GXO Logistics (GXO) 3 Aug 222022 Q2 Earnings call transcript

Company Profile

Participants

Mark Manduca	Chief Investment Officer
Malcolm Wilson	Chief Executive Officer
Baris Oran	Chief Financial Officer
Bill Fraine	Chief Commercial Officer
Chris Wetherbee	Citi
Scott Schneeberger	Oppenheimer
Jason Seidl	Cowen
Amit Mehrotra	Deutsche Bank
Allison Poliniak	Wells Fargo
Brian Ossenbeck	JPMorgan
Ari Rosa	Credit Suisse
Bruce Chan	Stifel

Call transcript

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Operator

Welcome to the GXO Q2 2022 Earnings Conference Call and Webcast. My name is Doug, and I’ll be your operator for today’s call. [Operator Instructions] Please note that this conference is being recorded.

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

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

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

Mark Manduca

second welcome and GXO’s everyone quarter earnings morning, Good to operator. you, call. XXXX Thank

earnings will can Malcolm. depth is exciting a Over opportunities to Chief Malcolm. deep Joining Commercial Bill our Officer; to and Fraine our over the I our Executive first our and Chief relationships. me Chief Officer; Baris today in call Financial about call Oran, speak you, our are customer to Greenwich growth Wilson, he turn Malcolm Officer. our in and newcomer Bill

Malcolm Wilson

successful spin. I ago from Thank Stock New traded We ringing York publicly opening with by the acknowledging our start anniversary Exchange X-year X after company GXO year only across you, this morning and by together to yesterday good business. became completing Mark the want at our everyone. that a bell celebrated operators

a expectations as a consistently beating quarter. first had public for or excellent have company. posted each results, operating truly achieving We We year remarkable

Clipper our acquisition, have We Logistics. completed first

We progressed of first targets. recognized pure-play team And best-in-class ESG standalone report The brand. company our have towards being quarter-over-quarter. member quickly our a a benefits published are have meaningfully levels and established globally we rise contract as ESG itself GXO satisfaction has self-evident. logistics seen

named warehouse in were only Year named We new to XX,XXX opened X have have and suppliers of out award. be X XX we of over GXO Since services XXX. to million was gratified recently, space. of been Supplier spin, by and the to And particularly the Boeing Fortune the support square partners total nearly feet our XX of we size this new receive business category.

also XX,XXX and XXX our employees, thank million markets and tremendous than gained have community making more a new customers for new to company. as standalone year-to-date this months With additional members XX verticals. XX customer more contracts XX,XXX I’d in broader added growth signed square high the have we exciting a like team We members. an and investment sites feet Clipper, team XX and than first

These of billion. records: value $X over lifetime $XXX quarter. we second quarterly the to highest million. two turning our set wins, pleased wins first, new Now I a business have that report level am have to ever of

This growth growth. of of in billion, XX%. Second, like-for-like by is ever measures we new net driven operations wins highest have organic delivered and revenue between roughly revenue equal $X.X split business our existing

adjusted we moment, cash per discuss flow. have will EBITDA, also earnings exceptional Baris free delivered adjusted share As a in and

best-in-class a customers are that major win Hardware and business their Restoration We Sports, looking Spanx. PepsiCo, new international brands retailers consumers & omnichannel Gabbana, include and These to to experience. L'Oréal, Lacoste, Dolce JD with continue give

in the had sector, also across industrial wins significant particularly America. North We

doubt confidence inventory sales attractiveness the continuing seamless our significant high markets Our long-term companies. combined drive our gains. in GXO record chain strength the we logistics inflation levels strengths all and This management supply increasing more performance, global in of elevated is our with are plays market mission-critical are and business. share and demand growth organic Across making for for and more of and the underpin market, to outsourcing industries, complexities, to no helping seeing

hand, return On we brick-and-mortar consumer. have seen some the one to by the

product these are trends. online in offering. still Group expand GXO GXO evidence We continuing whole. On the than outsized to positioned companies a gains which the grew our well as capture growth, of X% see omnichannel hand, is their to faster other large both from this

Our wins future. blue-chip year-to-date. both won have with continue new new of invest customers for new is amount This in which customers, the to XX% contributed the we activity our reflected of and existing

deep and with stability our to all longstanding vertical diversified agility of partnerships our the customers, predictability mix, Our add business. and our

be EBITDA pleased result, year. for and the a raising we for Clipper the account As both full taking you. Baris now Baris, will organic to the guidance to you our revenue acquisition, through over take into are details. and adjusted

Baris Oran

thanks, Many good and Malcolm morning, everyone.

delivered consolidated end the weeks closed earnings the we from quarter presentation our of for results and at The May. our results with thrilled of in revenue as Clipper as growth. again second strong are numbers acquisition X include We we the

and deconsolidation our Our guidance current the ex-synergies, Russian FX of rates JV. reflects Clipper

was increase reflecting consecutive is organic XX% we by our this $X.XX EPS in capital of which a $XXX adjusted diluted as the million profitability continued a to million, $XXX by in double-digits. shareholders a mentioned, growth revenue a efficiency. quarter, existing well organic driven pro $XX $XX our record our year was from growth, Malcolm last an From year. million, income revenue $X.XX, our the and sixth Net have wins. inflation perspective, from business on startups business. XX% as grew attributable forma basis from ago, well expansion a up as as reflecting pass-through new of grown all-time quarter million up As delivered Adjusted EBITDA we in new This execution to year-over-year,

Our return at opportunities to business are great stand on we write returns creating continue XX% snowball see in effect. over capital if high-quality was these continue a to as our higher, once to contracts. reinvest again We invested

Turning to cash year. flow. this flow performance quarter, saw We to $XXX cash excellent quarter the compared operating same million driving million collection in last of $XX

our XX% for flow XXXX. revenue guidance range of We sales previous guidance We the million, was a to up cash remain of and for year well to our XX% from confident record our full cash XX%, organic free Our to cash of flow expect XX%, growth conversion above free quarter raised EBITDA adjusted of We guidance. outperformance XX% our in reflecting the now half $XX wins. conversion. range first

phenomenally $XXX also is million. performed We our upgraded of EBITDA upgraded quarter. to the are GXO contractual we the our confident $XXX business and to resilience And phasing. adjusted has forecast full in very model, now our million previously the predictability given million $XXX second guidance $XXX through its million and year

top debt exposures. investment expected also match so our has of an just revolving bonds to and year leverage balance geographic The Clipper, of unused full is swapped has to-date. with financing our into been as the GXO fixed EBITDA European available million credit $XXX Xx adjusted for currencies, issued on facility Our robust after XXXX. sheet for over levels majority at grade remains

targeted Given our free generation, delevering over will and our integrating XX strong as extracting range. focus synergies Clipper our growth the cost adjusted EBITDA months within to soon and flow and possible, be next as cash revenue

of Beyond the our resilient moving cash our contracts, resilience mix more following we cost the about book high-return plus even is forward. company believe even our with Clipper acquisition, half is contract balanced more

Sales. has Commercial of XX our industry he to years experience, Now, contract frontline starting you, and FedEx, material Bill logistics grew Bill has handler strategic in from Head I XXXX mic will decades since. to Officer. joined sales ever Over Bill. He the pass business at driven over the in a to where Fraine, Chief of with

Bill Fraine

Baris. Thanks,

economic needs wheelhouse. have closer increase we All as when all customers This increased plays reduce they supply high is is an while have operating Malcolm dealing is disrupted than our equally right growth customers for an in continue and environment as won $XXX problem chains. to new of consumers, same and to time, in business is downturn this this in in move are GXO’s efficiency. more inflation markets. with high the business current to GXO products we seen issues into our like during who and about customers for now so great costs. reality all-time powerful need at that noted, gain e-commerce have need we applies inflation record to solving and it to quarter, need customers still share GXO’s the Today’s ever the million and

in for XX% significantly customer return remember, with more our resold. here up with seeing inventory quarter the We they why of to GXO. where problem consumers. on give are what and most logistics. to catch current are customers come Retail returns as second GXO global to the this higher reverse is products resold rapidly of you a consumer is better product never product a alleviate see products for behavior. some get the their GXO levels managing into GXO. me are than returns approximately That the the these generates This E-commerce helping significant levels. back customers growth is are above ground. customers. E-commerce U.S. the XX% XX% opportunity is With market to problem of our XX% included of And involved, we industry as brands up pre-pandemic put big growing to whole, products more in also. wins online And Let continue examples we for of faster

some software helped management optimize and SKU have inventory we of XX%. sites upwards per which of example, to suite inventory installing reduces in For some cases, GXO’s systems, customers by

can expertise facing are customers They and also GXO’s we drive along efficiency and inventory the inflationary this with improvement in increased need automation, precision environment. reconciliation. cost-out Our continuous rising with costs

wins efficiency of GXO, $X earlier, comprised of technology can solutions building life our for And at because through to the further projects end customers. automated in solid we which solving also the mentioned strategic sites, is these for all for As across at also highly we they the as know which that highly is verticals, pipeline increases quarter contract. reduce bring at delivering better industrial, and customers, aims enormous benefits geographies our and I our the billion. come are second stood are that in and consumer over pipeline, we quarter costs GXO the were automated of This where are our to problems of Customers XX% deliver win.

from demand to I career, to for speed first-time pipeline new such for faster my reflecting new Mark, share. opportunities which this gaining we have simultaneously is and existing now all seen while yours, the with over are never adding is Mark. turnover I outsources we Importantly, are has winning customers. high automation. with accelerated and logistics business, great reverse This and and customers a going environment existing GXO am hand In

Mark Manduca

Thanks, clearly of records. Bill. has quarter been This another

We which model, has compounding have business its high and and about GXO robust our about revenue cash this earnings, Coupled durability, durable core enviable returns heard with today predictable is growth. generation.

million revenues over three quarter We and the $XXX of things. have this means second in won

our for expect a in incremental from rate. $X.X XX% XXXX, wins growth gross Firstly, revenue billion to-date, we implying over revenue

revenue of for solid us growth have $XXX a through the quarter. signed $XXX million for next around secured And clear year. already XXXX. Secondly, second gives wins thirdly, business that into million line XXXX, sight of And approximately we we have for new

long-term customer gives high this XXXX. quarter the rose continue our of to the us great our in Irrespective in into again the and second XXXX growth XXs, our macroeconomic retention growth. firmly which confidence to backdrop, mid expect we Given in rate, high remain to

We Q&A. call up now open the will to

Operator

[Operator with line you. question. first Citi. Please your with Wetherbee from Our the proceed question Thank Instructions] Chris comes of

Chris Wetherbee

questions Yes, Maybe I’d Good guys. couple hey. the a of Thanks. to morning, with start on like quick guidance.

a does in first So half the of been. a half from given a assume organic how deceleration back growth the revenue the bit revenue strong increased standpoint, has

how about wins sounds new understand the to like quarter want quite are pace I of business you off, guys good. was It current during generation activity? thinking first So the business and

seeing that in the implied between year? of back in I bit And So, similarly go difference a of rate guidance then EBITDA the revenue organic maybe growth side, deceleration make want the that’s a on are to sure understand half the up the by revenue I of kind the again. we and

is the second not we of think I this seeing raised year, you’ve time this EBITDA organic follow that. growth are it kind but

costs startup Thank I of dynamics that you. So to as well? the want within understand

Mark Manduca

for you Thank that. take I’ll question. here. the Mark It’s Chris. Hey,

So talk I’ll then seeing take the to in the color of will we side on the side. to pipeline. revenue And do, and question, will he in revenue we then what and what the about pick on the first just portion terms EBITDA Bill ground will Baris come get on his is up

So I business. where done quarter a to as growth. are optimistic had Chris, we XX% firstly, a think your We question, organic we just have

about. that’s So, a that’s and something sign to good think

we are consider: QX, QX firstly, there to look particularly elements customers. through and I think if secondly, to second the existing two customers; new half,

a the team. existing young we the QX management I comp first pandemic economy, this given in are And full macro highlight going be would for is and company first this For customers, will business. be where that the therefore, experienced an coming the of to more out are obviously, with the year unknowns, we normalized

what be message So second for to are year. we say to it’s you this we And a conservative want half the trying guide. to is this with of sensible

this a Secondly, on very important the new customers, is point.

point, you you look To the customer positive clock roughly overall is If of this in the mid signed what as that quarter the growth desire has business XX% of for longer customers a and term if that this high about this the about we business its services. to extra new second our statement our this announced have that and revenue and year, our takes gross couple billion talk an year hopper retention in new $X.X durability to XXs also this rolling your visibility year. XXXX. forward for well of we you the of idea wins, in revenue the confident the obviously rate, will got business wins for is of with we $XX wins to in that, for in that million at Chris, million from Bill second is won $XXX another roughly that’s quarter the And our

of million falling in $XXX That XXXX. $XXX roughly got to takes next million. have We number your that additionally year

the XXXX. sight on with gives gives you wins more very of line of that clear probably of already opening QX So, even have got QX growth and you in sight a in of and wins QX be you statements that for line clear next those And very new mentioned top going a to though that, for year. I

talk Baris, All of and to visibility you side? about of do EBITDA this the strength talks business. our want to

Baris Oran

the to to ease from The startup we is the and Sure. from has further fourth this our margin expect quarter started visible in delta margin clearly third numbers. see maturity. And quarters, in

season the more course, Of of the size second year-over-year the the that on the the accretion nature which for margin we impact the side, maturity. in be half Net-net, will forecast on of of an lot prevalent fourth peak will quarter. a have year

Bill Fraine

to And Yes. this to Bill. add is that,

the second I billion as end of now $X.X billion. pipeline, Our mentioned, was the quarter. at $X It’s

geographies I some quarter, mentioned really this all on reverse it. customers. it’s last the grow. and thing And growing to would across growing we is it say It’s second strong all verticals, in had is the and growing So in continuing XX% with

verticals. say market, growth across capitalize to the just it’s omni-channels, show products our we’re it aerospace, But is their as centers throughput. is say industrials. and able which in into it do not through e-com, large to With is back e-com, and clothing to It’s obviously tech, we on them able we how we take of XX% them what return other we’re and it is e-comm critical getting all or the

continue our a making that are in to very difference, I’m same why selling at levels. things be it’s and these the will big growth So our confident

Chris Wetherbee

you the I want with you’re consumer of don’t interest the sort you, macro look if what seen customers? as or from I sort any new sense very facilities. guys to stress I now of maybe guys a get in they it activity customers? activity down think you to being want about what if just helpful. does break That’s your a you cycles? Bill, are in have there impacting you want for coming seeing previous Europe, wins particularly into dynamics, reflected to or of How business is how sticking Okay. maybe know maybe Europe, on in geographically otherwise. or there particularly new sense, get through versus

Bill Fraine

ago, I’ll are there. sites give growing met growth their Europe also North example. weeks – I America. one with larger you they in the now one they X But our is of strong and over very past and I year, was with across focus right Europe big continual customers us

is things. want of we what what they them. they up But Direct. beginning two would what central on a the now to us coming So I putting GXO the to year is at facility on work in is them with say do want focus One, with for really

to They in U.S. having a they open. we’re put questions. same They quicker and Direct up from just moving point to flexibility they that’s same Mark, for want two because the are – to for this to exact example, exciting now in But sites GXO had our month is thing response you it them time customer Europe. So much have a We them and us one other year were add you allows and is so who really this one we’re are say facility fourth. core allows more? them needs. their seeing going the can then and use They with do but can just markets, just to Dallas, I to the joined opening signed to opened very Europe, – which that’s distribute a three.

Mark Manduca

Sure.

the from numbers color some side. Let me give

by first net growth, coming And organic this you half percentage the We from and discussed from comes is business. operations, half components and increase operations, when organic organic start-ups new revenue phenomenal to into in growth look the have like-for-like our in our of our driven business last we the core growth. delivered wins existing record our XX% quarter of growth, our second organic similar

look the back business Now you and North America almost Europe. back details level organic between divided new the of wins, those, the activity – when stepping going to into is of evenly

growing continents. we in So are both

are now. that. in multiple right showing numbers growing The geographies We’re us

Chris Wetherbee

for Appreciate thanks the Okay, time. it.

Malcolm Wilson

you. Thank

Operator

comes line with Schneeberger of question. Our next Please Scott your proceed from question with the Oppenheimer.

Scott Schneeberger

company. very you congratulations first year Thank stand-alone Good public a much. and your morning on as

regard a I’m I XX, contributed, little I think maybe with though, that we in the the bridges deck or that good contribution, into growth there curious, and slide for in go the bit saw the its the second going on business. Could overview for in was of forward in a guidance. organic with of the a more what regard about ‘XX from ‘XX? guidance, to maybe of the depth it strength Clipper Slide you’re the thinking run-rate how quarter, year to contribution rest changes

Mark Manduca

completed $XX contribution Sure, included – Thank Clipper Scott. of for as historic weeks have X%. you. our that for the U.S. revenue future operating and It $X consolidated been the the May million EBITDA the and on made results. has We you been And margin company X had has mid EBITDA to a net the low the roughly XX recall that to GAAP million single-digit X% acquisition, been to we basis company single for expectation, in of income.

included specific cannot basis acquisition guidance have the guidance take can provide is reflecting our what we We the Clipper. we in remainder in your as the for modeling. models. you included our basically have that what And of on So

net Russia net and there the the there remainder deconsolidation EBITDA you the component. in bridge, of is minus The M&A see Clipper would is means Now FX impact, the a M&A. –

and XXXX, exchange from coming the shareholders We on million been roughly from the our on XX% $XX hedged. is are hedged And XX% the have volatility hedged. for year of EBITDA, shield the rates, not our XX% bridge. EBITDA has not delta to last that And those components directly

Scott Schneeberger

that is of could your consideration the works what what and XX% owned joint may into Great, for that to the you timing impact the the speak deconsolidation that year, And have? of type Thanks. rest how for venture thanks. I and appreciate Baris. guidance that of

Baris Oran

happened first the Yes. half. It in has

you been FX As the in that updating last recall we components, the has guidance as lot. FX. entire And whilst our are for larger moved has including included discussion. well as Clipper upgrade are year, a from EBITDA guidance the there

have year. the So full components we our all for included update to guidance

Scott Schneeberger

thank Okay, you.

Operator

of proceed Cowen. question Please Seidl question. next Our line Jason with from the comes with your

Jason Seidl

the that prepared and Gentlemen, to back economic ‘XX your made clarify, ‘XX, operator. last just good you, the I quarter. irrespective to to revenue backdrop you’re is to revenue go Wanted believe congrats the morning thank you of or is grow Hey, going of you that and that on said in EBITDA? guys want and remarks. was comments some I during

Malcolm Wilson

that. Yes, Jason, on here. let me comment Malcolm It’s

‘XX. getting organic be contract as implemented wins a will through automation is we’re last ‘XX writing It’s some ‘XX and they I that the confident fact, announcing warehouse $X.X not of year, only of of that time we’re We’re billion good deal new in in are next after. in the under place. of huge and right contracts a growth this fact, the right lead all and instances, and, it going it our were are into seeing fully of on the year you coming year, through on the go many even you confident year now, there and the expecting remember grow of Why a right middle we’re to of But implementation wins actually, lot because that, back memory really because Bill preparing mentioned, we now. just that, in year mean And ‘XX. customer in next much just fact. in and if to in good into

important collaborative we lot is enablement, think of I it’s what it’s I and a more more robots. are it’s containing goods or at arms a really robotic tech business mean, or now. of signing margins, increasing robots whether pace person the point, On an really to

whilst loan like we put XXX, it. automated that that, reach these take of lot our reality size. XXX, to XXX, time is a a mean, our machinery forward I imagine And honestly, These even it’s a solutions and warehouse into people. huge teams a they centers still XXX for And bit a creating employment. So have centers, a efficiency, lot of employ of starting can actually shopping big it’s huge software in big like you menu little the know it’s

So it’s big these margin understandable XX that of do between they centers, sort reach maturity. to months take and X

So that see. ‘XX together, can what mean, confident ‘XX. We we And fundamentals we’re all U.S. of put on very see and any that’s future. don’t can continue the that I for as in to why

Jason Seidl

believe, what them? appreciate that. I to on in of that it, contracts color I bidding the said of percentage some And new the you then of component that Okay. sort you on some have the mentioned, tech tech-enabled you win enabled are you XX% contracts have

Malcolm Wilson

maybe talk that? you can Bill, Yes. to

Bill Fraine

Bill. range. And X.X that in a customers labor, years. is last same we’re This of main in finding Yes, obviously, what it’s is the the been concern has

automate. driving to the the it’s and willingness happening is what’s need so And

employment a other The better our employees employees environment them for site great They you, is of to more find have in, our can it’s I and we automation working we for a that and Any happier workplace place like side create work. tell to want a that. it. with helps automation

of that’s the And get labor. labor the with it driving customer productivity. things sticky faster labor there what for much the One, relating enjoying throughput It that’s it. savings, both So then means in more and how It grows terms those two are the of advantage, lifestyle the the benefit, on to we we more. the but need labor. labor also the

Jason Seidl

gentlemen. Thank you as the for time always,

Malcolm Wilson

you. Thank

Operator

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

Amit Mehrotra

The Thanks. of last Hey, that XX% follow-up Bill, new wins. to a question. just the

it That’s a a I little automation. a said if know because because bit bit higher that you I – didn’t it’s or percentage software don’t there not automated, highly charge depreciation point You automation, more nuanced changed has whether with obviously, fixed charges. is or some little amortization automation associated a of was know

versus a were I want that If embedded of it. XX% those little for it? just highly – to bit could make up year? last just that those higher I’m terms that change doing have higher in change So businesses you to automated you sure picked have big margins out a obviously, and contracts us, a on of quantify Is too not I making because deal what wording,

Bill Fraine

success mentioned, our Thanks, Yes. – would I I years, automation. we the And the we’ve in potential that with site. as tour through our as Amit. gained again, as customers say this,

So site when the processes have When gain and see customers, our the they very the about automation results path. are automated. down we get see and we going XX%, it’s they automation for about talk becoming they that excited an we the

So as the a is you’d imagine, big in picking. involved site process a portion of

they work have finding stress that’s we and what are mean want they for building, for employees. processes to more of on you the more those. automated I and automated able to labor the bulk person, where and taking is sites with in the automated, life better better more work have it’s the when more less they also to choose that them efficient, offer said and you’re you before. of It’s that more becoming in the like It’s So their what either co-bots the allows the work automation. – processes because or highly a good body are you’re what and employees enjoyment in that working sites a say you’re the because automating When we

Amit Mehrotra

But just Yes. want I make sure. to

to contract you’re right of charging and a a a way there think it? automated on less attached a cost higher like-for-like about margin because dollars more fixed contract EBIT that type to that maybe of basis, So the off is base, is

Bill Fraine

It fixed from have contract. returns, sizable and continue see does less automated. automated through way contracts. clearly return capital and whether have trend contracts it. right we of our record or contracts, the to as are think a track statements they life automated financial revenue that the for That’s these on are EBITDA and remember, And that XX%, over fantastic invested you is writing with and we about we fixed Clearly, writing sizable come the high-quality

Amit Mehrotra

And I helpful. here. couple just more then That’s have Okay. a

So of million obviously, if of least wins headwinds, is is there probably some $XXX the new through. maybe you this million of year, There is Clipper to at year back half the that $XXX business, I around year, business then as incorporate existing new business. some new but revenue there there mean, cycles next revenue incremental $XXX million of FX $XXX revenue, additional for disclosures is million churn, next

it basis. billion $XXX year million talking reported next like to $X I revenue incremental looks mean, a So we’re on about of

you margins If know are maybe you incremental the I winning lower book, a that contribution year. margin coming could but because low you’re associated from of is wonder is the for margin, revenue talk then I to just have opportunity which more ROIC. if starting about then with that. business next what higher want open that synergies Clipper And new off

reported next year? FX profile on the So year? dilutive whatever revenue Talk incremental margin is some new terms Baris, the the growth like a Is about is margin contribution would group margins basis it coming that you little expect profile dollar and on to you group in headwind? got next margins, of bit us because business

Baris Oran

margins therefore, in very margin historically slightly GAAP Sure. of X% EBITA. basis higher and U.S. GXO about and limited EBITDA X% than Remember, has depreciation, Clipper to

of arrangements, that we trending So of contribution continues contracts EBITDA, year, provide so the grow. of be from of we we need the we to as further is quite Once as will cannot Cripple you’re bottom perspective, a this of impact but that. details whole in thinking arrangement impact you maturity well is line Clipper next that. and because top separate provide have to the better year. FX When effect course, separate have component healthy full further the details. business have the But whole our a started line on The completed, synergies will on year there about will

We entire maturity improvement for have extra a contracts put will as Furthermore, decided for started management, customers to full continuous to you facilities the our this quite and year in the the productivity years see impact of improve existing EBITDA have those. we improve margins efforts effort before, of the to lot and compared organization. our year on

of the rest the well through quarters that of impact as as see to XXXX. expect do we So

for things multiple So, be will next in year. effect

Amit Mehrotra

you that to on be. or the that, will about growth. on to equal growth growth a bogey tie think basis whatever the relationship way what Is a to it I greater year, than just it fair revenue bow percentage would so to EBITDA will versus be next be revenue guess XXXX? revenue a that’s have So in EBITDA

Baris Oran

the There be There you’re Clipper balanced. There nominal will component going productivity out. is going and the be is – EBITDA is components. the FX those There Clipper synergies that to component. if impact looking balancing to of couple the be a needs to be that’s there is at pieces an

the four our balance of XXXX. So those will will how in margins determine evolve

Amit Mehrotra

you, Take But tried it. Thank care. I ask appreciate question. Okay. to guys. I that

Operator

from questions. proceed Please next question Wells comes Allison with from Our the Fargo. your of line Poliniak

Allison Poliniak

Hi, morning. good

implementations? X with automation of Just side some of in had line with the you’ve new those ability level the that to partners concern of robotics of given any would any maybe that’s up and growth And your keep that? you to it, just justify contracts, in Rivers providing have that with what a are risk then Just thoughts of Any contract you they bit unique sort that? a there? explain or could you

Malcolm Wilson

Yes. here. Malcolm Allison, hi. It’s

me you background Let that. on some give

solutions any customer, designing the regard really, for our concerns in is a really like, we the you when with don’t optimum. we they are of availability, design teams, if have for Reason automation. that do to So a

we has in So components. example, facility It’s that comprising manufacturing have, just running multiple of don’t for warm manufacturers, normally one it. automation different

robotic robots person, coming be the do, what one to coming manufacturers. a And of from a coming with manufacturer. – goods from we another different manufacturer manufacturer arms a could robot we working are a typically, So all collaborative from

plan. We forward have a

mentioned, about sales what So won was But we just pipeline. that implementing now business broadly lot we’re a ago. our a we to talk up year

So for long automated times these processes we’ve implement got where within and implementations. X highly months win then just They center. piece business of lead typically not are a for you a

contract So, like in huge perspective, lots logistics That us to with estate. scale working because, kind mean, business, simply value are with as manufacturers that real demand they company. I those mean, good quite and I a after we’re mention finding the things world. a automation, the company providers largest tight of partners buying a sales in from to comes it pure-player GXO and the of when equipment not we power gives us remembering that are process

People their of And the It from in a a peers. want operation. benchmark. we’re player sets in have kind automation, own for We’re automation to big their apart GXO them. them

kind really not than centers. So any we’re for where historically our creating of experiencing difficulties an different have they been environment that are lead for these are times what big implementation

on you that bit So, it. I flavor a of hope gives

Allison Poliniak

And that’s today. unique there? Rivers. on color just Yes, color what automation a providing that’s is you bit the in any Any X it Like great. space

Malcolm Wilson

were Bill know was we I I in running where last Well, center a huge collaborative a week robots. Bill. mean,

Bill, you on So that? just maybe can comment

Bill Fraine

Yes.

Rivers X really few it years brings X have brings. a in much is benefit few, the you what faster a It now. brings with And when efficiencies involved for in it been we’ve place. but So Rivers the a sites

Here’s quick a example.

efficiencies. you get for employee With day, with the teach where half an bit. is. can much season in alongside is can pretty to lay co-bot, and out weeks a when they are close seasoned already to to employee working them down at you them they a where all exactly knows to them product a in, you knows the site. the employee at bring thing And do employees, knows The the a going. the they little good first very site bring take a the get top that take it’s you robot slow usually that And reason an when the It site, so is can of

the them of and the a then it product, And it when point co-bot, you the out scans it in. it, will and an show the shows take product, the around will put site mine employee into a goes it so, then will picture order

away, goes favorable go with relationship we position efficiency defects So up. X have them. such And Rivers is our with that

like they in largest the they say with the are Malcolm product it. mentioned, products. need the that sell logistics helps pure-play they we company which we because also it to get product, dealing And them their when get As world their for

a great relationship it’s So around. just all

Allison Poliniak

on then pipeline or I Anything customers even that Great. on, pipeline, of just of you a that mix balance expansion? customers. And touched versus diversity know between shifting that new in the it’s you’re seeing new still expansion lastly the and just existing

Bill Fraine

time, as my of can imagine, lot the a you on road. spend I

do give how how deliver an efficiencies? do existing What I’ll purchased improvement, they improve with do and you always they so we do existing a what And cost, they we How do get customer, is we new lower what how always customers. we customer from for are – more and to looking continuous us.

with the the on So, when have do, lot that we the we then up. from they our And with We the are the is can we them customers, us the at they ease lot so competitor. together targets are work sticky and of with seasoned imagine, in how very one a our as collaborate and work number because that constantly you of of is to site site with two we a is a selling, that that on is on we working year your we’re these are story implementations. teams of and at we And with started tech of that level and then put beginning very we their leadership it working those we’re customers. go and planned with through. amazed just out. with customer One, And through implementation the were It’s teams. easy have us why a new that came plan

So, these very are planned out.

specific a have follow. very we implementation process We

team a that. have that monitors We

We on so have sit as it. monitor Americas. both of the project and senior that that Europe I executives managers

and – very in impressed they with they that. this So, we are the are time just are all together

with are So, brand-new or us customer, tell they whether us you see view be a of what GXO. that would with is would long-term what from I the you you are

Allison Poliniak

you. Thank Great.

Malcolm Wilson

you. Thank

Operator

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

Brian Ossenbeck

Thanks Hey. Good for Maybe the another taking for one question. morning. Bill.

share of some I shape to in able wins gain even size you back wrap up U.S. that And of bring in because overall in helping on of good they have some returns can can because just be actually about underway mentioned get little to size or XX% integration pretty think a sort believe the do when Clipper form then business really I we that it haven’t have You think a an might reverse heard that product the think returns And you the you market there. with update of maybe you the the Is while? accelerate well? you full new logistics I as

Bill Fraine

Yes.

a start because it’s me question. great returns Let with the

my are years returns. X the returns marketplace. in now we opinion ago, with way a we about change large sports really, company And back started is operate So, on the

What So, with focus. back almost in-season get product back, started with get back really buy and ticket me use returns another deal a our was we these to the had product always been, was we coming product and get get that most money my of That then was immediately. how back. do into

it as and B A, would they C. So, grade

was So, we do. able to And market. been the A focus that’s more our in what have

call we five ready it’s in And we we planning. We have truck right the they When authorizations, to been at as by return quicker. that the the usually – have them. look get know that to XXX then trucks out been we able a in trucks, We the looking door, out. days So, away. a in go process coming have we until spot do able into product of what it’s market at need RAs demand get more back what to that back And manner. we

The built out of we did second thing the the site. an we of is center e-comm back

the And of distribution So, for to were on the truck it instead and we put that the ship are we out site store, number selling the a it during center. of customer. COVID, a of having back to an right one product end

used customers. be they and So, new to look business would returns it I would to that then example their using we happening us example, am And show to that at as it talk we an they later. take because about is what’s

a lot margin-rich why is dealing you We with be are for to that And There time, XX%. value them say of is and see same our that at about are you in I when the both is customer will environment there. the returns. talking on last thing a that’s very

will a percentage. ability there Malcolm of that. the to make let to to us So, grow lot I and money is for talk And

Malcolm Wilson

mentioned and in Clipper. I reverse about thanks, going Well, logistics Bill, Europe, Clipper management. on Clipper a Brian think returns fact, comment Yes. on in just I as leader the was seen to because it’s

really that, on actually quite it’s fact, things one just that assist are it’s but they the the of number some our that across just that And all Europe. all our of that across North it’s us can part attracted business. not making percentage back of the growing a but that. our processes really potentially forward that In and Returns and fact, it suites across appropriate, master business. of not because have was is software it a And in into we American where we business, of bringing of reasonable synergy really UK, bringing to on of looking And business. a important

you the just Mark, maybe, on that. On can side, off margin cover

Mark Manduca

business. than less your about our split it’s percentage question on on Yes. Thanks, of Brian, slightly Malcolm. returns, XX%

Brian Ossenbeck

some continued the FX see rates the FX And some sensitivities, current FX Europe in think you assuming, acquisition. Do all you sensitivities I Can the terms share here. Alright. have in you I Great. disclosed a in some flat could market? getting what with that Thanks not larger assumes Baris, you for am then EBITDA for maybe might we that. to from with of the hedged, guidance completely that follow-up give volatility mean if

Baris Oran

Yes.

next synergies. rates as roughly, the and do cost – million, business XXX current for $X business, as – roughly not improvement million $XX that year, of For look currency are as we now. away the EBITDA roughly levels year-over-year far business you balanced be the to year. for new exposure Clipper when as pound-dollar, makes the be you the we sensitivity to with our as the forecasts hedged are are pound is year. right impact net and into rest well X% year, into continuous those entire impact to Clipper into if euro-dollar going about as XX% it and separately, of taking around opportunities as look our that we is roughly for too look $X built next And this wins, And euro And and about each of every average much that’s but the going be much pound rates roughly as for to FX from is this this less XXX we year, million rates year, for euro which have will impact for well XXX for the

Brian Ossenbeck

Okay.

year. Just Is Is as that $XX EBITDA? would would mentioned, you have other next million headwind savings. there some offsets to clarify And that from, that if things as the stay you a are cost takeaway? from – be they from and now, then currency on on is Clipper

Baris Oran

That Clipper, to improvement contracts currencies of the maturity the average year be going is that’s staying for for Clipper are and of opportunities. offset pound-dollar, correct. And continuous million XXX, synergies, $XX euro-dollar if XXX and our around XXX the by for and

Brian Ossenbeck

it. Appreciate details. those for Thanks Okay.

Operator

with next the Ari Our Credit your question. from with comes line Suisse. question proceed Please of Rosa

Ari Rosa

Hi. Good morning.

to context mentioned, industry come we of long you the to GXO standalone at wondering both is change seem is new relatively business this and but some in model downturns performed kind that I their maybe people is am give understanding I in performed new that with start, a as number macro from downturns. environment, time entity, slowdown? decline how entering a part how indicative specifically, outsourcing of trend likely to think on the broader for you in I guys as on the business of thinking first-time quarter. hesitancy have a business in if has time. you lumpy, will the around And saw this Maybe as obviously last be as slowdown some been am past of And I past business So, could potential about a maybe customers that XX% that, the XX% first are industry on has outsourcing to

Malcolm Wilson

that. Thanks for Yes.

Let in two me that ways. answer

wouldn’t sort first. our part just sales fact, the billion. statistic. around. moves reality $X in Let the is address over I mean pipeline latter quarter that of quarterly of the into your I me question anything closed read And We

the am like from really and same in because good, the the outsourcing numbers still customers. I a the or think they What his back line is seeing, contingent of is, pipeline up sales a it’s terms really of am I all fact, healthy seeing by And builds first-time business mean are populated point, that’s is in It’s I this projects existing billion. moving focus. over growing. brand-new I customers of coming situation environment. of at mix week $X.X What

no on people experience just pandemic, seeing lots much continuation less a And outsource. consider guess want highly efficient on of automation. and needed wonder create is And I it’s know-how so are nowadays you how big to I rely to guess to and more deciding technology has We to of when the people and environment. proven companies

read just statistics. wouldn’t quality I So, the into anything

there say the that. to landed quarter. on we that’s It’s So, is in more nothing just how

your how market. pass-through all quarter to about, point the our mean Next are costs, be number of etcetera, behave question will contracts very more a different does The Then again. well, a coming is the nature resilient. that our subdued business in

Our contracts governance. are all struck strong with the

have I customers, of And experienced, this fixed line, way just splits that bit bottom was little management on fact, business. where of the the in fact, in being very roof, stand resilient. in would corresponding the to if top free a very, do in would the former that’s you remember what to function we subdued So, the a that more reality the point you vividly slowed, through through the effects came am existing am one But intensely is, become find, that top actually – slow what the goes a line maybe focused fact, little exactly management describing remember in am stagnant, costs very of And would be a and our your very what base that the But bit. sure the lower. economy we we in customer is an up, view. line that, line a fact, projects the I everything of even goes European cash Norba [ph], acquisition resilient, really Bottom of saw and were less stabilize, And cost from I mean We go XXXX I market, the that is you the that, in XXXX. of brand-new saw. bit our through recover I if if in from business fees. Xbo

a So, working market. slowed of deal you it’s by. that with we – organization tend really But equipped is to kind surge to Nobody to an which in mixed was well find margins a in if wants are a happen. so

our of unique. particularly quite I and think Ari. not of much an do we even of And governance is I bit job it’s we hope think are why I we you we would But hope talk to, company environment. have that resilient resilience, were a predictability. slowdown. in a see that don’t think this if That’s I industry the contracting all really so you maybe much a very a thing Listen, process. good because contracts dynamic that background, about we gives we a in our so

answer. the length the for of Sorry,

Ari Rosa

No. really helpful That historical was terrific and context.

So, May. ask, question, second to Clipper closed so I wanted in just the acquisition

the buying read, it’s you wanted – at different after business get a Just of after closing versus your to when bit from obviously, a looking little early acquisition. length kind arm’s are

from acquiring business bit Has been get Has anything to it there expected? what been the wanted met anything maybe you? been expectations? divergent initial surprised you since that’s Just impressions little of as a kind that there

Malcolm Wilson

me Yes. myself, at it. formed this rest back of because the with very company here, having come Baris the I together deal of we in that the are Ari, on know sort let and obviously, of team the well heart

May. in deal the closed we So,

the body. And We of for No we That’s all to well. but expecting on now August hopefully government a a are would to September. a in call is where that that on Europe, going full zone. And is We end very a moment. bit are That’s soon, about, technically month review. regulatory for so. the in nobody listen, CMA at we little what big clearance separate where have have at do it’s regulatory hoped a issues us whole

be is, we to can What able are going the see it’s Baris suspect to end we as I mentioned, though do September. unfortunately, numbers. of So,

to We have are Clipper able management. discussion amounts also of with certain

this of have the that So, know looking all are to but all team. staying are done integration They we everybody, will of we sort doing long-term the kind mentioned, a process called deals thing a we of net absolutely out in And I a more year One all out, when if it’s to that very issue. think committed. bag, they have That’s to management that’s he start. management Baris call management ultimately, organizing synergies, and forward process was got the you what is is of are like, the are chance. bridge, senior decision, issue. my for that’s all this They

that best if that cognizant are customers GXO, CMA peak Clipper clearance our the mad season. is We peak, peak, the we September, of is when of like of end It’s make and different. in peak no happening season. are just It’s year all

for year. purposely So, Clipper We see that want busy period of that or the disrupt of Clipper synergies don’t in part we to customers. will big not anything last teams

good. our impression is overall, but – very, very, So very no,

you the gives Hope of some color going. commencing are the on it. to start We forward to process getting And you going from really January that beginning see those looking forward. synergies, will

Ari Rosa

for terrific. absolutely. so Yes, much That’s Thanks the time.

Operator

proceed line Our Bruce from with question. your Stifel. line Chan the comes next Please Bruce with is of Chan, your live. question

Bruce Chan

Yes.

just morning everyone But good about on here. for and thanks mute Sorry the then time. that,

follow-up to on Clipper. wanted Just

integration steps first a as commencement. of of And a color then what opportunity you in as little on the good synergies am those some you might for as the what not seeing I improvement? follow-up number kind are looking maybe for buckets but next of on highlight year? us be here, on synergies. process maybe the far the as far bit that gave detail margin offer you big in You But just terms could can timeline a

Malcolm Wilson

One things Sure, a the teams mean talk of start is, he synergies. Baris the be I will the synergies. say I continuity. January. detail. mean from I of commence can business together, through businesses from management business I to financial I when They important we you thing starting running say is synergies point, really Synergy cybersecurity, get-go. a putting management very lot will that very are identifying Bruce. way right are all database scale we all that of already But straightforward procurement that both up to process and best-in-class ask where and aspects great immediately. and job. the a and to start result. the will January get to power the buying give Yes. aspect say, I service, But best-in-class you to also, very, buying are numbers what and into we we kind doing from the covers mean that where It’s our course, successful right a you together already good are results. sum synergies integrate will give will I you of will Management two those will start I would very, put see engaged. put as mean, kicking process together, the But when very from it’s and we very important, two is really

to just the start color as quarter know little the will bit You we more deal, Maybe, but a synergies. Baris, I called the flavor if see can part of in to of kind them values you bit on one. of a them that. can talk of you out maybe the give

Baris Oran

anticipate million of of Clipper. by We cost years Malcolm. of roughly $XX first integrating the Sure, synergies the X end

procurement sciences, refurbishment into synergies the unable are synergies. us Clipper we which be new get business. center winning requirements, life that due all trading to Germany, company and well include and we looking are As presence into. to level sizable is and much But will will further you detail. in faster. This separate of And greater has help grow data consolidation, not repair including does The these highlighted, vertical revenue and

synergies, As far the help of the related as will in are the the modeling. year. synergies majority synergies timing that cost on months realized historically, the first of Hopefully, acquisition of to costs the side, your the XX

Bruce Chan

here, follow-up not, terrific. are putting particularly on if market? M&A helpful. quick that just are Are you. are this you And there you then about you fully service lines a on? a Thank bit? any And the That’s think you hold process, Very or through as still in verticals that Okay. focused

Malcolm Wilson

[indiscernible] GXO. that. teams I mean it’s big here. are very a acquisition Clearly, Bruce, we very But it’s – represents business our this will for integrate – end, It’s one Clipper need Malcolm they to and nevertheless, first was smoothly second – already management successfully. in the digest

In of industry. marketplace M&A consolidating M&A terms as in whole, market are a we a –

We growth a company. are

immense quarter, great this is Well, back said our return of where capital free throws always into business in to it as ton we off have last company a have seen We put use this you of own on that cash. our capital are is a invested. enjoying

say, we probably North America, market, doubt, in no of will have market. favorite the M&A to lots I is again opportunities. our So, look

very will businesses a really do don’t bring what We that diligent We scale. need benefit be into today. we

see, you turnover. not As can we are to a in buy needs extra business that

organically and attractive businesses verticals, customer will can go new be on bring signing great where We great to the are these new super contracts. a services, But growing at forward. us pace

Bruce Chan

helpful. Thanks very everyone. That’s

Malcolm Wilson

Thank you.

Operator

remarks. the time have back I questions. like Wilson hand for would closing Malcolm the all That over is for to call we to

Malcolm Wilson

well, and all that, this the asking questions for thanks all the for people morning. questions and I appreciate managing from very Doug, thanks call the Thanks great so Okay.

have We call. really enjoyed the

Really call. to side. much for it’s behalf and that few time, bit how my work a of it, from say over this been am the people way, a just words but want a are speaking on We all myself enjoyed kind I have XXX,XXX whole colleagues, a we business. in of that’s I great my and in

today rolled might managed First with sleeves the is is is it’s on a approach. and call, hands-on detected management. Everybody off company, this foremost, you really on have call who this

were We business. in the recently present in present all North High are We headquarters. American Point

our day, congratulations celebratory our really approach. a really think I business It’s teams.

We verticals, in are very its in of its really all the business. The across is doing all regions, company well.

of very proud are We very, that.

year-over-year. into business first organic earnings EBITDA fourth are including wins increasing cash of just That’s we stride. record our marking getting quarter is and well amount quarter a release our new our as every growth, flow our strong record year, performance. After of This consecutively as

you for call. that, that support will the And are the for everybody you joining GXO. close thanks Thank with to So, the giving you we again. call. Thank

Operator

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

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

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