GXO - Earnings call transcript Q3 2021

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Operator

Welcome to the GXO Q3 2021 earnings conference call and webcast. My name is Doug and I’ll be your Operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session.

If you have a question, please dial star, one on your telephone keypad. conference recorded. this that note is being Please

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

no including statements call non-GAAP During this made rules call, most applicable a by of call. the refer Reconciliations meaning actual company that today, on any of will defined number unpredictable affected which as of may conditions Unless applicable inherently United under that its all laws, be nature in to made what these exchange forward-looking The contained results trends stated, regarding are could and and company’s results it its that spending, the this inflationary and release results differ within call company’s assumptions. supply date market in business reflects services estimates or other from to factors This to with by A possible could fluctuations demand statements release also its It the and projected are for company’s discussion and certain the securities factors materially extent The factors such its be rates, could of are operations. the measures the their in not the making differ the forward-looking company reported to otherwise the in foreign financial filings the remind law. reported labor The detailed on therefore obligation involve SEC be States and required forward-looking is statements pressures, guidance except risks, as uncertainties the actual the dollars. and by in earnings statements. economic the certain actual update the today and from materially to changes also to for company website. in earnings forward-looking cause is and the to related may to chain company those on various impact The materially incorporates results COVID-XX in global to demand constraints, tables results in company’s of financial appropriate SEC. date only during guidance. this believes materially contained global this measures many filings. has company GAAP factors, company’s measures the are will predict guidance of and consumer financial SEC to non-GAAP or of comparable you its the on the also pandemic actually cause differ

on important find can non-GAAP company’s You Wilson, turn company’s will section regarding copy forward-looking now contains in and the which the information measures Investors you the earnings to I may release, website. call the a Mr. over of Wilson. additional financial statements Malcolm begin.

Malcolm Wilson

quarterly shareholders. culture, update and me Manduca, Good work you accordance the successful Operator. is welcome Investment our and collective the exceptional of team dedication to our of completed in XX,XXX months. with members, GXO’s was loyal can-do thanks eight August. our In early only our hard and customers, listing our This was support our following to With and in Chief our our Chief Officer. Thank first Officer, Financial third earnings are today call. Baris quarter Mark GXO’s Oran, This spinoff morning

was revenue their only digit the of history. quarter we pursue ahead secular third our Not We consecutive the opportunities. quarter. extremely EBITDA growth. highest market stellar expectations, in and third quarterly excited In delivered our operations for as we the did revenue organic double adjusted we growth are second beat journey surpassed quarter, the a This

adjusted billion, raising chip of our as over value such here and with the EBITDA midpoint an a of retailer. wins quarter guidance guidance $X third to pro As our Ross Raytheon, a the largest aerospace $XXX forma omnichannel global in lifetime ecommerce global of In contracts $X.X total to the year-to-date year manufacturer, full chain of our Stores, of to Zalando, a blue included raising Wins and large of in billion. a customers aggregate Europe’s taking one department million. $X.X won result, we billion this quarter, stores Zara, value revenue our U.S., the companies, are global we fashion midpoint

contracts leading an a duration These average also five U.S. semiconductor We won years. of have with business company.

implemented reliability $XXX wins with the customer and & quarter basis. uplift also we growth approximately span global of for from have XX% formerly our best-in-class solutions Currys, our and in revenue, one customers our automation, Carphone, technology with underpinning on up revenue scale The customer of country. expect solutions Today, unabated, to more for speed, proficient relationships now chip We our stand us massive a that outsourcing million than to remain blue and and and new next Dixons a comes ecommerce warehouses at Abercrombie Fitch, rely XXXX tailwinds our to upon Apple, year. and

global top now across we land-and-expand as like and countries for H&M. Disney, customers is our On and Our of with ASOS, XX we’ve XX in operations Year-to-date, our leadership top XX our operate XX with of by scale technology customers. evidenced average, three underpinned strategy new our expanded customers each differentiator, a locations. key

is We disruptions value and an global throughout the just being chain navigate not needs, peak of our for to critical. compelling. a but is year, employer we tight As growth to our we strive labor continually market, that and we hire meet employee choice supply proposition believe ensure

pride we we implementing know-how. competitive workplace hard offered. best-in-class are we working and software benefits the and As Against automation, and this backdrop, paramount, our and valued, meet same At recruiting on deployment are compensation are warehouse is warehouse our inclusion programs increasing time, a diversity safety and our are where of to leveraging needs. creating a the company, solutions ourselves ecommerce

for to to corporate members a Belonging, retail opportunity omnichannel a note our LGBTQ+ centers that teams inclusive, GXO on inclusion. and of awards the diversity. were Index safety, GXO advisory strategy jointly citizen. goals. use a centers for Knowledge find and President GXO, pleased our across employee held Campaign Diversity recruit ways our launched Institute to inclusion GXO this decades new and like largest overall. distribution firsthand recognized measures good take Rights welcome to the are technology team year, at James. diversity community more of inclusion productivity, our U.S., granted diversity innovation the our that Equality the that with Earlier for to also Innovation to Exchange as Corporate this numerous and The of make few workshop Vice a We that diverse technology would technology in from I values. a boosts recognized core Inclusion the and inclusion After of distribution with leadership Letitia also also visiting our our serve of one Media, enhances winning we found by joint we and two and strong makes a and progress combination. the and have I’ve saw of talent customers board quarter seen balance pool, on and diversity tracks Diversity, weeks the Human We and improves spending I’m the of and Virgin highlighting experience

expands. great to place be choice and enables work this partnership to a employer us of an our of as All

our to me great MSCI, announce highest the Finally, a placing among it industry we recognizes It have ESG gives GXO rating also and company double-A the governance. XXXX. our that social presented on goal its rating firm awarded largest have This pleasure carbon we been as from that acknowledges months, be environmental, ranked including places peers. neutral that recent to importance targets clear the by in

want the about benchmark formed across making at entity. day. for feel and As a progress we our future investor the supply a already our good ESG chain targets as We business, our confident set are set we on newly out to

We deliver Baris pass to play you I Baris, to potential on vast growth logistics performance. global financial you company. through will contract you. are over take the to excited now as pure over to largest our our

Baris Oran

third billion, for I’d to third everyone. financials we and generated walk morning through good guidance a land-and-expand quarter, revenue Malcolm, revenues of XX% you FX with net well XX% $X customers In of to one-time $XXX strategy. global from on partner third top of is today. X% Thank tax for date, success of of approximately organic XX%. next as basis, scaled rate an million. party organic the are $XX The growth have increase represents million notable up ourselves Quite XX%, as Today contributing upgraded $XX EBITDA organic XXXX. of items, you demonstrating the year-over-year of quarter This adjusted choice for revenue reconfirming grown and brands. as our simply, growth year we million we our and like logistics view XX including the income XX.X% in XX% to that X% our Year of M&A the context and contributing is

great of of strong third Moreover, XXXX XXXX quarter, business from through the of organic trends we here into November, the our XXXX. have of a on looking visibility, early One heading in benefits as we model is our the its and and revenue stand view business even pandemic. high X.X%, end like our delivered of revenue note the growth growth CAGR we even to back we the nature through have a of would that reflecting an

delivered EBITDA book adjusted via robust efficiency strong revenue combination the We of wins earnings, existing particularly new had we growth to reflects gains. and a as contract Moving wins. customer growth have our customer the well as expansion, in open

are quarter and this. the a a reflect one-time in structured of approximately in third from $XX pass-through with quarter, the environment third spin. tax Separately quarter. We is positive contracts effects results negative cash an related fourth than spinoff. to in mechanisms, million cost resulting impact a $XX Our item adjustment inflationary tax to million provide we our of the resiliency in recorded P&L expect This less

bill capex, third and Our from operations invested cash to acquisition. for working represents We recent flow of of million flow growth XX% an our was $XX technology over software. and generated $XX our high new the in with future million, in of our We we increase Overall, automation, free EBITDA. capital spent million. specifically associated capex which our in due $XXX quarter spent we total approximately XX% on cash adjusted starts

roughly $XXX $XXX Turning we and to of million a had the of million notes which $XXX about end, included net finance million at balance fees. of quarter debt sheet,

X.X trailing within reported is of range ratio net adjusted EBITDA. Our X.X times. discussed to the leverage X leverage previously XX months This well is times

our also We available rating. revolving to our over at and I’ll disposal $XXX committed to credit the Mark. are investment-grade now call turn million an have facility credit

Mark Manduca

Thank Baris. you

highlighted. a going resiliency and secular breed on with combines growth Baris that rare and Malcolm and I’m this As Baris of the Malcolm dependability. high expand highlighted, is that one company, to themes

pure us global This largest EBITDA the automation, play contract as and to for logistics puts technology-driven position forefront demand of drive and double logistics continue the Malcolm These the mentioned: revenue mega-trends due three Our secular growing outsourcing. three to adjusted company tailwinds at solutions. ecommerce, that growth. our digit is

X,XXX within systems implemented units quarter, and to that than Firstly, the more efficiency our in resulting solutions automation for and the marketplace, grew margin for productivity person increased XXX% and our across customers. differentiators warehouse across of revenue systems Total deployment technological boost and XXX% key third of the solutions. goods helping year-over-year and we technology uplift our are technology quarter, by of our In GXO in year-over-year. footprint technology total automated the our grew in leadership new and third

XXX over We’re in testing also technologies sites. currently new our

for Some the members, outsourcing. new network technologies speeding customers, also our customers across transform to of GXO. our and that further the and to and benefit are up existing our technology inevitably of bringing There has value multiple cadence solutions, team generate this ability

will XX%. of by we picking cash recently safety, reduces a be This brings significantly increases new manual robot trialed very weights. example, collaborative a three capital. and tasks, It autonomous a technology For years on transporting heavy invested payback and of and return implementing improves offers capable than less efficiency high

we from strong continued to persistent Secondly benefit quarter and growth. the on secular in ecommerce,

the in ecommerce outbound technology increased reverse XX% year-over-year year-over-year. and revenue aggregated our Our quarter by by logistics and third revenue increased retail omnichannel XX%

our expect ecommerce use we will customers forward, fast products possible. into consumers’ Looking hands channels to get increasingly as their as

our outsource and a Finally which massive of from from existing on expanding to have outsourced. who billion, roughly $XXX Year-to-date, yet won billion wins still scope, be remains new is of competitors. from XX% XX% outsourcing, with come significant market addressable are their customers contracts, the potential $XXX runway XX%

Our opportunities outsourced continued record never before from sales growth pipeline contracts. indicates

before gross As revenue from the in $XXX from we we Malcolm contracts quarter X%, consider mentioned, a the further revenue secured XXXX. brand-new million strong growth fourth almost uplift of with the of even wins to rate our This In moment equivalent improved for approximately our would XXXX. conjunction and pipeline valued at revenue is day our of note gross XX-month $X.X the billion. I as win our announcement, is pipeline quarter and third also that trailing with investor retention our since has rate in the at opportunity

our very in the that a and Given vertical. I’ll same as surprise to it retail leadership that come call back to this technology wins XX% now more of won’t the to discuss vertical, from than year-to-date omnichannel hand are our ecommerce Baris outlook. know

Baris Oran

of Thank At into investor performance net our and for we confidence you highlighted majority year-to-date customer quarter our revenue gives XXXX fiscal July, and us of from wins, XXXX. growth our the Mark. in comes that day the strong fourth

to a contracts with revenue growth of and chip to fourth with business. As being of we another good digit our We a forward visibility at midpoint business, quarter return in duration our long range this growth look on high customers. XXXX year capital the investment strong double blue have given

components monitor light of labor. to deterioration full XXXX focused macro shortages including in continue strong chain third the of in of the We and input and environment, we disruptions quarter We our our impact closely visibility upgraded mitigating have. supply guidance any the year results and on remain

seeing fastest ability that energy speed fulfillments, solutions demand tackle returned ecommerce for We are direct-to-consumer to optimization, and products. to market, an reuse increased

million in $X.X XX% to $X.X $XXX delivering and time. XX%. revenue million tax $XXX at EBITDA. Meanwhile, expect has to are rate forma challenging will we that We of to adjusted this our now to pro We XXXX of been our expected tremendous customers lowered value billion generate billion to

$XXX guidance We also updated $XXX our capex to million to million.

progress a chain growth grew shareholder are adjusted and sustainable value. are growth record million pleased sales team built unchanged. call vigilant. million our capital, XX% supply In financial now while world to are increasingly pipeline maintaining organic and XXXX deliver strong with to on environment, to investment present We class of term, set platform to tough the our high a EBITDA. return up We’ll level, enviable we the open remain revenue These and Q&A. $XXX long our to targets X% Our demonstrated alongside $XXX

Operator

of [Operator instructions] Oppenheimer. Our first your with with Schneeberger question line comes from question. Please the Scott proceed

Scott Schneeberger

announcing we long a of everyone. also those see to it the timing Thanks new wins much curious morning good in very and new win I’m and when margins about and profile initial ramp-up the optimal how ramp take might of margins. results, and margin to Thanks.

Malcolm Wilson

first Thanks talk over that Scott, then hand it’s Malcolm Wilson here. I’ll of cover profile. part Baris to about margin the question to I’ll the and

warehouse scale, facilities, New contracts normal range our the can of today, and sizes. level Due and in in we relatively to because our nine depending clearly - of shapes months, I availability stock. a automation Typically mean, seeing the lot three all they good all a a period between automation into of implant going on months start-up that’s come we’re facility.

flavor the very, if warehouse. very a hope we’re design designed the and in detailed landlords, industrial through situation. a I the suit it’s our starting large the that the of the be planning, the and very just a where so highly customer, warehouse, terms nine a typically It optimize you the all to actually to together anything flow with working with little software going than of of with detailed in building level to of is we’re three circumstances, connection physically build the we’re be working so In our could of of longer doing blank months other to normal. gives IT those We’re canvas work not the goods hampered a automation. facility, automated is

you can Baris, maybe margins, add? the Regarding

Baris Oran

and increasing roughly Sure depending to see in scale a Hi margins employed margins higher us level. employed, these in the we basis technology we a up higher. employ more When margins involvement, operate. it the automation XXX to to on the the for start the year technology points months a this XXX be higher of operation, basis scale size, Scott. is technology a On tend that Malcolm. a the to we takes six being points certain facilities to have and to lot is full facility, at Remember, we technology and it ramp days, average,

Mark Manduca

you a adding our a as about Scott, not point this model transactional contractual business Baris’ to know, is And and business, business model.

to to returns level capital working We those have cash great Malcolm than years aspire more capex on when be day any visibility one, write we and XX%. Baris talked contracts with contracts we moment, of and on about, deployed, aspire than less and and that our project of the paybacks at have all profitable three

Scott Schneeberger

Then appreciate labor current you be with just inflation Great, of to it event company - your are if Baris, question, more speak how a thanks Thank go from and you depth, may little regard if in that. briefly, you. a but total all, then availability, we bit on a a doing to follow-up, curious touched contracts covered could bit perspective. can a how in as but you wage

Malcolm Wilson

Yes Scott, it’s Malcolm here.

Let back an huge visited I zip literally I’ve that in of from key that around traveling just past locations. business do What on the me and and is that, way cover we ideal number competitive I’m - place down and is solutions, the provide analyze our for a we’re code the come seeing right ground, month, U.S. we level. we to it’s the benefits and compensation

realizes the each to HR we Customers work that team imperative needs, current such make labor, important to of clearly figure place, fact resource our members. heavily benefits tight it’s with team we’re our sure come that all involved organization what location. have to out in everybody and the of that the abreast actually customers we’re aligned we that. make that, that best and checking for market, of is specific us It’s very hand-in-hand We our in environment is because a members with and and doing to in in those latest sure super GXO we’re keep valuable compensation solution the

those of overview, mention of combination with to a to the really make and just GXO combined factors come I’ve And contracting very a that’s QX do great ensures seen is As in pretty customers. go lot good and we’re of to they into so it’s we last us to our got to [indiscernible] a stead, lots you’ve environment, an people well, an be earnings. environment to encouraging technology, as customers organization for that fully terms we thing The very, work good solution. give of have the of hard like works that of with boilerplate the technology, the business, people part place working a course, our It’s our robust back really in us in put seamless work.

Scott Schneeberger

Great, turn good a I’ll Congratulations thanks. on over. it start.

Malcolm Wilson

you. Thank

Operator

of proceed Brian comes Morgan. next Our with JP with question Ossenbeck your line the question. from Please

Brian Ossenbeck

the for morning. Hey guys, good Thanks question. taking

to wanted about you XXXX. Just ask

growth revenue You of contract Maybe you’ve which rates roll gross sounds little a it looks some year? into when like revenue bit are retention talked talk Why more about about wins the the these that. like at forward this point, not can guide are throughout going got especially raise already increasing especially that you large so ones also year, underpinned. about it mentioned, amounts next as rather, almost XX% to that these think I wins, of Mark new are you’ve got

Mark Manduca

good that Thanks raised. points Brian. the stuff, couple A you’ve question. It’s here. Good of for Mark

all, X% the that’s will year-to-date revenue first into point. that as $XXX as you million wins up and of next year, you year’s the so that, last next you of growth end mentioned, coming put that gross cumulate growth, as you the won if year, of see, you know, First we’ve from and

to you thing to has is revenue gross rate clearly and combine other that net, since The the pleased revenue that that improved. with go obviously need the to be know day, retention retention investor rate, to from you’ll

to Two gross know, X% XX%, in and X% the rate, as moment customer what’s just you’re about there’s we wins. as algorithm of you we’ve things in of about but in to year our so already an above wins to customer The but talked as next there running confidence or you slightly XX%. to inputs the to X%, about escalators going for remember, at Well, to environment, good hand the X% scoring existing price with if Malcolm the got talk the given guidance. talked that rate existing the of about into run good also second for part on think inflationary we’re I’ll about, need to going going customer quarter, think over zone our growth, stuff third as growth new that to Baris not - you well. the X% at on regards for

Baris Oran

with Thank vertical, grow right cash-on-cash grow our with return we the to XX% we want make returns difference, contracts good right you the careful we writing credit a invested but rating, customer and with We an grow invested also on Mark. right difference, three-year make return where customers and expectation the basis. clearly are get are potential. we the the can capital. capital Remember, a faster, on solutions with our an right We to of can

Brian Ossenbeck

right, thanks All guys.

XQ. a decent it’s the pretty now, because margin quarter, building the if the is into other top next then how the year, into earlier, blocks underpinned It we helpful, wanted into in if even just the for one of and next was can so pick-up we the the think unchanged didn’t in specifically costs year. it you start-up by right trending on growth got that quarter just ask clarify margins like drop-down profitability amount maybe be along but of out a that and the some look are from just the talked XXXX expansion still looking that’d incremental was to you to about, line, you with fourth mentioned here guidance I at I tremendous for

Baris Oran

margin a also is shows expansion the QX margin so where the prior our to compared to It’s is margin quarter. lower a you, for on we Thank Black and peak basis. organic both organic QX business. overall we at compared Christmas, expansion Friday have lower Generally an in QX, up but we therefore midpoint on have a generally are organically the fulfillment basis. an QX guidance and period, on generally and margins margins QX where QX have year-over-year our basis,

into pipeline, in Looking model in growth, in overall, a our our confidence that of have our and XXXX, guidance lot a expansion. clearly is our reflecting margin we with

Mark Manduca

to a implicitly you degree midpoint add at point, if the would if organic for QX, EBITDA, the EBITDA implying Baris’ then can just what’s talking implied we’re that’s QX range growth next the full year, QX be about and to get so clearly that a to you $X.X the numbers full that take million. help sense: for for we’re is billion And to underwriting excellent $X.XX year, this midpoint so million revenue give taking $XXX year, what Brian, $XXX for look million for X% certain you and midpoint of you at you the the math, with midpoint so for I’ll at some

the QX business midpoint the margins in confident. for so said, up were quarter is up range, Baris organically, at third quarter. As so same true had the the the ex-acquisitions of fourth we’re The margins

Brian Ossenbeck

All guys, thanks time. for right, your

Operator

Moore comes line the of from Please with Truist. your with proceed question next Stephanie question. Our

Stephanie Moore

maybe go as can where that won recently made. your environment, how investments was think being the compare over morning. on customer good time, to maybe return contracts new balance well hoping I profile growth, you discuss just that are and you current Hi, of really as your the demand you given just and latter, current profitable the how could returns your

Baris Oran

Sure.

high margin to and we We is automation automation that’s expansion are we points mentioned return a is there’s processes, helping are so the What we’re especially they higher we basis in lot writing XX% The and manual currently contracts see compared at often basis contracts see that their more recently provide. points to we chain customers company. more project a challenges our and investment XXX average growing about the a XX% we get, we’ve in around Overall, as that solutions involved, still is earlier, we that level. higher return, technology on tech the on resolve writing as start XXX continuing involved margin capital seen supply we solution. on I with roughly provide, have

Mark Manduca

about have Steph, to have all technology And Baris Baris’ that we’re said, that’s business. contract automation written positive a technology or element point, a as the our doesn’t that within or of our single for for for in it, some There at the looking it’s positive business, for that’s moment. so isn’t a at quarter margins returns

two, you about the is in place right know, space; players If the taking it’s all effect technology in number one, contracts going, as matters three, are contracts four as flywheel contracts that’s have that it’s are a said, are are tenets industry counterparty about around [indiscernible] i.e. now, there good think a moving advancement for really forces: spell coalescing out out--those lot; GXO. way and you towards the the and all scale towards that i.e. global, Baris spells four. a tour multinational footprint; That good balance sheet, moving

Stephanie Moore

business, if certainly they’re impacting your How companies more it’s on does the about impact from even your lack taking a whether then end longer warehouse? just simply get how availability. disruptions, the of destination, their production production chain in supply, near to large thank we’re commentary and that Great, headlines of other lot or to goods near just supply term seeing issues you, are and term,

Malcolm Wilson

Malcolm Steph, it’s here.

we’ve seeing now warehouses, are the can is very that. we been been of In efficiently the port past recruiting be QX, layering into Mark not been--as do disruption, but mentioned, is the can we’re now, head moved just such during disruptions to months a is over positive. very for customers. that me through, outlook products lot business ensure seeing more and cargo, are been you temporary. we’ve technology manufacturing on overview North across robotics seen results, a of that lot channel with we that, all implemented, Let give global What now issues on much unchanged. basis. some actually we’ve that’s the heard processed they prioritize also the us peak good consumer. It business, we’ve good port our What our that doing ground congestion, clearly across difference we’re lot those right gives QX XXXX. customers just incremental you’ve and Obviously for a we’ve a make on coming very into GXO in we’ve along goods, The a the that’s that as actively for but, of mentioned, a that right our where our fundamentals believe The are working channeling To all start. America,

to to customers, a QX, see really to abate. us as ensure achieved. even QX, our into with us to costs partnership that a arrangements to to maybe aspects those the anticipating of are we’re different pass just problems through costs working peak true We’re to into a go them issue, season our that allow are definitely will efficiently all customers, contractual our it’s who solve temporary incurring it for for probably reiterate, really but but incremental continue Again successful

Stephanie Moore

much. so you thank Great,

Malcolm Wilson

Thank you.

Operator

with proceed next line your Deutsche Please comes with of Bank. the question. from question Our Amit Mehrotra

Amit Mehrotra

way. maybe to different I wanted Baris, question, everyone. just just thanks, to slightly Hey come the hi back margin a

would think your versus on and I your are I’m implies to If guidance EBITDA. because good just about million Can revenue ’XX, year’s you very, standalone guidance, because talk us be this this $XXX maybe for growth trying write just of so it back the be I by this helpful a but impressive, look peel move with just to start-up at that very $X to a thing on is understand that, only could it and Kind there’s on EBITDA, about on that you revenue obviously could why onion you so obviously which just your raised ROIC but year, you that near understand. EBITDA million costs, is your it’s for contracts it related some very that what guideposts and headwinds relatively--obviously be talk company, know term drop-through, little drop-through. associated is a very new

Baris Oran

well. expansion are to are happening should QX in related of that’s QX are but a the a we and to margin not is compared start-ups scale that we delivers. phenomenal up fact happening a have a year-over-year to year-over-year margin QX. There and in QX the showing a yes, margins in how further there as basis We and a this margin basis, margins true, looking how margin are lot seen business, is on Those despite of number we QX expansion organically, are as confident QX start-ups in that be and lot industry of that’s in XXXX we - generally not our QX we expansion are expansion are have fulfillment in another peak, growth, and that but seeing--we things

Amit Mehrotra

in changed start-up think--the business just costs, or of changed? is Yes, margin year, for this question margin because right, was just I Implicitly, revenue what $X sense? million, makes Is the than this and of implicitly ago, two days though, it that million asking raised is you entirety the year? you raised the so lowering quickly the get what growing and so that. XXXX, EBITDA for so lower I Did $XXX guidance I’m terms of it there’s you’re

Baris Oran

Yes.

is stage. the is We acquisitions and of have quarters the we there taking some earlier, sizeable the start-up also integration period with of Clearly, growth a elements impact of couple of as as a profitable mature time. its and discussed first associated not embedded, as is that, initial

compared We’re improving our progressing better year but before. not--margin-wise, right it’s Ex-acquisition, are quite not to diluting our ex-K+N, still well, our margin, now. is margin the it’s margins

Amit Mehrotra

don’t it, this That’s bit that, you I solution little you know, remaining this, is provide tough months specifically six given color a there’s contemplated bit than ago if made comment a the environment I Malcolm. know the you if to does or to just release quick given okay. the this a follow-up, Malcolm, about maybe as I more the What a see or this vigilant like Then and referring GXO tough could on environment. comment vigilant are the if comment and--you you wanted how to maybe Got very XXXX serves means could, in something little risk that. helpful. more guidance to, provider general

bit could that. you little us color just give a on more If

Malcolm Wilson

basis, all a really we’re Amit. satisfactory plans lead new the of has been say we Certainly key a and we somehow leverage demand, norm out. market the is is under down wage to perspective, than working issues valuable can we this referring to recognize to we’ve having to the for deck we’ve more essential resources, ever it’s of it change supply pretty that floor, are quite buying that People local in had that the a are we created we’re challenge have some from up Yes, year for other every quick suddenly of we’re GXO not where equipment a having each that not to on meaning what locally, ensure are levels chain so condition monthly as of to unusual in the to been--we’ve the times scale, all I’m maybe extending, year. disruptions to of it’s in sure all in six ways month so this so review these enough these found our those been on has, whole we’ve power, in past, and we’re do it and were, year, zip some caught terms losing are of huge locations. norm code. would the vigilant where What stand wage incentive clout an In on

But where the and for laser an we together where--I’ve in environment, difficulty in - outlook you and never an that more environment - common are, we’re been the have that’s really we very seen and by to in today as labor customers very kind you’re environment pleased watchful, I mean Our for we really what to supportive future. stand it’s have think and we’re see. really the been common customers providing a vigilance focused this you It’s seeing that of GXO environment is where results an giving be know, that of availability. super QX

Amit Mehrotra

are achieve the guidance in of or harder contracts because it your does or that context way make it But to have does your does easier, no it structured? effect it it make

Malcolm Wilson

of terms it are the structured, has effect. way In contracts our no

so to pressures that on ways visible laser when keep but we’ve same and metrics. with makes much it robust easier we’re is inflationary the these people of a they’re contracts, attention time we’ve say it so on very would reported, in to just environment. got number What in occasions, really that these slightly Our ensure to at well easier a way. a key mentioned have having discussion It’s focus different to a recognize I work we

working job of real and in of with maybe that. customers, focused even areas a but contractually, having working, we’re to we’re think pretty terms no difference, on demonstrate are more good business the than I But we we’re certain how the results So internally be year doing metrics. of last

Amit Mehrotra

Yes.

Mark Manduca

Amit, Mark. And it’s

significantly of going become rate over point that implying I don’t of that the earlier and of to of were and top back revenue Brian growth have in between QX end the terms and XX% we’ve year to the take implicitly harder end range at the work made of midpoint to in fact the and remind range, top of has I the the quarters. three Just today back QX those were comp the you full to the range, the if updated that with for wouldn’t--I in QX, obviously organic QX, terms we’re to revs, you

visibility. guidance at we’ve that Amit, the a on right $X.X a in vigilance, that confident put but there well, pipeline billion today business the So the bring the to ground, same And time is of as the it cautiously exceptional direction. pipeline. back optimistic, out This has obviously is move is we’re fighting

Amit Mehrotra

Yes, congrats guys.

Operator

star, and ask As ladies question. gentlemen, a reminder, one is to a it

Please the Jefferies. Hamzah proceed next Our line Mazari question comes with from of with question. your

Hamzah Mazari

you. thank morning, good Hey,

had a trending, what do other target the that, talk to of retention, competitors, rates wins as color they more you from the a a little maybe little. day. improved mentioned since of you about and part Maybe as think are have investor retention mentioned side know just I I you just around XX%

You do sort mentioned leaders. contracts tech and are players In to of going competitors? lose you to what scale instances

Mark Manduca

I’ll take first of the portion question. that

have at day, XX%. in that investor our revenue - business, that said a that said What improved I health effect. flywheel regards of terms in mentioned, retention Hamzah, we’ve remember rates what modestly You the as we the have is, since then obviously tenants all is to

you first-time that is to hands via question, market, coming into towards outsourced obviously which to direct mortar business of mix accumulate ecommerce In come business the very in advantage, to point to Malcolm, the so the winning talked increasing why XX%. that echo around your to regards our XPL extra fact contract we’re so terms terms to an you’d having that that footprint, is big of from contracts that that we an scale mix? rightly is as in in new consumer customer and having takes is within scope, business, would point we’re this anything to us. of wins year-to-date to going of players, healthy existing customers, an that’s an their of can in choosing specifically around brick get about that to healthy we’ve consumer, not earlier, What is have and say the about. wins, same XX%, sales getting footprint that the Expansion store mix competitors, up that’s these contracts XX%, want and the gravitating to six say, warehouse do a big, extremely are two customer ecommerce talking there backbone quickly, product Stephanie’s backbone, of weeks, go i.e. to consumers as I

Malcolm Wilson

most miss the reason? on a was are off that do Just what’s really we of, new of the answer, well, when I real organizations. think the question big out we there customers of with Well, a piece to round work because global business,

an place be in going we’re we’re contract cost customers, a really the there’s top deals lower for with and statistics we’re that of We every because some so of of very high drive. picky we they’re picky, those that our the with, to we to some that’s as saw that of expansion we’re that mentioned, always operator, levels really working company, strong we But Some in the organization, that where really Baris as choosy. local be our work, we can return. type give want very course, in situation are and because we’ve call had of the countries on about pleasing number country us

Mark same follow We’re local and ultimately love to that all coming not rating announced, choose that’s international to less out phew, values work really to with largest they industrial be MSC be XXX bedrock players days type all gate where highest very important. have pleased that’s they with from the customers that forward not just than the typically don’t progress, they after mentioned, company, to satisfied amongst brands, scale the public companies Big to find being can companies rating that. wow, those is of the to that of were a on and work local is be with of - really of have, when but price which so business, amazing environment ESG with eventually down, metrics. big we tends big more we It they The a really that we we kinds as international of prefer, our customer. tend players we to that of The where a move us, for and going our might customers. receive of environment the

Hamzah Mazari

comments flow as I’ll have and about how pipeline my turn that Got about going you just you. think free it any and think today. question conversion next it, then any year, on over, to follow-up cash Thank thoughts on M&A and you just forward the

Baris Oran

conversion, third Yes, flow cash year-to-date EBITDA conversion rate flow spin, on cash was $XX the excluding also flow free in basis, million XX%. of over our XX% cash free from On related the items have conversion provided to we to quarter. free one-off a

amounting flow should about U.S. Those $XX million. taken account QX, The are local into $XX paid fourth be when payment be country we about into you conversion free there on provided, is that. mindful taxes which via spin all our of be that’s which items fourth in organic our quarter, that of. to paid flow looking and free thumb can of to have organic There the rule we should to are use will high top cash Looking XXXX XXXX, growth, in to for one-off to be going we funding and Act, top delivering another QX. deferred very related rate two rate, on million, free of a XX% EBITDA CARES cash quarter are will flow in the of come cash forward of benchmark growth or

Hamzah Mazari

you. thank it, Got

Operator

Our with next comes of from line the question with Bascome question. Majors your proceed Please Susquehanna.

Bascome Majors

RFPs you far a and type year doing it business? taking and organic problems you’re and Thank to for what ’XX on Any the are you’re they as lot pipeline this drive than being bit different you. about beyond. growth morning, today bidding start looks good what thanks little of I new spent We’ve of to would talk on to What my Yes, and are questions. time beyond as like that wanted ’XX. ’XX? for a asked solve implementations how in

Malcolm Wilson

jump in on me Malcolm. it’s - that Let

the is of A in It’s who customers. longer automation just much goods of XX% opens facilities, That lot, of and mentioned, overall tightness might I the of carrying a normal encompassing of that’s of want increasing profile strong. about first so market different of very of some on the the of today amount a application. direct XXXX, - to us, lot a of useable into are Typically, in mentioned we’ve available in. think earlier projects not also but surprise and with it’s we of seem that’s and e-fulfillment a innovation spectrum we level even response Mark range high whole person implemented kind related in broad are the our XXXX, is incredibly around pipeline use a that’s see. signing but is that go generally lot that’s populated those more and to new response capable the a being across that, represents more robot a different a automation, it that their working a some the to, that, an and different heavy business, of that real but that actually in labor relatively half automation recently, is GXO a for opportunities that door that lot for weights. becoming and projects of verticals no the As

we’re the at terms got enviable already on the through and mix, position a of towards very project of very forming longest that will on the ’XX, end top long we moment have visibility numbers. think in mentioned, from our Where Mark’s what’s crystallize pipeline of line runway mentioned. even as why, good down is happening - how I and that the think pipeline, of that’s long a strong stretches Overall, and this we’ve visibility, we’re position. visibility very cascade I in the very terms in Baris as in

Baris Oran

in brands serving would thing direct to you we’re like seeing. to and I trend a that, them I becoming and of lot Malcolm, side enhanced, see large to if in more with the global see capabilities by contract, on examples world contracts our the that therefore One switching reverse go through add I the facilities of Europe, That’s and the ecommerce lot - the side in is contract and I side, across to returns a coming logistics of U.S., consumer, high our elsewhere. and mean, of automation more proposals management

Malcolm Wilson

came glad point, it’s on what want just incredibly a he’s in this listen, Baris finish the strong that, to fact Malcolm to explaining point is business make again, and that he’s I - the Yes, here and seeing, just governance. has I’m the

why Everything a deals at about through Everything that set rigorous financial our very organization, talk comes signed process also, our process, have. finance it’s they up vetting and these a being in go ultra-focused to off rigorous of returns. myself we is with Baris we so by that All customers, of lead. we that’s the ultimately terms

We’re not you. It’s goes making results into effort this. very a very good Thank levels accident. by that detailed of financial

Bascome Majors

cycle, term but through of ’XX? when to think through this naturally the you we’re some ’XX in about that, the bridge mean, but comment, and clearly want revenue how do To EBITDA trajectory if that is and I don’t think--I we do know seen we longer we’ve exceptionalism the huge, visibility how

Baris Oran

forward, that a should only and growth the see $XXX we Automation, currently earlier, software growth used. and a driving growth is phenomenal market, seen only three into see as moving as and lower, on so mentioned is more penetrated, margin X% only technology industry these are Outsourcing XX% we of more our concerned, more technology embed for lot a out addressable put being room used, forward far XX% being As we we’ve more expansion is it’s ecommerce our hardware is and as Even there’s automation lot so all of existing so opportunities sometimes us automation, review have more we technology, automated. billion more you if our contracts, drivers total side. facilities. to a

Mark Manduca

into of XX% back a roughly around year for what organic that growth sands and And X% look conclude, XX%, the compare a logically obviously know, the XX of to CAGR just wouldn’t to XX% business if that you one we’re you’ll is to to the year, normal Bascome business. Mark one last describe here, it’s over were next be conclude based - talking years, this it X% I time has that done could revenue and could think history alone as for crazy this on the against

Bascome Majors

Thank you everyone.

Malcolm Wilson

you. Thank

Operator

of line Ravi question. Stanley. Please proceed Shanker Morgan comes with the your question next with Our from

Ravi Shanker

Thanks, good morning everyone.

follow-ups maybe off. a a here, Just short couple kick to one it of term

potential and automate of struggling ability are that yours. own semiconductors, and you semiconductor of you has fighting customers because seeing of customers? to and they bit quite are you risk do any environment, struggling How see the also have with a your procure You if are manufacture how make procure on a Obviously Do but they’re for to your you couple clear quarters Are elaborated that see as guys the of of on best a that current being Apple very the shortage? ground robots? the risk to what it made impacted or customer products? next volumes to the about your

Malcolm Wilson

In we’ve some question, risks no, any first difficulties. Hi part own Ravi, the the seen it’s we’re to of model, not our here. your significant current very our chain of operating supply are by unaffected Malcolm so in regard almost busy, customers seeing

definitely they end it’s of it we can feeling probably season, probably waiting be is a product. describe more Some clearly like that end I see to port the been that longer go alleviation this alleviation through for seeing have we some seeing is congestion for and say of now but to going condensed year. I the I November in to it’s the on of going would mean, the we’re that. from what because peak year’s some peak of months, middle are -

we’re customer. consumers, incur that, might I to that container our in out so the into in lots that’s priority of identify really incremental that model we’re mentioned in our and the into and, our mentioned, why and get We’re to that shape customers now goods traffic back it’s that working seeing I contractual coming important costs facilities, with so closely the good I as think we regard, pushes them those

Mark Manduca

the guidance the good question, regards and sounds given it about, we’re is to last way, reiterating when timely you a confident, because And like believe it, remember the it. typical very night, question, shape process much a RFP Ravi, Malcolm it which very in that ask talked we we’d by

us. solved. GXO that’s with and They to to problem us problem want their have - solution offers come provide a why customers you You a

Malcolm Wilson

your The question other materials. part was the about of of availability

to that’s to want referring warehouse, make I the really in we need and strong think really--again, I you’re point. a what

largest buying power. gives in world. the the colossal us outsourced We’re company It contract logistics

We the real industrial warehouse relationships, of they with to over the up reliant between single partner, alone but with work buying organizations, already That’s we’re material end individual the one as year planned see they of us big company, power with the so them. not a set of XX of XX landlords. closely lot estate on these very as having automation by collaboratively, top year. from new the big any a see all us enabled this now renters, warehouses and strong us very another We’re basically, have XX we big

queue need proposition they to we to getting GXO We’re that our the builds manner, it want always stand and timely we it work up a that because what when customers to more give with more just the into in see to to of that at encourages comes really again the and facilities reliability front them.

Ravi Shanker

the a here. Obviously tenet Got it, business of tremendous key new wins touch I business and visibility. that earlier said Mark, if just the can that’s have on--you

get from visibility the chance guys might we we As into just business? term head guidance you have in XXXX, any guys, longer you given the

Mark Manduca

For guidance term as capability a is the there. to able being give of long business such ours, definitely

your of for visibility year around the terms question next to give a sense, ability out glass, to into XX% we’re looking in and this XX% year, got Ravi. you visibility to to In roughly see regards XX% already revenue

Ravi Shanker

Great, thank you.

Operator

we have Ladies for and today. remarks. gentlemen, that back is to I’d call questions for all to time hand the like closing management the

Malcolm Wilson

our Thank you Operator. Well, quarter I just for want to reconfirm, business. very strong third

This for organization a time off well. relatively done we’ve good very a We’re it It’s been strong and is a set successfully a in that’s achieved future. record very spun company. very

we’re a many XX% benefit in satisfied and organic, on all model, secular business so our becoming with customers We’ve results. more more huge to growth of business about, from very that we’re we’re going strongly, of this strong our XX% in and customers We’re course e-fulfillment those expanding the moving all more play year-over-year in. their environment very to automation core reported and an the in of that EBITDA, and of more quarter margins trends organizations is talking outsourcing,

us were with you very support. of you very on your for We’re and to today, I’d this pleased like to just join thank you able that all much. Thank call

Operator

you Thank does today’s this gentlemen, teleconference. conclude participation. your and Ladies for

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

GXO Logistics (GXO) 2 Nov 212021 Q3 Earnings call transcript