconsolidation of variable interest entity	—	—		—		—		2		2		(5)		(3)
Dividends	Dividends	—	—		—		—		—		—		(3)		(3)		Dividends	—	—		—		—		—		—		(3)		(3)
Balance as of June 30, 2022		118,610	$	1	$	2,561	$	214	$	(246)	$	2,530	$	31	$	2,561
Balance as of September 30, 2022																	Balance as of September 30, 2022	118,629	$	1	$	2,569	$	277	$	(278)	$	2,569	$	30	$	2,599

See accompanying Notes to Condensed Consolidated Financial Statements.

GXO Logistics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of GXO Logistics, Inc. (“GXO” or the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules of the U.S. Securities and Exchange Commission ~~(“SEC”~~(the “SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included.

Operating results for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The Company’s Condensed Consolidated Financial Statements include the accounts of GXO and its majority-owned subsidiaries and variable interest entities of which the Company is the primary beneficiary. The Company has eliminated intercompany accounts and transactions.

The accompanying unaudited Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). Certain amounts reported for prior periods have been reclassified to conform to the current period’s presentation.

The Company presents its operations as one reportable segment.

Recently Adopted Accounting Pronouncements

In 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The ASU applies only to contracts and hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. In 2021, the FASB expanded the scope of the guidance to include derivatives. ~~In 2022, the FASB deferred the expiration date for Topic 848 from December 31, 2022, until December 31, 2024.~~ On March 9, 2023, the Company entered into Amendment No. 1 to its revolving credit facility replacing LIBOR-based benchmark rates with SOFR-based benchmark rates and other conforming changes (the “Revolving Credit Facility”). The Company has transitioned its existing contracts to a replacement index. ASU 2020-04 and its amendments did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

2. Revenue Recognition

Revenue disaggregated by geographical area was as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	(In millions)	2023		2022		2023		2022		(In millions)	2023		2022		2023		2022
United Kingdom	United Kingdom	$	893	$	777	$	1,737	$	1,481	United Kingdom	$	958	$	890	$	2,695	$	2,371
United States	United States	692		685		1,406		1,366		United States	711		709		2,117		2,075
France	France	217		183		419		359		France	207		171		626		530
Netherlands	Netherlands	198		163		394		333		Netherlands	216		175		610		508
Spain	Spain	136		123		263		243		Spain	133		117		396		360
Italy	Italy	94		80		182		162		Italy	97		81		279		243
Other	Other	164		145		316		295		Other	149		144		465		439
Total	Total	$	2,394	$	2,156	$	4,717	$	4,239	Total	$	2,471	$	2,287	$	7,188	$	6,526

The Company’s revenue can also be disaggregated by the customer’s primary industry. Revenue disaggregated by ~~industries~~industry was as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	(In millions)	2023		2022		2023		2022		(In millions)	2023		2022		2023		2022
Omnichannel retail	Omnichannel retail	$	1,026	$	879	$	1,990	$	1,704	Omnichannel retail	$	1,051	$	919	$	3,041	$	2,618
Technology and consumer electronics	Technology and consumer electronics	355		315		721		620		Technology and consumer electronics	360		338		1,081		963
Food and beverage	Food and beverage	335		336		642		674		Food and beverage	362		335		1,004		1,009
Industrial and manufacturing	Industrial and manufacturing	270		269		540		532		Industrial and manufacturing	263		275		803		807
Consumer packaged goods	Consumer packaged goods	232		223		458		436		Consumer packaged goods	231		227		689		663
Other	Other	176		134		366		273		Other	204		193		570		466
Total	Total	$	2,394	$	2,156	$	4,717	$	4,239	Total	$	2,471	$	2,287	$	7,188	$	6,526

Contract Assets and Liabilities

Contract assets consist of two components, customer acquisition costs and costs to fulfill a contract. Contract assets are ~~primarily~~ amortized to Direct operating expense in the Condensed Consolidated Statements of Operations over the contract term.

Contract liabilities represent the Company’s obligation to transfer services to a customer for which the Company has received consideration or the amount is due from the customer.

The contract asset and contract liability balances from contracts with customers were as follows:


		June 30,		December 31,			September 30,		December 31,
(In millions)	(In millions)	2023		2022		(In millions)	2023		2022
Contract assets included in:	Contract assets included in:					Contract assets included in:
Other current assets	Other current assets	$	15	$	25	Other current assets	$	13	$	25
Other long-term assets	Other long-term assets	161		165		Other long-term assets	161		165
Total contract assets	Total contract assets	$	176	$	190	Total contract assets	$	174	$	190
Contract liabilities included in:	Contract liabilities included in:					Contract liabilities included in:
Other current liabilities	Other current liabilities	$	196	$	154	Other current liabilities	$	183	$	154
Other long-term liabilities	Other long-term liabilities	119		134		Other long-term liabilities	114		134
Total contract liabilities	Total contract liabilities	$	315	$	288	Total contract liabilities	$	297	$	288

Revenue included the following:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	(In millions)	2023		2022		2023		2022		(In millions)	2023		2022		2023		2022
Amounts included in the beginning-of-year contract liability balance	Amounts included in the beginning-of-year contract liability balance	$	16	$	8	$	98	$	71	Amounts included in the beginning-of-year contract liability balance	$	11	$	12	$	109	$	83

Remaining Performance Obligations

As of ~~June~~September 30, 2023, the fixed consideration component of the Company’s remaining performance obligation was approximately ~~$3.5~~$3.4 billion, and the Company expects to recognize approximately ~~74%~~72% of that amount over the next three years and the remainder thereafter. The Company estimates remaining performance obligations at a point in time, and actual amounts may differ from these estimates due to changes in foreign currency exchange rates and contract revisions or terminations.

3. Leases

The Company has operating leases ~~primarily~~ for real estate, warehouse equipment, trucks, trailers, containers and material handling equipment. In addition, the Company has finance leases for warehouse equipment.

The following amounts related to leases were recorded in the Condensed Consolidated Balance Sheets:


		June 30,		December 31,			September 30,		December 31,
(In millions)	(In millions)	2023		2022		(In millions)	2023		2022
Operating leases:	Operating leases:					Operating leases:
Operating lease assets	Operating lease assets	$	2,194	$	2,227	Operating lease assets	$	2,133	$	2,227

Current operating lease liabilities	Current operating lease liabilities	$	568	$	560	Current operating lease liabilities	$	561	$	560
Long-term operating lease liabilities	Long-term operating lease liabilities	1,838		1,853		Long-term operating lease liabilities	1,800		1,853
Total operating lease liabilities	Total operating lease liabilities	$	2,406	$	2,413	Total operating lease liabilities	$	2,361	$	2,413

Finance leases:	Finance leases:					Finance leases:
Property and equipment, net	Property and equipment, net	$	124	$	123	Property and equipment, net	$	111	$	123

Current debt	Current debt	$	31	$	35	Current debt	$	26	$	35
Long-term debt	Long-term debt	96		97		Long-term debt	91		97
Total finance lease liabilities	Total finance lease liabilities	$	127	$	132	Total finance lease liabilities	$	117	$	132

The components of lease expense recorded in the Condensed Consolidated Statements of Operations were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	(In millions)	2023		2022		2023		2022		(In millions)	2023		2022		2023		2022
Operating leases:	Operating leases:									Operating leases:
Operating lease cost	Operating lease cost	$	183	$	171	$	398	$	340	Operating lease cost	$	163	$	187	$	561	$	527
Short-term lease cost	Short-term lease cost	63		23		92		45		Short-term lease cost	78		24		170		69
Variable lease cost	Variable lease cost	29		22		57		42		Variable lease cost	36		31		93		73
Total operating lease cost (1)	Total operating lease cost (1)	$	275	$	216	$	547	$	427	Total operating lease cost (1)	$	277	$	242	$	824	$	669
Finance leases:	Finance leases:									Finance leases:
Amortization of leases	Amortization of leases	$	6	$	11	$	13	$	18	Amortization of leases	$	10	$	5	$	23	$	23
Interest expense on lease liabilities	Interest expense on lease liabilities	1		2		2		3		Interest expense on lease liabilities	1		1		3		4
Total finance lease cost	Total finance lease cost	$	7	$	13	$	15	$	21	Total finance lease cost	$	11	$	6	$	26	$	27
Total operating and finance lease cost	Total operating and finance lease cost	$	282	$	229	$	562	$	448	Total operating and finance lease cost	$	288	$	248	$	850	$	696

(1) Operating lease cost is primarily included in Direct operating ~~expenses~~expense in the Condensed Consolidated Statements of Operations.

Supplemental cash flow information was as follows:

Six Months Ended June 30,
(In millions) 2023 2022
Leased assets obtained in exchange for new operating lease liabilities, including $249 from an acquisition in 2022 $ 239 $ 559
Leased assets obtained in exchange for new finance lease liabilities, including $14 from an acquisition in 2022 8 16


	Nine Months Ended September 30,
(In millions)	2023		2022
Leased assets obtained in exchange for new operating lease liabilities, including $207 from an acquisition in 2022	$	389	$	911
Leased assets obtained in exchange for new finance lease liabilities, including $16 from an acquisition in 2022	8		18

4. Debt and Financing Arrangements

The following table summarizes the carrying value of debt:


			June 30,		December 31,					September 30,		December 31,
(In millions)	(In millions)	Rate (1)	2023		2022		(In millions)	Rate (1)		2023		2022
1.65% Unsecured notes due 2026 (2)	1.65% Unsecured notes due 2026 (2)	1.65%	$	398	$	397	1.65% Unsecured notes due 2026 (2)	1.65	%	$	398	$	397
2.65% Unsecured notes due 2031 (3)	2.65% Unsecured notes due 2031 (3)	2.65%	397		397		2.65% Unsecured notes due 2031 (3)	2.65	%	397		397
Two-Year Term Loan due 2024 (4)	Two-Year Term Loan due 2024 (4)	—%	—		115		Two-Year Term Loan due 2024 (4)	—	%	—		115
Three-Year Term Loan due 2025 (5)	Three-Year Term Loan due 2025 (5)	6.33%	235		234		Three-Year Term Loan due 2025 (5)	6.54	%	235		234
Five-Year Term Loan due 2027 (6)	Five-Year Term Loan due 2027 (6)	6.45%	499		499		Five-Year Term Loan due 2027 (6)	6.67	%	499		499
Finance leases and other	Finance leases and other	Various	131		164		Finance leases and other	Various		118		164
Total debt	Total debt		1,660		1,806		Total debt			1,647		1,806
Less: Current debt	Less: Current debt		35		67		Less: Current debt			26		67
Total Long-term debt	Total Long-term debt		$	1,625	$	1,739	Total Long-term debt			$	1,621	$	1,739

(1) Interest rate as of ~~June~~September 30, 2023.

(2) Net of unamortized debt issuance costs of $2 million as of ~~June~~September 30, 2023, and $3 million as of December 31, 2022.

(3) Net of unamortized debt issuance costs of $3 million as of ~~June~~September 30, 2023 and December 31, 2022.

(4) Repaid in the second quarter of 2023.

(5) Net of unamortized debt issuance costs of $1 million as of December 31, 2022.

(6) Net of unamortized debt issuance costs of $1 million as of ~~June~~September 30, 2023 and December 31, 2022.

Factoring Programs

The Company sells certain of its trade receivables on a non-recourse basis to third-party financial institutions under various factoring agreements. The Company accounts for these transactions as sales of receivables and presents cash proceeds as cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows.

Information related to the trade receivables sold was as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	(In millions)	2023		2022		2023		2022		(In millions)	2023		2022		2023		2022
Receivables sold in period	Receivables sold in period	$	269	$	228	$	532	$	457	Receivables sold in period	$	288	$	259	$	820	$	716
Cash consideration	Cash consideration	268		228		529		456		Cash consideration	286		258		815		714
Net cash used in operating cash flows (1)		—		(8)		—		(2)
Net cash provided by operating cash flows (1)										Net cash provided by operating cash flows (1)	27		18		27		16

(1) The ~~three~~nine months ended ~~June~~September 30, 2022, includes ~~$8 million of cash used by factoring programs. The six months ended June 30, 2022, includes $116~~$134 million of cash provided by factoring program, reduced by $118 million of cash used in the securitization program that was terminated in the first quarter of 2022.

Covenants and Compliance

The covenants in the unsecured notes, term loans and revolving credit facilities, which are customary for financings of this type, limit the Company’s ability to incur indebtedness and grant liens, among other restrictions. In addition, the facilities require the Company to maintain a consolidated leverage ratio below a specified maximum.

As of ~~June~~September 30, 2023, the Company was in compliance with the covenants contained in its debt and financing arrangements.

5. Fair Value Measurements and Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The levels of inputs used to measure fair value are:

•Level 1—Quoted prices for identical instruments in active markets;

•Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and

•Level 3—Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.

Assets and ~~liabilities~~Liabilities

The Company bases its fair value estimates on market assumptions and available information. The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of ~~June~~September 30, 2023, and December 31, 2022, due to their short-term nature.

Debt

The fair value of debt was as follows:


			June 30, 2023				December 31, 2022						September 30, 2023				December 31, 2022
(In millions)	(In millions)	Level	Fair Value		Carrying Value		Fair Value		Carrying Value		(In millions)	Level	Fair Value		Carrying Value		Fair Value		Carrying Value
1.65% Unsecured notes due 2026	1.65% Unsecured notes due 2026	2	$	347	$	398	$	342	$	397	1.65% Unsecured notes due 2026	2	$	353	$	398	$	342	$	397
2.65% Unsecured notes due 2031	2.65% Unsecured notes due 2031	2	312		397		294		397		2.65% Unsecured notes due 2031	2	303		397		294		397
Two-Year Term Loan due 2024	Two-Year Term Loan due 2024	2	—		—		115		115		Two-Year Term Loan due 2024	2	—		—		115		115
Three-Year Term Loan due 2025	Three-Year Term Loan due 2025	2	231		235		234		234		Three-Year Term Loan due 2025	2	233		235		234		234
Five-Year Term Loan due 2027	Five-Year Term Loan due 2027	2	493		499		499		499		Five-Year Term Loan due 2027	2	495		499		499		499

Financial Instruments

The Company directly manages its exposure to risks arising from business operations and economic factors, including fluctuations in interest rates and foreign currencies. The Company uses derivative instruments to manage the volatility related to these exposures. The objective of these derivative instruments is to reduce fluctuations in earnings and cash flows associated with changes in foreign currency exchange rates and interest rates. These financial instruments are not used for trading or other speculative purposes. The Company does not expect to incur any losses as a result of counterparty default.

The fair value of the Company’s derivative instruments and the related notional amounts was as follows:


		June 30, 2023							September 30, 2023
(In millions)	(In millions)	Notional		Derivative Assets (1)		Derivative Liabilities (2)		(In millions)	Notional		Derivative Assets (1)		Derivative Liabilities (2)
Designated as hedges
Designated as hedges:								Designated as hedges:
Cross-currency swap agreements	Cross-currency swap agreements	$	1,337	$	14	$	37	Cross-currency swap agreements	$	1,337	$	26	$	14
Interest rate swaps (3)	Interest rate swaps (3)	250		9		—		Interest rate swaps (3)	250		9		—
Not designated as hedges
Not designated as hedges:								Not designated as hedges:
Foreign currency option contracts	Foreign currency option contracts	$	315	$	4	$	—	Foreign currency option contracts	$	424	$	16	$	—

Foreign currency forward contracts								Foreign currency forward contracts	58		—		—

(1) Derivative assets are included in Other current assets and Other long-term assets in the Condensed Consolidated Balance Sheets.

(2) Derivative liabilities are included in Other current liabilities and Other long-term liabilities in the Condensed Consolidated Balance Sheets.

(3) In June 2023, the Company amended one interest rate swap, with a notional amount of $125 million, scheduled to mature in 2027 to ~~2024, with a notional amount of $125 million. In connection with this amendment, the Company received $2 million of cash representing the fair value of the reduced term.~~

2024.


		December 31, 2022							December 31, 2022
(In millions)	(In millions)	Notional		Derivative Assets (1)		Derivative Liabilities (2)		(In millions)	Notional		Derivative Assets (1)		Derivative Liabilities (2)
Designated as hedges
Designated as hedges:								Designated as hedges:
Cross-currency swap agreements	Cross-currency swap agreements	$	1,337	$	22	$	13	Cross-currency swap agreements	$	1,337	$	22	$	13
Interest rate swaps	Interest rate swaps	250		9		—		Interest rate swaps	250		9		—
Not designated as hedges
Not designated as hedges:								Not designated as hedges:
Foreign currency option contracts	Foreign currency option contracts	$	354	$	—	$	5	Foreign currency option contracts	$	354	$	—	$	5
Foreign currency forward contracts	Foreign currency forward contracts	3		—		—		Foreign currency forward contracts	3		—		—

(1) Derivative assets are included in Other current assets and Other long-term assets in the Condensed Consolidated Balance Sheets.

(2) Derivative liabilities are included in Other current liabilities and Other long-term liabilities in the Condensed Consolidated Balance Sheets.

As of ~~June~~September 30, 2023 and December 31, 2022, the derivatives were classified as Level 2 within the fair value hierarchy.

The effect of hedges on ~~accumulated other comprehensive loss (“AOCL”)~~AOCIL and in the Condensed Consolidated Statements of Operations was as follows:


		Three Months Ended June 30, 2023						Six Months Ended June 30, 2023							Three Months Ended September 30, 2023						Nine Months Ended September 30, 2023
(In millions)	(In millions)	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative		Gain (Loss) Reclassified from AOCL into Net Income (1)		Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)		Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative		Gain (Loss) Reclassified from AOCL into Net Income (1)		Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)		(In millions)	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative		Gain (Loss) Reclassified from AOCIL into Net Income (1)		Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)		Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative		Gain (Loss) Reclassified from AOCIL into Net Income (1)		Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)
Derivatives designated as net investment hedges
Derivatives designated as net investment hedges:														Derivatives designated as net investment hedges:
Cross-currency swap agreements	Cross-currency swap agreements	$	(18)	$	3	$	—	$	(34)	$	—	$	1	Cross-currency swap agreements	$	36	$	(3)	$	1	$	2	$	(3)	$	2
Derivatives designated as cash flow hedges
Derivatives designated as cash flow hedges:														Derivatives designated as cash flow hedges:
Interest rate swaps	Interest rate swaps	$	4	$	—	$	—	$	1	$	—	$	—	Interest rate swaps	$	1	$	—	$	—	$	2	$	—	$	—

(1) Amounts reclassified to net income are reported ~~within~~in Interest expense, net in the Condensed Consolidated Statements of Operations.


		Three Months Ended June 30, 2022						Six Months Ended June 30, 2022							Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
(In millions)	(In millions)	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative		Gain (Loss) Reclassified from AOCL into Net Income (1)		Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)		Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative		Gain (Loss) Reclassified from AOCL into Net Income (1)		Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)		(In millions)	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative		Gain (Loss) Reclassified from AOCIL into Net Income (1)		Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)		Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative		Gain (Loss) Reclassified from AOCIL into Net Income (1)		Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1)
Derivatives designated as net investment hedges
Derivatives designated as net investment hedges:														Derivatives designated as net investment hedges:
Cross-currency swap agreements	Cross-currency swap agreements	$	43	$	2	$	—	$	46	$	2	$	2	Cross-currency swap agreements	$	90	$	—	$	1	$	136	$	2	$	3
Derivatives designated as cash flow hedges
Derivatives designated as cash flow hedges:														Derivatives designated as cash flow hedges:
Interest rate swaps	Interest rate swaps	$	(1)	$	—	$	—	$	(1)	$	—	$	—	Interest rate swaps	$	12	$	—	$	—	$	11	$	—	$	—

(1) Amounts reclassified to net income are reported ~~within~~in Interest expense, net in the Condensed Consolidated Statements of Operations.

Derivatives ~~not designated~~Not Designated as ~~hedges~~Hedges

Gains and losses recognized in Other income, net in the Condensed Consolidated Statements of Operations for foreign currency options and forward contracts were as follows:


		Three Months Ended June 30,					Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,

(In millions)	(In millions)					2023			2022			2023		2022	(In millions)			2023			2022			2023	2022
Realized foreign currency contracts gain (loss)	Realized foreign currency contracts gain (loss)	$	(4)	$	7		$	(6)		$	9	Realized foreign currency contracts gain (loss)	$	(3)		$	10		$	(9)		$	19
Unrealized foreign currency contracts gain		3		9			4			15
Total foreign currency gain (loss) recognized in net income		$	(1)	$	16		$	(2)		$	24
Unrealized foreign currency contracts gain (loss)												Unrealized foreign currency contracts gain (loss)	8			(1)			12			14
Total foreign currency gain recognized in net income												Total foreign currency gain recognized in net income	$	5		$	9		$	3		$	33

6. Stockholders’ Equity

The following ~~table summarizes~~tables summarize the changes in ~~AOCL~~AOCIL by component:

(In millions) Foreign
Currency
Translation
Adjustments Cash
Flow
Hedges Defined
Benefit
Plan Less: AOCI
attributable to
noncontrolling
interest AOCL
attributable
to GXO
As of March 31, 2023 $ (136) $ 4 $ (112) $ — $ (244)
Foreign currency translation gain 33 — — (1) 32
Unrealized gain (loss) on hedges, net of tax (13) 4 — — (9)
Amounts reclassified from AOCL to net income (3) — 1 — (2)
Other comprehensive income, net of tax 17 4 1 (1) 21
As of June 30, 2023 $ (119) $ 8 $ (111) $ (1) $ (223)


(In millions)	Foreign Currency Translation Adjustments		Cash Flow Hedges		Defined Benefit Plan		Less: AOCIL attributable to noncontrolling interest		AOCIL attributable to GXO
As of June 30, 2023	$	(119)	$	8	$	(111)	$	(1)	$	(223)
Foreign currency translation loss	(98)		—		—		2		(96)
Unrealized gain on hedges, net of tax	27		—		—		—		27
Amounts reclassified from AOCIL to net income	2		—		1		—		3
Other comprehensive income (loss), net of tax	(69)		—		1		2		(66)
As of September 30, 2023	$	(188)	$	8	$	(110)	$	1	$	(289)

(In millions) Foreign
Currency
Translation
Adjustments Cash
Flow
Hedges Defined
Benefit
Plan Less: AOCI
attributable to
noncontrolling
interest AOCL
attributable
to GXO
As of December 31, 2022 $ (149) $ 7 $ (112) $ — $ (254)
Foreign currency translation gain 57 — — (1) 56
Unrealized gain (loss) on hedges, net of tax (26) 1 — — (25)
Amounts reclassified from AOCL to net income (1) — 1 — —
Other comprehensive income, net of tax 30 1 1 (1) 31
As of June 30, 2023 $ (119) $ 8 $ (111) $ (1) $ (223)


(In millions)	Foreign Currency Translation Adjustments		Cash Flow Hedges		Defined Benefit Plan		Less: AOCIL attributable to noncontrolling interest		AOCIL attributable to GXO
As of December 31, 2022	$	(149)	$	7	$	(112)	$	—	$	(254)
Foreign currency translation loss	(41)		—		—		1		(40)
Unrealized gain on hedges, net of tax	1		1		—		—		2
Amounts reclassified from AOCIL to net income	1		—		2		—		3
Other comprehensive income (loss), net of tax	(39)		1		2		1		(35)

As of September 30, 2023	$	(188)	$	8	$	(110)	$	1	$	(289)


(In millions)	(In millions)	Foreign Currency Translation Adjustments		Cash Flow Hedges		Defined Benefit Plan		Less: AOCI attributable to noncontrolling interest		AOCL attributable to GXO		(In millions)	Foreign Currency Translation Adjustments		Cash Flow Hedges		Defined Benefit Plan		Less: AOCIL attributable to noncontrolling interest		AOCIL attributable to GXO
As of March 31, 2022		$	(94)	$	—	$	(76)	$	(2)	$	(172)
As of June 30, 2022												As of June 30, 2022	$	(169)	$	—	$	(76)	$	(1)	$	(246)
Foreign currency translation loss	Foreign currency translation loss	(107)		—		—		1		(106)		Foreign currency translation loss	(111)		—		—		2		(109)
Unrealized gain on hedges, net of tax	Unrealized gain on hedges, net of tax	34		—		—		—		34		Unrealized gain on hedges, net of tax	69		9		—		—		78
Amounts reclassified from AOCL to net income		(2)		—		—		—		(2)
Other comprehensive loss, net of tax		(75)		—		—		1		(74)
As of June 30, 2022		$	(169)	$	—	$	(76)	$	(1)	$	(246)
Amounts reclassified from AOCIL to net income												Amounts reclassified from AOCIL to net income	(1)		—		—		—		(1)
Other comprehensive income (loss), net of tax												Other comprehensive income (loss), net of tax	(43)		9		—		2		(32)
As of September 30, 2022												As of September 30, 2022	$	(212)	$	9	$	(76)	$	1	$	(278)


(In millions)	(In millions)	Foreign Currency Translation Adjustments		Cash Flow Hedges		Defined Benefit Plan		Less: AOCI attributable to noncontrolling interest		AOCL attributable to GXO		(In millions)	Foreign Currency Translation Adjustments		Cash Flow Hedges		Defined Benefit Plan		Less: AOCIL attributable to noncontrolling interest		AOCIL attributable to GXO
As of December 31, 2021	As of December 31, 2021	$	(53)	$	—	$	(76)	$	(1)	$	(130)	As of December 31, 2021	$	(53)	$	—	$	(76)	$	(1)	$	(130)
Foreign currency translation loss	Foreign currency translation loss	(152)		—		—		2		(150)		Foreign currency translation loss	(260)		—		—		4		(256)
Unrealized gain on hedges, net of tax	Unrealized gain on hedges, net of tax	36		—		—		—		36		Unrealized gain on hedges, net of tax	102		9		—		—		111
Amounts reclassified from AOCL to net income		(4)		—		—		—		(4)
Other comprehensive loss, net of tax		(120)		—		—		2		(118)
Amounts reclassified from AOCIL to net income												Amounts reclassified from AOCIL to net income	(5)		—		—		—		(5)
Other comprehensive income (loss), net of tax												Other comprehensive income (loss), net of tax	(163)		9		—		4		(150)
Deconsolidation of variable interest entity	Deconsolidation of variable interest entity	4		—		—		(2)		2		Deconsolidation of variable interest entity	4		—		—		(2)		2
As of June 30, 2022		$	(169)	$	—	$	(76)	$	(1)	$	(246)
As of September 30, 2022												As of September 30, 2022	$	(212)	$	9	$	(76)	$	1	$	(278)

7. Employee Benefit Plans

Defined Benefit Plans

The Company sponsors a retirement plan in the U.K. (the “U.K. Retirement Plan”). Components of the net periodic benefit cost recognized under the U.K. Retirement Plan were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	(In millions)	2023		2022		2023		2022		(In millions)	2023		2022		2023		2022
Interest cost	Interest cost	$	(9)	$	(5)	$	(19)	$	(11)	Interest cost	$	(11)	$	(5)	$	(30)	$	(16)
Expected return on plan assets	Expected return on plan assets	12		14		24		29		Expected return on plan assets	14		12		38		41
Amortization of net loss	Amortization of net loss	(1)		—		(1)		—		Amortization of net loss	(1)		—		(2)		—
Net periodic pension income (1)	Net periodic pension income (1)	$	2	$	9	$	4	$	18	Net periodic pension income (1)	$	2	$	7	$	6	$	25

(1) Net periodic pension income is recorded ~~within~~in Other income, net in the Condensed Consolidated Statements of Operations.

The Company also maintains defined benefit pension plans for some of its foreign subsidiaries that are excluded from the disclosure due to their immateriality.

Defined Contribution Plans

The Company has defined contribution retirement plans for its U.S. employees and employees of certain foreign subsidiaries. The Company’s contributions for ~~both~~ the three months ended ~~June~~September 30, 2023 and 2022, were ~~$5 million. For~~$15 million and $12 million, respectively, and for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 were ~~$22~~$47 million and ~~$19~~$40 million, respectively. Defined contribution costs were primarily recorded in Direct operating ~~expenses~~expense in the Condensed Consolidated Statements of Operations.

8. Restructuring Costs and Other

For the three months ended ~~June~~September 30, 2023, ~~restructuring~~Restructuring costs and other totaled $3$7 million ~~and~~including $6 million related to severance ~~charges.~~charges, primarily from the exit of non-core businesses in Asia. For the ~~six~~nine months ended ~~June~~September 30, 2023, ~~restructuring~~Restructuring costs and other totaled $31 million, including $24 million ~~and included~~related to severance charges ~~of $18~~and $7 million ~~and~~related to non-cash impairment ~~charges of $6 million as a result of closing certain corporate and administrative offices.~~charges.

The following is a roll forward of the restructuring liability, which is included in Other current liabilities in the Condensed Consolidated Balance Sheets:


(In millions)
Balance as of December 31, 2022	$	13
Charges incurred	1824
Payments	~~(21)~~(26)
Balance as of ~~June~~September 30, 2023	$	1011

The remaining restructuring liability at ~~June~~September 30, 2023 primarily relates to severance payments and is expected to be substantially paid within the next ~~twelve~~12 months.

9. Income Taxes

The effective tax rate was ~~23.0%~~17.9% for the three months ended ~~June~~September 30, 2023, compared with ~~29.4%~~22.5% for the same period in 2022. The effective tax rate was ~~19.9%~~19.1% for the ~~six~~nine months ended ~~June~~September 30, 2023, compared with ~~26.4%~~24.7% for the same period in 2022. The decrease in our effective tax rate for the three ~~and six~~ months was primarily driven by a ~~decrease in pre-tax losses in certain jurisdictions for which no~~tax benefit ~~was recognized and higher transaction costs for the same period in 2022~~ related to ~~the Clipper Acquisition which were non deductible.~~return-to-provision true-up adjustments. The decrease in our effective tax rate for the ~~six~~nine months ~~ended June 30, 2023 also reflects~~was primarily driven by a tax benefit related to valuation allowance release.

As of ~~June~~September 30, 2023 and December 31, 2022, the Company had valuation allowances of ~~$39~~$36 million and $44 million on its deferred income tax asset, respectively.

10. Goodwill

The following table presents the changes in ~~goodwill~~Goodwill for the ~~six~~nine months ended ~~June~~September 30, 2023:


(In millions)
Balance as of December 31, 2022	$	2,728
Acquisition (1)	44
Impact of foreign exchange translation (2)	30 (38)
Balance as of ~~June~~September 30, 2023	$	~~2,802~~2,734

(1) Represents the finalization of the purchase price allocation for the Clipper ~~Acquisition.~~acquisition. See Note 11 — Acquisition for additional information.

(2) Changes to goodwill amounts resulting from foreign currency translation after the acquisition date are presented as the impact of foreign exchange translation.

As of September 30, 2023, and December 31, 2022, there were no accumulated goodwill impairment losses.

11. Acquisition

On May 24, 2022, the Company completed the acquisition of Clipper Logistics plc (“Clipper”), an omnichannel retail logistics specialist based in Leeds, England (the “Clipper Acquisition”). The Company acquired Clipper for $1,106 million, consisting of $902 million in cash and the issuance of 3,757,657 shares of GXO common stock ~~having~~with a value of $204 million.

The Company accounted for the Clipper Acquisition as a business combination using the acquisition method of accounting. The fair value of assets acquired and liabilities assumed was based on management’s estimate of the fair value using valuation techniques including income, cost and market approaches.

The following table summarizes the final fair values of identifiable assets acquired and liabilities assumed at the acquisition date:


(In millions)
ASSETS
Current assets
Cash and cash equivalents	$	26
Accounts receivable	143
Other current assets	67
Total current assets	236
Long-term assets
Property and equipment	80
Operating lease assets	219
Intangible assets (1)	392
Other long-term assets	29
Total long-term assets	720
Total assets	$	956
LIABILITIES
Current liabilities
Accounts payable	$	81
Accrued expenses	96
Current debt	55
Current operating lease liabilities	43
Other current liabilities	56
Total current liabilities	331
Long-term liabilities
Long-term debt	10
Long-term operating lease liabilities	176
Other long-term liabilities	173
Total long-term liabilities	359
Total liabilities	$	690
Net assets purchased	$	266
Cash paid	$	902
Common stock issued (2)	204
Purchase price paid	$	1,106
Goodwill recorded (3)	$	840

(1) The Company acquired $392 million of intangible assets, comprised of customer relationships and trade names, with weighted-average useful lives of 15 years.

(2) Represents the fair value of the Company’s common stock issued.

(3) Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed at the acquisition date. Goodwill acquired was recorded in the United Kingdom and Ireland reporting unit and was primarily attributed to anticipated synergies. The Company does not expect the goodwill recognized in connection with the Clipper Acquisition to be deductible for income tax purposes.

12. Commitments and Contingencies

The Company is involved, and will continue to be involved, in numerous legal proceedings arising out of the conduct of its business. These proceedings may include personal injury claims arising from the transportation and handling of goods, contractual disputes and employment-related claims, including alleged violations of wage and hour laws.

The Company establishes accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company reviews and adjusts accruals for loss

contingencies quarterly and as additional information becomes available. If a loss is not both probable and

reasonably estimable, or if an exposure to a loss exists in excess of the amount accrued, the Company assesses whether there is at least a reasonable possibility that a loss, or additional loss, may have been incurred. If there is a reasonable possibility that a loss, or additional loss, may have been incurred, the Company discloses the estimate of the possible loss or range of loss if it is material and an estimate can be made, or discloses that such an estimate cannot be made. The determination as to whether a loss can reasonably be considered to be possible or probable is based on management’s assessment, together with legal counsel, regarding the ultimate outcome of the matter.

Management of the Company believes that it has adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable. Management of the Company does not believe that the ultimate resolution of any matters to which the Company is presently a party will have a material adverse effect on its results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s financial condition, results of operations or cash flows. Legal costs related to these matters are expensed as they are incurred.

The Company carries liability and excess umbrella insurance policies that are deemed sufficient to cover potential legal claims arising in the normal course of conducting its operations. In the event the Company is required to satisfy a legal claim outside the scope of the coverage provided by insurance, its financial condition, results of operations or cash flows could be negatively impacted.

13. Subsequent Events

Financial Instruments - Net Investment Hedges

In October 2023, the Company terminated a hedge with a notional amount of $115 million. Also, the Company amended a $235 million hedge to extend its maturity from 2024 to 2025. Additionally, the Company entered into various hedges for an aggregate notional amount of $313 million that will mature from 2025 to 2028.

Acquisition

On September 13, 2023, the Company entered into an Agreement and Plan of Merger to acquire PFSweb, Inc., a Delaware corporation headquartered in Irving, Texas (“PFS”), and on October 23, 2023, the Company completed its acquisition of PFS. PFS provides e-commerce order fulfillment services. The Company acquired the shares of PFSweb at a price per share of $7.50 in cash, totaling approximately $181 million.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and other written reports and oral statements we make from time to time contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “trajectory” or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include those discussed below and the risks discussed in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements set forth in this Quarterly Report on Form 10-Q are qualified by these cautionary statements, and there can be no assurance that the results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on February 16, 2023 (the “2022 Form 10-K”), and the unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

Business Overview

GXO Logistics, Inc., together with its subsidiaries, (“GXO,” the “Company” or “we”) is the largest pure-play contract logistics provider in the world and a foremost innovator in the industry. We provide our customers with high-value-add warehousing and distribution, order fulfillment, e-commerce, reverse logistics and other supply chain services differentiated by our ability to deliver technology-enabled, customized solutions at scale. Our customers rely on us to move their goods with high efficiency through their supply chains — from the moment inbound goods arrive at our warehouses, through fulfillment and distribution and the management of returned products. Our customer base includes many blue-chip leaders in sectors that demonstrate high growth and/or durable demand, with significant growth potential through customer outsourcing of logistics and warehousing services.

We strive to provide all ~~our~~ customers with ~~consistently high levels of~~consistent quality service and cutting-edge automation. We also collaborate with our largest customers on planning and forecasting and assist with network optimization, working with these customers to design or redesign their supply chains to meet specific goals, such as environmental, social and governance. Our multidisciplinary, consultative approach has led to many of our key customer relationships extending for years and expanding in scope.

The most dramatic growth in secular demand in recent years has been in e-commerce and related sectors, including omnichannel retail and other direct-to-consumer channels. We expect to attract new customers and expand the services we provide to existing customers through new projects, thus earning more of their external and internal logistics spending. We use technology to manage advanced automation, labor productivity, sustainability, safety and the complex flow of goods within sophisticated warehouse environments.

Our business model is asset-light and historically resilient in cycles, with high returns, strong free cash flow and visibility into revenue and earnings. The vast majority of our contracts with customers are long-term in nature, and our ~~facility~~warehouse lease arrangements generally align with contract length. The Company has both fixed-price contracts (closed book or hybrid contracts) and cost-plus contracts (open book contracts). Most of our customer contracts contain both fixed and variable components. The fixed component is typically designed to cover ~~facility,~~warehouse, technology and equipment costs, while the variable component is determined based on expected volumes and associated labor costs. Under fixed-price contracts, the Company agrees to perform the specified work for a pre-determined price. To the extent the Company’s actual costs vary from the estimates upon which the price was negotiated, the Company will generate more or less profit. Cost-plus contracts provide for the payment of allowable costs incurred during the performance of the contract plus a specified margin.

On May 24, 2022, the Company completed the acquisition of Clipper Logistics plc (“Clipper”), an omnichannel retail logistics specialist based in Leeds, England (the “Clipper Acquisition”). Due to the Clipper Acquisition, comparisons in our results of operations between 2023 and 2022 are less meaningful.

Results of Operations

Three Months Ended June 30,
(In millions) 2023 2022 $ Change % Change
Revenue $ 2,394 $ 2,156 $ 238 11 %
Direct operating expense 1,957 1,775 182 10 %
Selling, general and administrative expense 245 220 25 11 %
Depreciation and amortization expense 84 77 7 9 %
Transaction and integration costs 6 24 (18) (75) %
Restructuring costs and other 3 1 2 n/m
Operating income 99 59 40 68 %
Other income, net 1 23 (22) (96) %
Interest expense, net (14) (9) (5) 56 %
Income before income taxes 86 73 13 18 %
Income tax expense (20) (21) 1 (5) %
Net income $ 66 $ 52 $ 14 27 %

~~n/m - not meaningful~~

Three Months Ended ~~June~~September 30, 2023 ~~compared~~Compared with the Three Months Ended ~~June~~September 30, 2022


	Three Months Ended September 30,
(In millions)	2023		2022		$ Change		% Change
Revenue	$	2,471	$	2,287	$	184	8	%
Direct operating expense	2,012		1,885		127		7	%
Selling, general and administrative expense	258		227		31		14	%
Depreciation and amortization expense	101		89		12		13	%
Transaction and integration costs	3		14		(11)		(79)	%
Restructuring costs and other	7		—		7		n/m
Operating income	90		72		18		25	%
Other income, net	7		17		(10)		(59)	%
Interest expense, net	(14)		(6)		(8)		n/m
Income before income taxes	83		83		—		—	%
Income tax expense	(15)		(19)		4		(21)	%
Net income	$	68	$	64	$	4	6	%

n/m - not meaningful

Revenue for the three months ended ~~June~~September 30, 2023, increased by ~~11%~~8%, or ~~$238~~$184 million, to ~~$2.4~~$2.5 billion compared with ~~$2.2~~$2.3 billion for the same period in 2022. The increase in 2023 compared to the prior period primarily reflects ~~an increase of $154 million from the Clipper Acquisition for the periods that were not comparable and~~ growth in our Continental Europe ~~business, primarily driven by new contract implementations.~~and United Kingdom and Ireland operations. Foreign currency movement increased revenue by ~~$17~~$126 million ~~in 2023.~~for the three months ended September 30, 2023 compared with the prior period.

Direct operating ~~expenses~~expense is comprised of both fixed and variable expenses and consist of operating costs related to our ~~logistics facilities,~~warehouses, including personnel costs, ~~facility and equipment~~rent expenses, ~~such as rent, utilities,~~utility costs, equipment maintenance and repair costs, transportation costs, costs of materials and supplies and information technology expenses. Direct operating expense for the three months ended ~~June~~September 30, 2023, increased by ~~10%~~7%, or ~~$182~~$127 million, to $2.0 billion compared with ~~$1.8~~$1.9 billion for the same period in 2022. Direct operating expense increased primarily due to ~~the Clipper Acquisition and~~ higher personnel and temporary labor expenses ~~due to growth in our business.~~and higher facilities and equipment expense. As a percentage of revenue, direct operating expense for the three months ended ~~June~~September 30, 2023, was ~~81.7%~~81.4% compared with ~~82.3%~~82.4% for the same period in 2022.

increased by ~~11%~~14%, or ~~$25~~$31 million, to ~~$245~~$258 million compared with ~~$220~~$227 million for the same period in 2022. SG&A increased due to ~~the Clipper Acquisition.~~higher personnel costs, primarily for certain administrative functions, and higher bad debt expense.

Depreciation and amortization expense for the three months ended ~~June~~September 30, 2023 increased by $7$12 million to ~~$84~~$101 million compared with ~~$77~~$89 million for the same period in 2022. Amortization expense was ~~$19~~$18 million and ~~$13~~$21 million for the three months ended ~~June~~September 30, 2023 and 2022, respectively. ~~Depreciation~~The increase in depreciation and amortization expense was primarily related to increased ~~primarily~~depreciation expense due to the ~~Clipper Acquisition.~~impact of prior capital investments associated with new contracts.

Transaction and integration costs for the three months ended ~~June~~September 30, 2023 were $6$3 million ~~compared with $24 million for~~and primarily related to the ~~same period in 2022.~~acquisition of PFSweb, Inc. Transaction and integration costs for the three months ended ~~June~~September 30, ~~2023~~2022 were $14 million and ~~2022,~~ primarily ~~relate~~related to the Clipper Acquisition.

Restructuring costs and other are primarily related to severance, including projects to optimize finance, human resources and information technology functions, and are not associated with customer attrition. Restructuring costs and other for the three months ended ~~June~~September 30, 2023 ~~were $3~~was $7 million ~~compared with $1 million for~~and primarily related to the ~~same period~~exit of non-core businesses in ~~2022.~~Asia.

Other income, net decreased due to foreign currency movements and lower pension income. Other income, net was as follows:


		Three Months Ended June 30,									Three Months Ended September 30,
(In millions)	(In millions)	2023		2022		$ Change		% Change		(In millions)	2023		2022		$ Change		% Change
Net periodic pension income	Net periodic pension income	$	2	$	9	$	(7)	(78)	%	Net periodic pension income	$	2	$	7	$	(5)	(71)	%
Foreign currency:	Foreign currency:									Foreign currency:
Realized foreign currency contracts gain (loss)	Realized foreign currency contracts gain (loss)	(4)		7		(11)		n/m		Realized foreign currency contracts gain (loss)	(3)		10		(13)		n/m
Unrealized foreign currency contracts gain		3		9		(6)		(67)	%
Foreign currency remeasurement loss		—		(2)		2		(100)	%
Total foreign currency gain (loss)		(1)		14		(15)		n/m
Unrealized foreign currency contracts gain (loss)										Unrealized foreign currency contracts gain (loss)	8		(1)		9		n/m
Foreign currency remeasurement gain										Foreign currency remeasurement gain	—		1		(1)		(100)	%
Total foreign currency gain										Total foreign currency gain	5		10		(5)		(50)	%

Other income, net	Other income, net	$	1	$	23	$	(22)	(96)	%	Other income, net	$	7	$	17	$	(10)	(59)	%

n/m - not meaningful

Interest expense, net increased primarily due to higher variable interest rates on our debt ~~incurred for~~compared with the ~~Clipper Acquisition.~~prior period. Interest expense, net was as follows:


		Three Months Ended June 30,									Three Months Ended September 30,
(In millions)	(In millions)	2023		2022		$ Change		% Change		(In millions)	2023		2022		$ Change		% Change
Debt and capital leases	Debt and capital leases	$	23	$	12	$	11	92	%	Debt and capital leases	$	25	$	16	$	9	56	%
Cross-currency swaps	Cross-currency swaps	(8)		(3)		(5)		n/m		Cross-currency swaps	(9)		(9)		—		—	%
Interest income	Interest income	(1)		—		(1)		n/m		Interest income	(2)		(1)		(1)		100	%
Interest expense, net	Interest expense, net	$	14	$	9	$	5	56	%	Interest expense, net	$	14	$	6	$	8	n/m

n/m - not meaningful

Income before income taxes for both the three months ended ~~June~~September 30, 2023 ~~increased to $86 million compared with $73 million for the same period in 2022. The increase~~and 2022 was ~~due to higher operating income, partially offset by lower other income and higher interest expense.~~$83 million.

Income tax expense for the three months ended ~~June~~September 30, 2023 was ~~$20~~$15 million compared with ~~$21~~$19 million for the same period in 2022. Our effective tax rate was ~~23.0%~~17.9% for the three months ended ~~June~~September 30, 2023, compared with ~~29.4%~~22.5% for the same period in 2022. The ~~decrease~~change in our effective tax rate was primarily driven by a ~~decrease in pre-tax losses in certain jurisdictions for which no~~tax benefit ~~was recognized and higher transaction costs for the same period in 2022~~ related to ~~the Clipper Acquisition which were non deductible.~~return-to-provision true-up adjustments.

Six Months Ended June 30,
(In millions) 2023 2022 $ Change % Change
Revenue $ 4,717 $ 4,239 $ 478 11 %
Direct operating expense 3,863 3,523 340 10 %
Selling, general and administrative expense 503 410 93 23 %
Depreciation and amortization expense 167 153 14 9 %
Transaction and integration costs 19 43 (24) (56) %
Restructuring costs and other 24 14 10 71 %
Operating income 141 96 45 47 %
Other income, net 1 39 (38) (97) %
Interest expense, net (27) (13) (14) n/m
Income before income taxes 115 122 (7) (6) %
Income tax expense (23) (32) 9 (28) %
Net income $ 92 $ 90 $ 2 2 %
Nine Months Ended September 30, 2023 Compared with the Nine Months Ended September 30, 2022


	Nine months ended September 30,
(In millions)	2023		2022		$ Change		% Change
Revenue	$	7,188	$	6,526	$	662	10	%
Direct operating expense	5,875		5,408		467		9	%
Selling, general and administrative expense	761		637		124		19	%
Depreciation and amortization expense	268		242		26		11	%
Transaction and integration costs	22		57		(35)		(61)	%
Restructuring costs and other	31		14		17		n/m
Operating income	231		168		63		38	%
Other income, net	8		56		(48)		(86)	%
Interest expense, net	(41)		(19)		(22)		n/m
Income before income taxes	198		205		(7)		(3)	%
Income tax expense	(38)		(51)		13		(25)	%
Net income	$	160	$	154	$	6	4	%

n/m - not meaningful

~~Six Months Ended June 30, 2023 compared with the Six Months Ended June 30, 2022~~

Revenue for the ~~six~~nine months ended ~~June~~September 30, 2023 increased by ~~11%~~10%, or ~~$478~~$662 million, to ~~$4.7~~$7.2 billion compared with ~~$4.2~~$6.5 billion for the same period in 2022. The increase primarily reflects an increase of $378 million from the Clipper Acquisition for the periods that were not comparable and growth in our ~~business, primarily driven by new contract implementations.~~Continental Europe operations. Foreign currency movement ~~decreased~~increased revenue by ~~$83~~$43 million ~~in 2023.~~for the nine months ended September 30, 2023 compared with the prior period.

Direct operating ~~expenses~~expense is comprised of both fixed and variable expenses and consist of operating costs related to our ~~logistics facilities,~~warehouses, including personnel costs, ~~facility and equipment~~rent expenses, ~~such as rent, utilities,~~utility costs, equipment maintenance and repair costs, transportation costs, costs of materials and supplies and information technology expenses. Direct operating expense for the ~~six~~nine months ended ~~June~~September 30, 2023 increased by ~~10%~~9%, or ~~$340~~$467 million, to ~~$3.9~~$5.9 billion compared with ~~$3.5~~$5.4 billion for the same period in 2022. Direct operating expense increased primarily due to the Clipper Acquisition, as well as higher ~~facilities expense and higher~~ personnel and temporary labor expenses ~~due to growth in our business.~~and higher facilities and equipment expense. As a percentage of revenue, direct operating expense for the ~~six~~nine months ended ~~June~~September 30, 2023, was ~~81.9%~~81.7% compared with ~~83.1%~~82.9% for the same period in 2022.

Selling, general and administrative expense (“SG&A”) primarily consists of salary and benefits for executive and administrative functions, professional fees and legal costs. SG&A for the ~~six~~nine months ended ~~June~~September 30, 2023, increased by ~~23%~~19%, or ~~$93~~$124 million, to ~~$503~~$761 million compared with ~~$410~~$637 million for the same period in 2022. SG&A increased primarily due to the Clipper Acquisition and higher personnel costs, primarily for certain administrative functions, ~~reflecting the growth in our business.~~and higher bad debt expense.

Depreciation and amortization expense for the ~~six~~nine months ended ~~June~~September 30, 2023 increased by ~~$14~~$26 million to ~~$167~~$268 million compared with ~~$153~~$242 million for the same period in 2022. Amortization expense was ~~$36~~$54 million and ~~$27~~$48 million for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively. Depreciation and amortization expense increased primarily due to the Clipper Acquisition.

Transaction and integration costs for the ~~six~~nine months ended ~~June~~September 30, 2023 were ~~$19~~$22 million compared with ~~$43~~$57 million for the same period in 2022. Transaction and integration costs for the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, primarily ~~relate~~related to the Clipper Acquisition.

Restructuring costs and other are primarily related to severance, including projects to optimize finance, human resources and information technology functions, and are not associated with customer attrition. Restructuring costs and other for the ~~six~~nine months ended ~~June~~September 30, 2023 ~~were $24~~was $31 million ~~compared with $14 million for the same period in 2022. For the six months ended June 30, 2023, Restructuring costs~~ and ~~other~~ included severance charges of ~~$18~~

$24 million and impairment charges of $6$7 million ~~as a result of~~due to closing certain corporate and administrative ~~offices.~~offices and the exit of non-core businesses in Asia. For the ~~six~~nine months ended ~~June~~September 30, 2022, Restructuring costs and other was $14 million and included severance charges of $6 million and $8 million related to the deconsolidation of a joint venture.

Other income, net decreased due to foreign currency movements and lower pension income. Other income, net was as follows:


		Six Months Ended June 30,									Nine Months Ended September 30,
(In millions)	(In millions)	2023		2022		$ Change		% Change		(In millions)	2023		2022		$ Change		% Change
Net periodic pension income	Net periodic pension income	$	4	$	18	$	(14)	(78)	%	Net periodic pension income	$	6	$	25	$	(19)	(76)	%
Foreign currency:	Foreign currency:									Foreign currency:
Realized foreign currency contracts gain (loss)	Realized foreign currency contracts gain (loss)	(6)		9		(15)		n/m		Realized foreign currency contracts gain (loss)	(9)		19		(28)		n/m
Unrealized foreign currency contracts gain	Unrealized foreign currency contracts gain	4		15		(11)		(73)	%	Unrealized foreign currency contracts gain	12		14		(2)		(14)	%
Foreign currency remeasurement loss	Foreign currency remeasurement loss	(1)		(3)		2		(67)	%	Foreign currency remeasurement loss	(1)		(2)		1		(50)	%
Total foreign currency gain (loss)		(3)		21		(24)		n/m
Total foreign currency gain										Total foreign currency gain	2		31		(29)		(94)	%

Other income, net	Other income, net	$	1	$	39	$	(38)	(97)	%	Other income, net	$	8	$	56	$	(48)	(86)	%

n/m - not meaningful

Interest expense, net increased primarily due to debt incurred for the Clipper ~~Acquisition.~~Acquisition and higher variable interest rates on our debt compared with the prior period, partially offset by higher gains on cross-currency swaps in the current period. Interest expense, net was as follows:


		Six Months Ended June 30,								Nine Months Ended September 30,
(In millions)	(In millions)	2023		2022		$ Change		% Change	(In millions)	2023		2022		$ Change		% Change
Debt and capital leases	Debt and capital leases	$	47	$	21	$	26	n/m	Debt and capital leases	$	72	$	37	$	35	95	%
Cross-currency swaps	Cross-currency swaps	(16)		(7)		(9)		n/m	Cross-currency swaps	(25)		(16)		(9)		56	%
Interest income	Interest income	(4)		(1)		(3)		n/m	Interest income	(6)		(2)		(4)		n/m
Interest expense, net	Interest expense, net	$	27	$	13	$	14	n/m	Interest expense, net	$	41	$	19	$	22	n/m

n/m - not meaningful

Income before income taxes for the ~~six~~nine months ended ~~June~~September 30, 2023, decreased to ~~$115~~$198 million compared with ~~$122~~$205 million for the same period in 2022. The decrease was due to lower ~~other~~Other income, net and higher interest expense, partially offset by higher operating income.

Income tax expense for the ~~six~~nine months ended ~~June~~September 30, 2023 was ~~$23~~$38 million compared with ~~$32~~$51 million for the same period in 2022. Our effective tax rate was ~~19.9%~~19.1% for the ~~six~~nine months ended ~~June~~September 30, 2023, compared with ~~26.4%~~24.7% for the same period in 2022. The ~~decrease~~change in our effective tax rate was primarily driven by a tax benefit related to a valuation allowance release, a decrease in pre-tax losses in certain jurisdictions for which no benefit was recognized and higher transaction costs for the same period in 2022 related to the Clipper Acquisition which were non deductible.

release.

Liquidity and Capital Resources

Our ability to fund our operations and anticipated capital needs is reliant upon the generation of cash from operations, supplemented as necessary by periodic utilization of our revolving credit facilities. Our principal uses of cash in the future will be to fund our operations, working capital needs, capital expenditures, repayment of borrowings and strategic business development transactions. The timing and magnitude of our start-ups can vary and may positively or negatively impact our cash flows.

As of ~~June~~September 30, 2023, we held cash and cash equivalents of ~~$305~~$473 million and we had $799 million of borrowing capacity available, net of letters of credit under our Revolving Credit Facility.

We continually evaluate our liquidity requirements and capital structure in ~~light~~consideration of our operating needs, growth initiatives and capital resources. We believe that our existing liquidity and sources of capital are sufficient to support our operations over the next 12 months.

~~Sales of Certain Receivables~~Factoring Programs

We sell certain of our trade receivables on a non-recourse basis to third-party financial institutions under various factoring agreements. We account for these transactions as sales of receivables and present cash proceeds as cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows.

Information related to the trade receivables sold was as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	(In millions)	2023		2022		2023		2022		(In millions)	2023		2022		2023		2022
Receivables sold in period	Receivables sold in period	$	269	$	228	$	532	$	457	Receivables sold in period	$	288	$	259	$	820	$	716
Cash consideration	Cash consideration	268		228		529		456		Cash consideration	286		258		815		714
Net cash used in operating cash flows (1)		—		(8)		—		(2)
Net cash provided by operating cash flows (1)										Net cash provided by operating cash flows (1)	27		18		27		16

Covenants and Compliance

The covenants in the unsecured notes, term loans and revolving credit facilities, which are customary for financings of this type, limit our ability to incur indebtedness and grant liens, among other restrictions. In addition, the facilities require us to maintain a consolidated leverage ratio below a specified maximum.

As of ~~June~~September 30, 2023, we were in compliance with the covenants contained in our debt and financing arrangements.

Financial Condition

The following table summarizes our asset and liability balances:

June 30, December 31,
(In millions) 2023 2022 $ Change % Change
Total current assets $ 2,306 $ 2,428 $ (122) (5) %
Total long-term assets 6,820 6,791 29 — %
Total current liabilities 2,403 2,532 (129) (5) %
Total long-term liabilities 3,912 4,009 (97) (2) %


(In millions)	September 30, 2023		December 31, 2022		$ Change		% Change
Current assets	$	2,466	$	2,428	$	38	2	%
Long-term assets	6,625		6,791		(166)		(2)	%
Total Assets	$	9,091	$	9,219	$	(128)	(1)	%
Current liabilities	$	2,434	$	2,532	$	(98)	(4)	%
Long-term liabilities	3,840		4,009		(169)		(4)	%
Total Liabilities	$	6,274	$	6,541	$	(267)	(4)	%

The decrease in total assets from December 31, 2022 to September 30, 2023 reflects a decrease in long-term assets primarily due to depreciation and amortization of property and equipment, operating leases and intangible assets.

The decrease in total liabilities from December 31, 2022 to ~~June~~September 30, 2023 primarily reflects ~~the early repayment of our $115 million two-year term loan and~~ the decrease in accounts payable due to the timing of ~~payments.~~payments and the early repayment of our $115 million two-year term loan.

Cash Flow Activity

Our cash flows from operating, investing and financing activities, as reflected on our Condensed Consolidated Statements of Cash Flows, are summarized as follows:

Six Months Ended June 30,
(In millions) 2023 2022 $ Change % Change
Net cash provided by operating activities $ 100 $ 200 $ (100) (50) %
Net cash used in investing activities (140) (1,003) 863 (86) %
Net cash provided by (used in) financing activities (155) 869 (1,024) (118) %
Effect of exchange rates on cash and cash equivalents 5 (15) 20 n/m
Net (decrease) increase in cash and cash equivalents $ (190) $ 51 $ (241) n/m

~~n/m - not meaningful~~


	Nine Months Ended September 30,
(In millions)	2023		2022		$ Change		% Change
Net cash provided by operating activities	$	343	$	316	$	27	9	%
Net cash used in investing activities	(192)		(1,056)		864		(82)	%
Net cash provided by (used in) financing activities	(170)		863		(1,033)		n/m
Effect of exchange rates on cash, restricted cash and cash equivalents	(2)		(22)		20		(91)	%
Net (decrease) increase in cash, restricted cash and cash equivalents	$	(21)	$	101	$	(122)	(121)	%

Operating Activities

Cash flows provided by operating activities for the ~~six~~nine months ended ~~June~~September 30, 2023 ~~decreased~~increased by ~~$100~~$27 million compared with the same period in 2022 ~~primarily~~ due to ~~the decrease~~increase in ~~accounts payable and accrued expenses due to the timing of payments~~cash generated from net income adjusted for ~~transaction and integration costs and severance costs.~~non-cash charges.

Investing Activities

Investing activities used ~~$140~~$192 million of cash for the ~~six~~nine months ended ~~June~~September 30, 2023, compared with ~~$1.0~~$1.1 billion used for the same period of 2022. During the ~~six~~nine months ended ~~June~~September 30, 2023, we used ~~$150~~$205 million of cash to purchase property and equipment and received ~~$10~~$13 million of cash from sales of property and equipment. During the ~~six~~nine months ended ~~June~~September 30, 2022, we used $874 million, net of cash received, to fund the Clipper Acquisition, used ~~$154~~$239 million of cash to purchase property and equipment, received ~~$14 million from the release of an escrow related to the Kuehne + Nagel acquisition, received $10~~$26 million in proceeds from cross-currency swap agreements, excluding accrued interest, and received $6$22 million of cash from sales of property and equipment.

Financing Activities

Financing activities used ~~$155~~$170 million of cash for the ~~six~~nine months ended ~~June~~September 30, 2023, including ~~$138~~$139 million used to repay debt, ~~$16~~$24 million to repay finance lease obligations and $6$7 million in payments for employee taxes on stock-based compensation awards. Financing activities generated ~~$869~~$863 million of cash for the ~~six~~nine months ended

~~June~~ September 30, 2022, including $898 million in proceeds from long-term debt, partially offset by ~~$15~~$23 million to repay finance lease obligations and $12 million in payments for employee taxes on stock-based compensation awards.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations

As of ~~June~~September 30, 2023, the Company’s contractual obligations had not materially changed compared with December 31, 2022.

Critical Accounting Policies and Estimates

There have been no material changes to the critical accounting policies and estimates as previously disclosed in “Critical Accounting Policies” in Part II, Item 7 of our Form 10-K for the year ended December 31, 2022.

Accounting Pronouncements

Information related to new accounting standards is included in Note 1 — Basis of Presentation and Significant Accounting Policies in Part I, Item 1 of this Quarterly Report on Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk that may impact our Condensed Consolidated Financial Statements due primarily to variable rate long-term debt obligations and fluctuations in certain foreign currencies. To reduce our exposure to market risk associated with interest and foreign currency exchange rate risks, we enter into various derivative ~~instruments to hedge against such risk.~~instruments. There have been no material changes to our exposure ~~from~~to market risk for the ~~six~~nine months ended ~~June~~September 30, 2023, from those previously disclosed in “Quantitative and Qualitative Disclosures About Market Risk” contained in Part II, Item 7A of our Form 10-K for the year ended December 31, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of ~~June~~September 30, 2023. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures as of ~~June~~September 30, 2023 were effective as of such time such that the information required to be included in our Securities and Exchange Commission (“SEC”) reports is: (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to the Company, including our consolidated subsidiaries and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Other than the design and implementation of internal controls related to the acquisition of Clipper Logistics plc, there have not been any changes in our internal control over financial reporting during the quarter ended ~~June~~September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 12 — Commitments and Contingencies in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of our legal proceedings.

ITEM 1A. RISK FACTORS

There are no material changes to the risk factors as previously disclosed in “Risk Factors” contained in Part I, Item 1A of our Form 10-K for the year ended December 31, 2022.

ITEM 5. OTHER INFORMATION

Compensatory Arrangements of the Former Chief Human Resources Officer

As previously disclosed, Maryclaire Hammond ceased service as the Chief Human Resources Officer of the Company on November 3, 2023, and will separate from employment with the Company on December 31, 2023. In exchange for certain separation benefits, on November 7, 2023 Ms. Hammond entered into a settlement agreement with GXO Logistics UK Limited releasing legal claims and reaffirming her obligations under her Service Agreement with GXO Logistics UK Limited, dated May 14, 2021. Pursuant to the settlement agreement, Ms. Hammond will receive (1) 12 months of pay in lieu of notice, consisting of base salary, employer pension contributions and car allowance, as well as 12 months of continued health benefits, (2) an annual incentive bonus for 2023, calculated at the higher of actual performance or target, and an ex gratia payment equal to £278,175, payable in April 2025, (3) vesting of a portion of her unvested equity compensation awards, and (4) certain ancillary benefits, including reimbursement of legal fees in connection with the settlement agreement, outplacement services for up to 12 months, and global tax support for a transition period. This description is qualified in its entirety by reference to the full text of the settlement agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.

ITEM 6. EXHIBITS


Exhibit Number						Description
10.1						Settlement Agreement, dated as of November 7, 2023, by and between GXO Logistics UK Limited and Maryclaire Hammond.
31.1*						Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended ~~June~~September 30, 2023.
31.2*						Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended ~~June~~ September 30, 2023.
32.1**						Certification of the Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended ~~June~~September 30, 2023.
32.2**						Certification of the Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended ~~June~~September 30, 2023.
101.INS*						Inline XBRL Instance Document.
101.SCH*						Inline XBRL Taxonomy Extension Schema.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase.
104*						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
*						Filed herewith.
**						Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		GXO Logistics, Inc.

Date: ~~August 3,~~November 8, 2023	By:	/s/ Malcolm Wilson
		Malcolm Wilson
		(Chief Executive Officer)
		(Principal Executive Officer)

Date: ~~August 3,~~November 8, 2023	By:	/s/ Baris Oran
		Baris Oran
		(Chief Financial Officer)
		(Principal Financial Officer)