GXO Logistics (GXO) 8 Nov 232023 Q3 Earnings call transcript

Company Profile

Participants

Malcolm Wilson	executive
Baris Oran	executive
Adrian Stoch	executive
Stephanie Benjamin Moore	analyst
Chris Wetherbee	analyst
Scott Schneeberger	analyst
Christyne McGarvey	analyst
Brian Ossenbeck	analyst
Amit Mehrotra	analyst
Jason Seidl	analyst

Call transcript

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Operator

Welcome to the GXO Third Quarter 2023 Earnings Conference Call and Webcast. My name is Darryl, 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 the company's guidance.

risks, company of making by results applicable involve number the within forward-looking their to call, factors statements. a meaning other those the securities of the differ this materially will cause projected certain be statements nature, that from During could and in actual forward-looking uncertainties laws, which,

the or SEC results forward-looking extent required is the contained materially on discussion factors by filings. forward-looking are as A The differ made of release of no to that the of to could to company's statements call this today, these law. in the update except any made company cause company's earnings obligation actual only statements, in has and

financial Unless rules financial measures applicable related measures as otherwise The are that earnings its also comparable the reported States the to company will defined to you company's during remind such and non-GAAP its be in believes on also it call. release dollars. incorporates non-GAAP SEC Reconciliations The appropriate on business United measures what of to contained in reported are stated, GAAP date guidance most trends the website. the may today call company refer are certain tables this under this results and financial assumptions. to all

for actual and and guidance. differ demand company fluctuations to factors It company's from exchange detailed its inflationary The demand pressures consumer the materially chain be labor rates, not filings economic is results the constraints, possible in with are global inherently in supply its predict therefore, foreign materially including conditions in may by for results and services, many market SEC. unpredictable affected and changes factors and global various spending, could and actually the

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

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

Malcolm Wilson

Oran, Financial GXO. and Chief Thank and our you it Stoch, Chief and you, have Adrian We're morning, in Darryl, strategy lead for me further everyone. a automation will growth appointed to to our and higher excited With Baris update Officer; him first newly are on for good how Automation Officer, GXO. today returns Greenwich our

Turning just directly to is billion, pleased report $X.X resilience of proving model, quarter. record of growing many that which to about the the to business X% X% you third how year-over-year, we beneficial growth. organic quarter, that of we're was talked our we're be demonstrating revenue this to times and We've delivered

While the flow. macro and environment performing is control, new business profits cash strongly where in areas have do wins, uncertain, we're those we free

updated Baris will you year guidance in on full more give moment. detail a just our

year. share in earnings adjusted and we our the grew Our strengths per The diluted adjusted million, diluted quarter part above adjusted of X a to acquisition and share guidance EBITDA this the third top earnings allows the $X.XX, Web On business. to our for per during results PFS EBITDA our key the both both raise coming the last weeks adjusted incremental of ago, closed of time us and year benefit of this demonstrate that, expectations. $XXX was few

consistent working growth. is long-term our that effectively First, EBITDA business adjusted and of exactly designed contractual it illustrates our managing margins We're aspects model deliver all it's to. drive as to

third optimize them proposition improve their and Customers quarter, of stronger to trends it the more This us We million closed structural to capital companies new acceleration of wins sales in first our of new drive as half for came our and clear ever the is shows they over nearly end the coming consumers. time. is working to which than ever, our operations $XXX improved to services value growth. driving for and outsourcing pipeline. demanding the that their look sales growing only an from our from us Second, their more are wins are productivity,

Farfetch, we've with Daikin, the their Carlsberg, began on in blue-chip needs. Versace. and included new customers to for a for in continue partnership Germany. customers exciting October, joined SodaStream an And Quality win that great fantastic brands the GXO These exceptional logistics These us Group, rely

GXO's leading We're We're weeks, e-commerce inventory the brand their to global to optimize just to for new of partner more provide contract thrilled ambitions long-term Chief into with across role how in for long-term leveraging customers exactly retail. a moment. created our with their on and project brand technologies. sporting both fully warehouse last enable entered why and exactly a in automated couple and by significant brand. a this expertise Also, this we've new a we this of costs the industry-leading we've It's positioning Officer. Automation detail Adrian will do growth

but $X.X for We've excited than what's we also more We're where ahead. point of this tracking our of year. of quarter, this last new billion not by secured ahead only were proud business XXXX, results

remains our around years. market GXO competitors. length X winning average Our strong contract is at share from

in new year-over-year are up XX% wins total quarter. second the even record setting quarter Our after contract our

and operating consumer and across remains diversified at evenly verticals. pipeline billion. around both It's our it's Our solid $X industrial distributed geographies across well

We of health by It verticals, PFS service book robust our PFS growth to great is premium the strengthens earlier brands deliver the Laurent from PFS U.S. its to growth this believe winning to bringing Yves XXX milestones great opportunity world's key of combination share. I PFS of We're Pandora, & new and premier contracts of of over in the is L'Oreal, the record and luxury a the grow provider continues a offerings. mentioned web, key to jewelry, like business Glossier. iconic fulfillment market quarter brands, track and e-commerce most and growth one GXO profitable including and U.S. goods. beauty, Mint. the with Gamble, acquisition based exposure excited Saint has that here serves by continue our the of Procter including

lastly, on team in on even this market causing build excitement the a Like the to of numerous week business people, palpable. On expertise grow to inclusion able We PFS note with momentum have personal is before basis celebrated leverage the with will an this and the existing awards was build satisfaction to PFS of for I'm efforts been why And our the PFS people we're GXO, and our level industry that that be proud business. incredible We'll won massive choice to the such employer complement global employee a and on to in addressable this for pleased vertical very working into create transaction constant Dallas and to being last, of recognized. our it's I'm delighted clear of make quarter. the GXO, note, team. caliber the and high our are the people that possible faster. best has workplace

positioned to we're e-commerce. summary, we're growth automation, outsourcing within that confident immense on capitalize potential and tailwinds industry and In our the continuing the of

over Now the over to our Baris to numbers you through and to I'll updated you. walk hand it guidance. Baris,

Baris Oran

morning, Thanks, everyone. Malcolm, and good

quarter, finally, adjusted conversion. sales delivered great flow new results, free and outstanding including This set of a cash EBITDA wins, resilient we strong

about revenue in As delivered organic. was $X.X billion growth, X% quarter. the of X% we year-over-year Malcolm mentioned, record which of represents This a

and performance areas stability statements quarters, highlighted of and all clearly impact top strong as continued credible in management we execution. the of reflect other macro customer business of Our line income the volumes reflects prior on our near-term our headwinds

was year-over-year income the operating EBITDA quarter. adjusted third up Our $XXX delivered of XX% in We million.

the have the model. margins Despite We in discipline, and productivities in result our of headwinds have headwind continued our XX of improved resilient sequentially EBITDA site our second are quarter, are delivering And driving efficiencies business This points while driven a points they since margin our pension strength level from operations these hedges. by basis as on consistent focus central we XX basis adjusted initiatives. increased. cost FX specifically is and

income also of $XX million shareholders per share attributable delivered and net diluted earnings of adjusted We $X.XX. to

$XXX in capital. collections and the would new and of ample by invested particularly levels generate strong cash XX%, our well business helped highlight I on was future. wins quarter, robust which these returns our our to for for at third continue of a year-over-year above to return Our once deployment methodical was business cash million highlight reinvest free record to capital like accelerating again flow, opportunity the the

of We XX% for are reduced our of as on to of full track We year. target adjusted deliver our approximately EBITDA cash September flow free to leverage conversion X.Xx XX. the net

We have due repayments XXXX. debt no in

PFS X.Xx. sheet after acquisition Web and of leverage and investment rock our with around the to of net we expect year end balance Our remains solid grade

of I'd The take PFS, talent On to colleagues. new to just moment of welcome phenomenal. our a strength this team is like

Malcolm growth for accelerated believe mentioned, deal. this positioning Plans We already are thrilled is to underway as to together continued our are have and this GXO accelerate growth. and completed we

PFS of approach our exemplifies to Our M&A. acquisition

track established bought companies our customers. our We selective a and at highly are a in PFS, enhance to very offerings opportunities record we growth choice of we double-digit attractive targets, in In and trajectory pursuing markets for a that existing our of key presence expand further bring new and valuation.

accretive includes we best share deploy or Going continue M&A. excess to will our the shareholders, buybacks of forward, either interest which our in cash

full to to Turning to are see guidance X%. that you'll year from full organic XXXX revising our X% X% year, we to revenue X%

the than resulting anticipated, cases sectors, seeing contrast and volume is This consumer-focused season, peak. For last in uncertain growth year, more are volume. are in many prioritizing are global a brands serving we pricing holiday this with we lower customer particularly in in over

projects year In addition, lower some customer volumes. seasonal Christmas not this because recur will pop-up of

to in impact growth one-off a is fourth This softer. quarter, our be causing organic the

our incremental to cash to PFS swings. helps free our to which our predictability due the contracts, and remained EBITDA our from year The structure performance full adjusted adjusted million. confidence of us of volume upgrade insulate benefit financial from EBITDA Our to million customer $XXX $XXX and flow guidance gives robust to acquisition the

We upgrade diluted to $X.XX are to earnings for also share pleased $X.XX. adjusted per our guidance to

target this well capital following our year XX% invested finally, conversion flow And about we free results full free are reiterating cash return flow as our approximately XX%. of quarter, on cash as target of our

underpinned million efficiently our and is more incremental new of their XXXX. This new providing to by our booked We of year-to-date. are that customers growth $XXX $XXX million of helping them incremental value for manage wins. revenue we in of businesses for booked continued services revenue million long-term to Looking XXXX nearly reflects the the got business current ahead, won $XXX environment. our business the We've

outsourcing. In time, our the business our and half They're addressable total new same flows throughout third were headway into continue profits the At we of more produce to market. cycle. making cash almost trillion the wins quarter, $X.X

cash our free margins conversion resilient Our are rock flow solid. and is

as customers rigorous well as GXO a capital serve cost continue to focus interest manage both contract with to will and governance, allocation on our shareholders. the our We of discipline

And our for most now named Chief and over Adrian. I'll as our of July. Officer pass Adrian, important to mic He'll growth automation first on value levers Automation creation, brief who you was our the Over strategy. to you, in one

Adrian Stoch

during been automation as existing and meeting some visits operations I years, around as and been Thanks, as some in of Baris. I'd last accelerate I've to well like role for I've Good at my our for more you division. moved role was Head Chief strategy. of decades. site everyone. over quarter. chain had working I and Consumer the Automation into we're morning, American differentiation to our I've supply our my while as put Today, going X Officer AI North of X in GXO how previous than texture pleasure

future drive already employees' the XX% XX%. less market global the our better about the customers unifying Today, agenda, automated experience. outcomes industry and By leader of of automation. average operations the our than will of technology in for our GXO shape revenue we from comes improve our chain is supply industry, versus

provide increased our year-over-year. of go-live X% ago every our The of amount outsized almost At and where accelerated from deploy from sites technology, site our revenue this by to footprint has of we've has tech, Additionally, XX% these our benefits adaptive increased overall across customers. today. XX% post a tech we this actively to year we deployment proportion the deployed

our As grow the market result, share deliver and average. group faster, XXX a increase points higher of basis we than margins

operations. We critical of are at inflection in warehouse a point the automation

Up what that made, solutions we have significant exciting. on been what's tasks until tuned are now, finely reliably of been operations phase The automation Because supply truly multiple existing repetitive, focus to the require tasks. are of this problem. and to includes and The vision address lifting. to automating that combined seamless integration our and free AI the is enable heavy critical focus today, ahead dynamic complex of solutions merely customers' can advancements has have next laborious more solve chain services be needs. to discrete problems and faster with up complex significantly more on will performed replacing This in value-added that manual workers is

to reduced Let's already of household In in into overall a several and XX%. retrofit and reduction technologies well which additional a role, deepened name a we life. cycle where is per transformed time, drove retailer, bring without major apparel integrated productivity, previous conducted our that performance, industry an site This unit question, completely improved safety the It for game changer this end-to-end for implemented customer average, cost our partnership. flow. warehouse the my we was above increased a

deploy my and mission are technology just the optimizes myriad to other this warehouse example, each process our successes our the of organization. of that unify across While paths. consumer specific efforts Part is core led like team there this

and accelerate lead that the deployment this of of and better embodiment This has create to which ultimately been to my CI practices, and will of margin We is will I'll philosophy continuous bring global operations automation. performance. standards experience now the cornerstone best improvement

number with globe across validate partnering innovators Xx the combined creation tremendously within increased in and resulting This step-up around their we we're solution a solutions In a increase of per successfully deployed the consumer division, ROI. stop. to traveled to in bot sites multiple productivity in robotic by value for with goods-to-person tandem, and guide AI significant customer the huge the barcodes

platforms staggering, partnering hardware are with and AI that needs. suitable meet identify alike vendors for we are unlocks to and most software warehouse our automation to opportunities customers' the The

have sectors we addition, mature industry. In to other been the adapt from first the solutions into logistics

storage financial in just that also include improved quality, a results agility The retrieval from that basis. I've is extremely needs it everything we and industry doing benefit are reliability, source taking drive the a electronics. customer's us developed for global for partner multiplier on increasingly adapted effect the example, of and described implemented compelling, For the but was customers makes high-precision This and solution to, high-volume, specific pharmaceutical they a is consumer operations of that originally we safety. workforce cycle so our turn secret times, an intersection that and there's the

In to $X.X the market share we updating on right you all in technologies will back and this prove our forward is look role to to My customers' of needs. you I grow to industry. identify, X% And our accelerate all this Malcolm. with trillion turn, hand in progress. that, I'll

Malcolm Wilson

with a acquisition. and have our strong Thanks, as wins as well great Adrian. pleased macro EBITDA predictable teams closed and against cash We're performance adjusted we've this our another contract softer and flow free substantial very quarter delivered

this result, a year. we've profit As third for our time guidance raised the

customers to Our more enable our mission cost remains run effectively. to and businesses their efficiently

we're and succeeding are market We also share. our growing

high fuel help on model, the our optimize drive capital best heightened and interest shareholders. to returns our bolster continue will operating growth we'll our automation our and our in of resiliency focus Our and allocate

the to to Darryl transition back Q&A. hand mic we'll that, and With

Operator

Our Instructions] come the has from Stephanie question Moore Jefferies. [Operator with of first line

Stephanie Benjamin Moore

get really change since hoping moderating the could what was last seeing growth I of of in of material to been we trends or I'd guidance the these to just understand you you a year? about your temporary for have quarter? since there. drive the kind us Or help some love kind first cut spoke such macro organic thoughts

Malcolm Wilson

Malcolm it's Stephanie, here.

more you big and Let picture first me give the then detail.

slight the going Netherlands, European doing look actually business, big seen recovery we okay. a well. and regions Spain countries, We've GXO working and Continental in, is when the that our France, So at so Italy,

some bottom America, here we actually and that's green And of North signs think the early in shoots. Our about probably close the to we quite think we're bottom. business, U.K.

So seeing. that's the kind we're of macro picture that

we're slower every softer this space, of trajectory. a consumer-related verticals they're consumer delivered good single technology, services, definitely work that's that actually, environment. it's countered interesting. across softening and We've in despite the -- doing quarter, They're in can For in the some a but by business. in, well, is that's last organic clearly region, We quite macro growth food see

many volume holiday And environment. of type We've If our of and evidence hearing we our holiday that putting activities of generally think customers not the are short-term season. approaching several of customers consequence also seen holding we're we've years. that's normalizing that to the QX, to think a see kind seen seasonal are expect about actually of ahead. of previous how inventory we themselves, warehousing choosing in that vis-a-vis they're looking to expecting on off that type shopping. price We the consumer see many what our of We're a levels pop-up focus

in They're should that's strong And great very against very, maybe long-term for contract up bargains contrast new it's as season $XXX a in X, $X call, very year-over-year. contracts XX% we quarter sales, a the million, of quarter fully that, sales, X the We billion. into worth mentioned on. strong -- off to looking and later around so life its very automated start though with

So we're that. pleased very, very about

the talking that, worth all it's do resiliency our we've often our where protecting that remain talked to remember pass-through see inflationary in have, model to the and of of been contract, we've it's softer trading, also fact, guidance profitability In the allowing just And us about that very areas pressures. about. we good. in contract the That's we see that you the

with it's $XXX helps new GXO, customers, I'm us of we in productivity, now transforming they're was outsourcing existing part a for the of you'll so benefiting and of It improve that customers later pleased new play call. operations half services. environment the have Adrian better of importantly, big macro, from And his and but that million, an roughly where them. they're coming first-time hope our from technologies really uncertain them to such We're from working mission, kind improve from to This I GXO benefiting demonstrate and thrive. remember how new their that, in hear him we help customers,

And of seeing nevertheless, the caught the environment. the broader of then That's thing a say, But have inflation. have consumer. equally of Wage is couple interesting a been just wages difficulty points. last long to it's It's estate. the up much really the would real summary I it's helping pretty of that And environment, a market. ago We're inflation really we're last the months hard in would as seeing the kind and much is not easier real X find point to we to moderated. moderated. having We're look estate in

all kind of these exiting see now, we year. go half recede, So as a the environment we that, as be seeing of of will next right impacts a QX, picture we we should one-off type now the think back to in growth we're of that and lot of right will first

Stephanie Benjamin Moore

I really the incremental appreciate all color.

and kind understand like on in a despite follow-up, the to for Just touched puts sounds little and bit FX of the the the was a growth. you and the organic raise takes, as year little of kind quick a bit cut It trying in I'm guidance this EBITDA worse.

So that's PFS that's by offset likely, but being the slightly acquisition.

this that maybe the underlying kind of what raise talk low end on core business. of still So to to be EBITDA able about the were guidance just drivers

Malcolm Wilson

on Baris me that. to comment let Stephanie, ask

Baris Oran

per these Malcolm. will expand, pension million QX, $XX were FX about you Sure, to headwinds, would quarter. our recall, as In excluding continue margin roughly and

company margin contract and delivering continue generate is in due our in strong FX we past, down, our volume moderate profits highlighted and QX even we on cash to and excluding the promises comes expansion, many We flows expect times governance. as this to the continue to when pension

contribution dollars in we Furthermore, low million from QX. will PFS single-digit have

versus that's those restructuring be of we to QX, will $XX start will our prior operating been more the be million headway contribute they year of have next the as into into We even going million into at QX lot The the next year. impact roughly a of helping incremental year, our and and about end profitability. getting $XX integration into in a year benefits getting

even deliver So in its well. strong delivering contracts we results. promises and will all, this are benefits volume environment, continue to all working in Productivity are

Operator

the Wetherbee next of come Chris Our Citigroup. line questions from with

Chris Wetherbee

last and Maybe the around picking that guidance. fourth on up quarter particularly question, the EBITDA

I EBITDA up of XQ the there's couple range a of lot third XQ. I from quarter, downside. I to think range the has but there's of the bookend seen on normal a factors and kind accelerate the both at years last think and here, seasonality play, know

be of seasonal of little a So not normal some could little the offsetting what good, talk this you that the seasonal little out? being finer talked would bit play would might about you maybe a bit potentially you how point are, bit have? a activity that And think you've sort about think great. I but be uplift as factors of quite that

Baris Oran

growth. first Chris, this mean, organic is Baris. I the is revenue

we are organic seen, now from we headwinds slower new of And QX, revenue facilities we reduced delivered to we X% into these coming and volume of you've see X% existing reduced pop-up facilities. have growth -- heading activities, As seeing do ramp-up but more X%. guidance importantly, QX, in from

balanced is pass-through. That's inflation this our pricing top with and business line. the on of and All wins by

margin that's the continue pensions, we to a uptick margins. in done. see benefits from benefit that we're coming And margin, we had, slight $XX steady headwind a providing deliver I $XX be expected going to we have our and we as million QX excluding integration the to million and be roughly and FX and into EBITDA of restructuring On side, projects productivity highlighted,

of of procurement outsourcing of number activities. span As initiatives this we our eliminated of control, the XX% serving a our reduced on span basically, control. a roughly layers side, person. in organization, you noncustomer of the We recall, nonoperational increased meaning report of That's the people including year, to staff, more definition noncore took

delivering in operation. would core just told in our is of us about cycle, see the in helping But structure, lower and down perform QX all how contract ago, you'll year go our we a are this operate through like environment. that these you would this a contracts volume of So results at our

Chris Wetherbee

is beginning maybe stable. but back incremental revenue to of remains then a opportunities business and organic new pipeline does appreciate decelerating, bit little stepping growth about XXXX, it that that think I appear And obviously, the color. relatively

are So the Do expect the think same incoming to up pace as awards we new start as the to is corner turn that? pressure out into any to accelerate? XXXX, signing of seeing you there interest from XXXX, the customers new contract in of we deceleration roughly business? going be some to terms about that Or can be economic on we

Malcolm Wilson

Chris, it's here. Malcolm

me question. some Let you color on that give

in as is the So What call, we increasing. in we seeing earlier fact, mentioned pipelines remained around are is $X actually pre-pipeline billion. our

So is customers. in. can increasing. us receiving from can brands. It brand-new from we're customers, It for pre-pipeline That's be where actually existing projects be new

sign. And year to our a I actual also the That a different business with well, is organization within process new we actually bodes improve close that's So what [indiscernible] we're pipeline the our function think, sales have actually into that to seeing for is from improving. ability also, And customers. our underway convert that's good ahead. the of works

see did momentary quarter record X, about we new kind A But business remember have making of I fact, was in couple ago, that, of signings. it of quarters customers to actually a decisions. from actually a hesitation

little our sales -- So kind it gone. reporting bit to we bit a just little disguised, but were hesitation. of of definitely That's was teams a

pipeline, our proportion of now long-term healthy pipeline, automation at not projects. I big good very a very it's and seeing projects -- think all that big We're

signed, on we I just call. can't do name, we've share that the sorry, deal next our we will billion hope $X this I'm mentioned, customer we but As

need healthy of for sort a of proportion 'XX. kind there's deals. So those of And of deals

as And that's or forward. pipeline is good we're given a it's nothing from So we change see feel the it going market us that right customer any seeing as progress base that, now. to we our

Operator

the from come Schneeberger questions line of Scott Oppenheimer Company. & next Our with

Scott Schneeberger

focus of discuss I'm you that combination to that of you for anticipating what's opportunities And are drew there really this? Good the Malcolm, the PFS going integration business. with everyone. for you web, the morning, attributes them to Are you on the in for look synergy any What going acquisitions. please are type duration a portfolio like see? to bit could you?

Malcolm Wilson

a very customer-based it's valuation. we've and attractive acquired super a at a great company listen, and Well, organization,

us allow to the going it's itself. So business to PFS accelerate

own business. able of PFS us to blue-chip going allow growth leverage will be a all is the our leverage very company. it's specialized to a have business. And on We that to they customer into scale more Web also the relationships double-digit global

it shows had M&A well very very we've strategy where from been think perspective. selective the we've that I an

talked what to enter good company good market us really area a strong, either new or allowing good about enter new management, to always GXO. a We've a for is into M&A us with allowing it's geographic Well, position verticals. into

roughly service revenues, year business this this So fourth since around have our quarter, million a of late $XXX adjusted in October. EBITDA equivalent of $XX business million we

verticals. in impact a coming limited but number it's fulfillment-type So XXXX, a really really attractive very high-touch with of specialized services in

and So prestige of kind goods. health and collectibles, jewelry luxury beauty,

Tiffany are they read I time the L'Oreal, Pandora. wow, get mean, just I incredible. customers, mean, Shiseido, every the and Chanel, I I of some excited And customers.

meetings team then we also and thing the of the management, and of a Several We myself, our were with North own entire business is Carolina, say team, the team. one our I'd And the week. joined PFS really down it's teams. several great super Baris having last own joined company, in down in of Dallas other met management the

I'm activities North do about of America. they and We're footprint, opportunity deal. small ahead of the outside what's top ever business this the of which American even very really North and synergy the though It's absolute the great storm. business, just I'm core is have a growing lying excited. so line the really excited on

Scott Schneeberger

XX Should think of And M&A pipeline that's lot we Malcolm, what Is is about should quantifiable -- you'd size clipper right now? this. similar a or on like is maybe ripe. update how question this Or how months? coming period are to a on integration digestion to any And -- that's you the thinking as the over going just be progress or there there a see share. that, we on more side about maybe

Malcolm Wilson

me over Yes. on cover to those topics. you Baris to Scott, hand let

Baris Oran

Sure.

to proposition rates growing and acquired a end attractive at double-digit is an business have We of mean the valuation. -- with all and great great fantastic consumer. I this customers

of of is do. Scott, to the we So would type M&A this like more

We and Germany, America the different geographies. We're We'll right always is a these have a but this value wait buyback. core in creating into a in North strong our in now pipe of locations, own -- through are interested range against M&A growing company of interesting. in our at We'll of shareholders. verticals for investing be looking quite

very is valuation us. is these for growing So under important for for important us. faster enterprises Opportunities GXO

the ways PFS even after can acquisition, fact of geographies. into PFS we accelerate In new number with the already on we a growth started working of

We are very excited.

Malcolm Wilson

And Scott, off. to finish just

On for And into be moving facility the it's the now, talked German we recently footprint, put it's big now integration business is a how Clipper forward. a at on the really, on for call we Germany, when first We with in opened time that remember, site. used the group We've a and market business very us, where Dormagen. the the that. I first The to that state-of-the-art we're of our incredibly Clipper in if us in small. that has of going capitalizing wins gave that's Clippers as foothold we're GXO, And earlier pleased really you together and quality aspect, a frank, completed. been success big we're broadly one we're context mean,

facilities in We've GXO just business service And we've launched our in other Germany. got the plan.

should with a that is us. also success on deal M&As, of never for of great -- but also all been execution M&A successful very the integration. the lose it's sight fact a good secret the that management we really, So And

move successful And sure that the months. team very with few equally, the PFS will be integration we that next I'm combined over as a

Operator

Stanley. Shanker has with Our Ravi line the from next Morgan come of question

Christyne McGarvey

could McGarvey think just Christyne a strategy, on for differed couple focus maybe I or cost automation start hoping think from little much and bit here? little acquisition front, revenue Adrian. call, and is look automation really years parse if is the forward. want about of And see of the history on a et little the bit role here, the and over as GXO was you really you that's of first robotics, one at how And appreciated strategy customer more. I for the you out talk ask you Ravi. the of your strategy the This and could digging on comments versus a switch maybe next gears the how forward to this on for how in I I maybe we of cetera? as but evolution the you look bit

Malcolm Wilson

it's here. Christyne, Malcolm

before me point Adrian. over handing Let say a just short

years. So in Adrian a at forefront. really mentioned business he's earlier, our couple He's the of been been

consistent improvement results. That's our leaders right that that customers One out the in in of is right North in importantly, way period very and he practical of of in to business solution. he time. important automation key our productivity for delivered figuring our American GXO brings what efficiency, terms of the And window, over because a use

good stepped undertook very this reinforcement that when remember into space. margins, our really continues across leader warehousing deployment we're Day, of allow his we business, retention. for we Investor customer a to the is environment It's it the a to comes he tech the to pleased for us role, accelerating new So be of absolutely mission. -- to when have our back good January automating our about strategy his role to It

you. to the pleased very in Adrian, role. have to over So Adrian

Adrian Stoch

our strategy the I to the I just of per solutions address problems philosophy to deliver automation share don't it I through of of design ROI. I se. my to opportunity the robots automation. My to value and when the customers Before about solve on part look that at operational lens want it, perspective approach focused the how complex is best the and comes how question bring

that all acquisition? answer margin? about it about to answer it of The the is the Is question, it agenda, your customer so me specifically is Is gets above. about Christyne, is automation revenue? And

we even we've headwinds proven What thesis with previous macro in GXO it after go saw is not the and sites differentiation additional efficiencies. to integrate the is QX, then already further implement is seen I in a site using on automation of role multiple our bring to launching impact in times my positive positive. and automated, technologies the And be our tech the that with only where but are and live that adaptive highly

you all our the So items is it and in interest of X mentioned. differentiation, the is it of

Christyne McGarvey

of round some kind like just one helpful. thing a to really M&A ask on Maybe out focus. conversation, the the That's to of I'd strategic

you last you've into how which that forward, As go-forward years forward? you and strategy M&A in think could Or think we opportunities pick of you we've of from broadly spin should forward is look going feel pace might up just GXO that Do a basis? fitting do from what of the it seen? couple the seen it's you the of you you a post more going think is like on think acquisitions expect kind the Just do function pace you at operate the the you of curious been pace?

Baris Oran

Baris. is This

It depends have, that. much the we within first. grade how investment staying room Let balance we that's cash me sheet take generation the on have, basically

more size own execution it opportunity determine the and bite-size the how company. transaction of set. the mindful environment Those always to Secondly, option And in transformation the our we and us. of an stock. in pace is for that we're is investing third, like our M&A our into transaction, compare does looking M&A are capability-enhancing, in will instead the stock enhancing, stock M&A But geography today, investing --

Operator

Our JPMorgan. of line the next come Ossenbeck with Brian questions from

Brian Ossenbeck

can you sounds EBITDA back ask, to it It had of like reasons Wanted some and on but was the up just it if in come here. commentary, follow PFS the I small. think like the update and impact, for bigger upgrade maybe fairly sounded a Baris

margin better XXX that market the increase on upside you briefly accelerates that just I value-added get and And maybe just over wanted going then addressable that's about you as here. actually know touched think for helps do it driving services? factor a the EBITDA but little basis you the was point Or see now, when if higher So tap faster? time for automation, you I growth to maybe think bit the see a you for Adrian,

Baris Oran

Baris is here. this Brian,

of despite steady business And a our credit, delivering FX expectation the model. shows On resiliency single-digit improving of business PFS slightly headwinds, of and It pension millions the basically dollars. QX, contribution was low this and in EBITDA excluding volume margin pension. headwinds is FX and

strong But again model we are into is. components. those business yet are how this So proving looking the

operating profits headwinds, structure. headwinds volume in number projects, and small the PFS our but resiliency all QX two, with pension together one, productivity contribution; against contract operating and increased number Adrian? and put of Our FX

Adrian Stoch

in do specific of I So do further terms opportunity? a a also terms the acceleration give XXX growth margin basis from improvement. example. both but I I'll perspective, points of in and see

significant close in and by AI on benefits still an been phase, a in So but we've X%. able more factor of pilot to from planning more being predictive a we're where the seeing to piloted to program we respect recently with labor site precise be

to margins ability so improve of and reason optimistic our efficiencies many why AI our very these, help successful automation have I when the there's example we because is And for the on I'm mentioning. and pilot, just and am one a

We have the then it standardize global to to our X,XXX to close and opportunity sites take sites.

do So see growth improvement it margin a absolutely, a I and both level. as lever

Brian Ossenbeck

operations. more X level in you site the for Maybe terms of

softer area performance has of there here in a an backdrop. improved think been I

some more in Maybe fast an last So how a this more opportunity to you couple growth the mentioned was give progressing. that's that of fill of bit go-live the some of over pretty in of color terms post of implementations. the little Is years.

this on after this ramps go so when collecting more the site more in of back future potentially fact. you're opportunity we so actually of should going that in and up, Or an the outsized margin And is can uplift sort about add now? you what kind think a

Malcolm Wilson

a Yes, been and technology year-over-year, the program. Slide very that XX% this we've by describes our how we've active adaptive tech. And it significant on adaptive this it Brian. tech increased XX, through In number the we been predominantly opportunity, on is call deck, actually program units of has

and robots, space the the And the seen wearable through ROI best adaptive for to There remit partially always and tech those standardize site in in site is really is part of is program. improvement to to highly continuous where matter take is technology, other the tech, automated practices manual, collaborative formalize sites. vision doesn't so some it whether my our And -- existing automated. opportunity we've implementations of where examples

significant. and as compelling So very opportunity I extremely see this

Operator

Amit from come questions Deutsche next the of Mehrotra line Our Bank. with

Amit Mehrotra

double-click I guess growth for want question, on beginning my at the the that organic of first call. to discussion I

highest want including So that realized basically is think quarter, to the whenever growth better be which you little bit organic Sainsbury being Malcolm, your -- contract, of X the in understand but the won is bunch right contracts, fourth going to a I I a now. was

business obviously, significantly, base are that, either the volume cross or because currents of churn. is the So declining

up, we're sense trying if I to to churn intuitively the would just going And make in. churn I'm that that's that in is would so know me or don't understand, not. But up environment true it go

little If to in you can us help -- trying bit the of of mind from think what's about context churn. I'm the the a get customer

Malcolm Wilson

Malcolm. it's Amit,

mainly it's So a volume issue.

broad-brush, customers is facets X those choosing But not So our we and every discount. But a to consumer-related if are churn as think our is with of definitely, universal we're seeing quarters. what previous lot businesses, customer. on churn, a pretty business about you of consumer-related single is it's consistent can on say our not

And with past disruption, generally starting inventory chain choosing the with can manufacturing problems. So over of But through levels aspects inventories a out. couple part different supply quarters and is levels over of the say the we better now starting can choosing discount as see out being the not few elevated starting sell a normalized probably past at result are maybe normalized we of to years necessarily basically have of with customers price. they're that inventory pandemic, a product to

good. that, Now that's for

they're in well. actually travels numbers more our see obviously, many a in But organizations of it's that we furring warehouses. the of volume aspect and our through You business, the work

it's a Quarter probably X, it. always to important that's the important. quarter. that all point bit numbers. quarter focused going And X be X We're very in quarter is little for this it's is a most So It on our seeing significant traditionally, compounded quarter our you're very customers. by

of holiday earlier, in that. maybe basically the the the later that evidence hope to season I we're end around, mentioned putting occur. consumer off themselves, But again, the implementing guess in volume time any not signs the I discounting closer of echo And They're I warehouses, think might the to the some shopping. quarter. those will historically, putting because off smaller there's of that it with year that in several be happened last typically, thing definitely just seeing extra -- we last the This they're overflow that the of volumes starting

important. it's comment So really the Maybe numbers on for of backdrop we're just you, Baris on ask that's Amit, the I seeing. because to fine that detail kind can the

Amit Mehrotra

Before could just if I ask a question.

issue, to to for year than less ask there's it's growth churn like cyclical I'm Baris me worries issue. -- because wanted about a a So going it next which loop seems because I in,

like guys So won But for next that's to kind churn have about year, you is all think a as we up underlying tallies think growth, to flat. of volume business X% fine. and I X% lot of assuming it

we're that deal can assumption? the next organic won to we year, get mid high at single So business Is digits bottom right you growth given of back now? and in like the new that the to just dynamic fair a kind

Malcolm Wilson

I mean been incredibly strong. earlier, mentioned as new I it's business,

signed outsourcing. on is that million 'XX year landing business of that good stat is nice $XXX be going just at of is that landing -- $XXX in the million last million, this of $XXX in broadly million coming just quarter, in of from and very $XXX look first-time to is this and that XX% year, $XXX If the another the XXXX, you new

that's of rolling So all forward.

for the all Everything to through expansion, customers their from In for all we're next right week, next of that will starting of guess absolutely when of now, we had management budgeting us of that. meetings. take literally, year, forecast products. You're We're I the last year, cycle in cycle. about this teams in goes the the present plans your plans we're year. And budgeting collecting for that, the observation. right lots think the changing information end we've into

critical for true our a us to place right just for for this about the thinking business, process months, It's us bring on couple customers. allows ahead. our really, guide all focused that bit soon so year be into last bottom-up then now the a that, we're It's of to

Amit Mehrotra

automation. I'm Adrian talk Yes. around That's one, I I could. know fair. wanted And to if to I then allotment, one for my but over the sneaky

So was in of compelling Adrian, lot buzzwords terms in there of are everything automation said and a there you and AI. really

side into I is actually analytical of on model. kind means we've problem that the what think had the converting the that it for

had and kind you you automation, new position direct as of I'm I've for the Automation X. is but amount evidence you move labor this that that Officer, problem allow lot so because take And a of what has to KPIs of of on anecdotal Chief the the a costs, are trying of huge those to company there's still balance

every role, from success So are think new this how about judging quarter, as month, it perspective the a like we too? follow maybe every you is, whatever you KPI that can

Adrian Stoch

for the Amit, question. thanks

X to it answer different I'm going categories. in So

second or financial. operational around and is metrics, strategic tactical the is and more first The

at global out the from a course, we're a measure look leverage scenarios best the an more and those case able roll the more to establish perspective. going sites, to we're from because, perspective, get as we of that of we're adaptive and the amount redeploying success tech operational best So of practices other to them that then

extent expansion. of tech the adaptive So

Secondly, tactically be terms course, the very the plans of execution of respect of implementations. measure we'll will to regions in each targeting of with what

that will from financial metrics and we and but more X be be derived perspective, about. tactical the automated we'll think I a primary will automation from the Those indicators, revenue is margin the audience operation. so And talking strategic financial that this be on the the around get focused from what's relevant more for which

Operator

Cowen. questions from of Seidl Jason TD the come line next Our with

Jason Seidl

wanted a for 'XX. about your outlook little bit I touch to

it? America should before shoots mentioned the I coming your at How second late saw since half half. think a runs that should throughout green you are maybe in you How that North one year? of first Europe hitting maybe the that you Europe, assume geographies turnaround mentioned then we and looking in you be in

Baris Oran

volume you number slower warehouses Christmas-related lastly, X% XXXX them is to organic they reduced volume X% QX. the heading QX, middle about seeing X first volume elements QX, We're of which It's X% about activities, seasonal are We facilities, Let these is me is some not walk QX pop-up X% X% of impact, it facilities, impact. you put components, implies which operating. X% have for into are when but to impact range to new from in from the well. seeing a you headwinds. And of environment, because about is been right X% our the existing see now as ramp-up impact. more from growth growth reduced flat delivered And current through in impacts XXXX, the growth we we're one-off for X% immune

comes balanced to QX. pass-throughs, pass-throughs All of flattish in and growth business to this inflation pricing our X% is roughly making have headwind in our we that is our wins business X% with that

the see start Now probably volumes the XXXX, has start looking banked already contract business to improving goods, even year environment, $XXX into but revenue wins. the subdued acceleration remain at in QX. get U.S. million Customers and in due over will revenues growth into half will you We throughout likely time. the back from of a gradual year on won and that and when XXXX, expect of with large our first win a incremental contract look into you we sporting increase XX-year the contract to in

we give we rate highlighted, of this our about initiatives we is continue get year margins steady and XXXX. $XX benefit. into to $XX us hold during a million to million, from are which expect And productivity to this ending support time, about going we million $XX Remember, run

into wins of about second improvement of nature. a some in in year half and more half, QX activity these lot talking next seasonal So first the supporting you're new into headwinds are

Jason Seidl

the little over a to bit AI the it. at part conversion I A was me pre-pipeline those of here I in lot sales increased AI rates, of do a wanted much had could customers discussed questions. it. actually turn Do bit use they about improve the conversion could And of on when with an AI. how on the pre you How But sort and think the little increased it to some impact as future? much to your think it previous marketing look on rates in rates pipeline? Let the diversion you a mentioned talk is Adrian. pre-pipeline have

Malcolm Wilson

routing, can our definitely think AI planning, precise AI there's the our there's to wait to enterprise other also AI customers very us to used around we've across but compelling to do been to metrics example pursuit differentiate I with I our not more example us they're myriad for. benefit. mentioned times and and that the where examples ESG improve where I reason in in which labor used optimize is make to a has that AI for the But gave one customers Yes, of our robotic important transportation travel only times what's able financial another what has in looking pre-pipe pipeline. we've and fantastic believe

be is customers with that success stories to our going sharing yes, the use cases do what it customers of mean to very our in big in these So in can I believe it. pursuits, and a discussions part and

Jason Seidl

So you expect conversion of moving pre-pipeline would forward, to increase? the the rates

Malcolm Wilson

hope yes. is and intention, That the

Operator

Thank have Mr. to is we closing that hand you. like back gentlemen, Ladies to the today. over I'd time Wilson for any and remarks. all the call questions for

Malcolm Wilson

every and delivered hosting a results pleased our we're for wins, deliver call this Darryl, profitability quarter into again. flows per adjusted strong We and our our model, cash very continue of We've raising resilience and business deep be diluted to of free web, XXXX team that. upgraded strong we our a underlying the Set you, EBITDA macro, share from Thank PFS thanks of acquisition against recent guidance account benefit our and no story. third softer and appreciate incremental robust We've today. guidance really to taking earnings the a new growth adjusted secular and operating expertise the the business quarter.

you wish thank With your rest you. I'd the and end. bring call for an a the like attendance. to We'll of to that, Thank everybody great day,

Operator

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

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

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