GXO - Earnings call 4 2023 | GXO Logistics, Inc.

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Operator

Welcome to the GXO Fourth Quarter and Full Year 2023 Earnings Conference Call and Webcast. My name is Darryl, and I'll be your operator for today's call. Later, we will conduct a question-and-answer session. [Operator Instructions]. Please note that this conference is being recorded.

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

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

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GAAP measures tables Reconciliations contained are financial financial call stated, of website. company's such on related United in all non-GAAP most its to in on dollars. Unless States measures release the are this reported the otherwise are earnings and results comparable reported the

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

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

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

Malcolm Wilson

Darryl, With Stoch, Automation everyone. quarter are you, Adrian me us XXXX Officer; good Financial morning, and Chief today earnings Chief appreciate call. our fourth I and our joining our you Thank in Greenwich and Oran, Baris Officer. full year for

We a stellar and annualized fulfillment year, EBITDA the free growth. our to year of adjusted high-growth business was new a billion XXXX year. customers a for record for delivering into of deployed record operate GXO. XX% $X more GXO adjusted we We through that We raised efficiently, million the of amount our PFS, expectations positioning cash verticals. converted full acquired for a EBITDA We continued flow. signed automation helping premier in wins $XXX provider

of $XXX line we delivered our managing for this X,XXX peak partnered generated others. some We For for handled with companies GXO in the volumes from benefited quarter XXXX, fourth expectations. revenue million, EBITDA $X.X XX a and billion, we quarter while operate. adjusted record balanced countries of where softer we We of our with over across portfolio

of X%, XXXX, year $X.X organic. generated full billion growing X% revenue, which the For we was of

the a As you'll million was million. guidance range recall, $XXX EBITDA $XXX our for to initial adjusted year of

EBITDA the We healthy our that at to a $XX of we coming are million year by midpoint million. say guidance full proud with $XXX adjusted beat in

about solutions. for new GXO $X to opportunity. $XXX as look of of XX% Unilever. make we which in-house, $XXX XX% the years volumes enough. to a of group billion wins and PepsiCo the win is huge of XXXX, spin, the Kellogg's, talked growth later, our our LVMH, tremendous of of wins, GXO's XXXX about partnerships diverse about about customers presenting annualized from expansions including business. new $X came total customers billion from can't up emphasize customers, During to we a handled outsourcing At business X their closed market year, strategic with billion the blue-chip billion significant in ability new with in business this speaks and a a a I superior signing demand time addressable in point short Only change Nike,

on deployed set technologies, of highly automation humanoids, record including which some few into and side X robots and AI-powered in We we're of exciting automated a I'll volume Adrian our moments. update amount ask at cutting-edge trialing to records and operations all-time our you a very

automated in market robotics automation And is to continues our verticals GXO and expertise our for we've set apart. Our in where customers. share higher

for to us lower enable cost service and solutions customers. automated Our our improve

our warehouses are trajectory. our the is We of growth area this critical creating leadership of and long-term the a in part future,

PFS, of growing consumer results gained in business excellent brands. experience had over a in portfolio for the and that acquisition the iconic world's the a XXX amazing differentiated valued trading to of our of partner and Through looking we've is PFS an achieve brands fourth beauty is resilient markets. most quarter. This a luxury

on focused growth. supercharging we're Now PFS's

For example, global country was the in scale American Glossier expansion our with and product PFS GXO. a of of North relationship one strong recent the

Turning to will a issued to a EBITDA behind that positive guidance trends our $XXX upon the XXXX. year just of organic our I'd the seeing with million outlook few touch full projections, indicate to million for to cover for growth X% trajectory growth like adjusted financial we're Baris but of ahead. this X% $XXX year, we've detail

to wins navigate moment that billion of chain the of of is help their I $X Customers XX% a activities ago outsourced. our complexities chain sales to supply that about new increasingly were operations. supply First, being pace the XXXX were outsourcing of them noted in accelerating. turning GXO are

and for return reverse Second increasing need the logistics. is

as both high their customers logistics represents in to single-digit the us XXXX reverse percentage as GXO's existing faster asking manage a part grew Our of supply increasingly critical revenues chain. are and help and a this whole them of group than new

our for to use greater And efficiency. In their guidance demand pronounced for the the our improve most the service customers third our how and to conversation throughout costs is running commercial nearly on through perhaps and chains. automation lower every are asking supply trend discussions

more on objectives market. and uniquely these capture leader logistics total to the positioned As even of in automation, our deliver addressable we're

We are commercial for role meet of Richard to order services. that operations, Head Chief demand Revenue serve our we've simultaneously of huge to Cawston, continuing On our to in our a appointed created European strategy accelerating and note, sharpen newly in Officer. the

globally and customers Our more them and demanding accelerating are to more support adapting our on we're services, organization network trend. capitalize this and

is our what's business, with to on down a share doubling new sound update growing incredible on all level which also site on GXO our We're delivering are Adrian winning services you and to leadership improve our moment. productivity, automation in firing cylinders a for ahead. best-in-class vision customers. will We

guidance. I'll Baris, to with Baris to that, you you. financials our And hand through you walk over over to and

Baris Oran

Good morning, everyone.

As XXXX for a invested growth grew return our converted an delivered XX%. free We year more was our income than of flow. performance XX% out, maintained of grew cash a Malcolm Revenues X%, operating on capital GXO. net environment laid and and income operating XX% XX%, through in target lower remarkable adjusted above margin grew strong EBITDA

to details. Turning

billion, generated of For delivered the revenue XXXX, million. adjusted $XXX growing of We X%. year full EBITDA $X.X of we

points also due Our FX. XX headwind overcoming approximately resilient, adjusted margins a and were basis pensions effect to of EBITDA the net of

In $XXX full we of million, income million million. as XXXX income million, in EBITDA year-over-year. from revenue XXXX. fourth adjusted was well for $X.X generated $XXX the delivered year Our the up XX% as $XXX of up operating quarter, of $XXX billion We net

new set billion As in a mentioned, of XXXX. the Malcolm in years. won quarter signed $X of contracts the fourth well business X of And all-time we new above average length record

XX% year-over-year $XX Our XXXX. was fourth quarter million, growing and million, operating net $XX million from $XX income up was income in

capital target. XX% once was Our well operating return above on invested our at again

all free cash flow. In XXXX, we on surpassed expectations

on sharpened investments have greatest and our we focus our customers. capital for services allocated CapEx that From We a returns effectiveness. to technologies drive have perspective,

high stellar achieved GXO. capital cash returns for working the compound drives On side, of which all collection, we

As also our this a million. full which of flow XX%. ahead year quarter, that adjusted $XXX very actions, we result am of ahead delivered of the we expect our to in free of more fourth significantly than taking in was outstanding XXXX, target. to converted million We be an target the $XXX pleased cash EBITDA, these of XX% I of

net million X.Xx at the PFS. the down the leverage net financing our of $XXX that from beginning ahead at lowered start which target XXXX acquisition includes of X.Xx, set our we We of levels the to of XXXX. Operationally, leverage we are of

solid investment Our remains grade. balance and sheet rock

are from S&P, We have ability for meet to and the significant Fitch innovation no received that in illustrates rating both Moody's debt XXXX, due upgrades the have outlook to and exceptional GXO's demand. XXXX. and in credit This need market coming we in pleased

turning Now our guidance. to

growth of organic year X%. growth sequential we to full acceleration throughout a XXXX, the deliver We of the to For anticipate X% year. expect

upward that input early the an in bottom. was growth on trend. sequential fourth first believe the from the we Based results quarter organic Our trading our our quarter indicate January customers, shows

are as several as our We we brands wins throughout in the aerospace new on full LVMH, business significant first, Mars and have industrial factors: including with growth and as basing ramping XXXX, the year notable starts up following verticals, projections Sainsbury's. well such

fully are Hence, throughout that the these slightly highly longer up to ramp of the take implement. automated year. Some sites

growth very we second year-on-year that while get customers verticals throughout XXXX our through progress are the of half softer many easier the comparisons Second, as Third, strongly, year, of of volumes performing several higher in sequentially are our consumer significantly saw the the year. expecting

million cash XXXX. to end We EBITDA reiterate, Xx our the also EBITDA. into $XXX trajectory to expect deliver This to flow, adjusted to by conversion free of And points $XXX EBITDA cash convert expect of long-term debt to target. above XX% approximately we to of XX% net our adjusted to million XX%

And billion With are incremental nearly live through XXXX XX% the XXXX booked very see we we already for stage we of this will trajectory. additional excited higher Roughly, XXXX. revenue than revenue All business our in XXXX. half accelerate last year. in our of taken, $X go already at won long-term expect growth about year, $XXX million revenue to incremental new

great to continues and compound capital. returns on GXO drive

invested is significantly XX%. Our evolved capital operating return on

unprecedented balance This taking this strategy. sheet flexibility generated to to have with We year an leverage X.Xx. disciplined us cash amount M&A the provides continue while flow of our our

create across that, focus are automation contracts into progress our automation update outlook. that to be getting brands Adrian. more Over proving over we the you to our to capital more and value it the customers, on And is we global primary While I'll and to organic on allocate delighted Adrian with able world. hand growth, longer, to our are to

Adrian Stoch

everyone. wins new generate with in revenue GXO blue We automated XXXX from morning, highly half our for global Good was contracts year long-term $X Baris. billion of a chips automated won to Thanks, business operations. expected of multiple standout XXXX in over are and automation.

of to XX% range units XX% XX% fourth We are trialed as delivering from revenue including this increasing on total increasing to solutions about of and broad our our hardware long-term and operations, autonomous the year-over-year contribution of entrenched position We of from new warehouse major was our year-over-year. has leadership software automation promise vehicles. AI-powered further A and humanoids, robotics by which technology automated quarter. our a risen

we As are future. Malcolm warehouses noted, of creating the the

talking looking their for ways about how efficiency customers company chain productive problems. resilient more complex supply to more We're Every every to solve and make operations with is with day goods fulfillment today to and tomorrow. their move

operations. is advantage our to efficiency site life their competitive helping customers in Our bring

model. for on their needs automation and experience Customers' business differ based

for pride automation. the for to to We and partner best-in-class new new over XXXX, Someone any need transformational through solutions operation in invest an XX% need be the many wins will automated contract. operations existing large-scale for Of being our tailored to a able meet approximately billion customer take with on outsourcing are results. first ourselves time. Others their $X in

that of typically we we continuous annual in our X% half X% addition, new will for of adaptive tech over from to manual programs. billion rates see expect This result wins In conversion through automated to revenue improvement modular of own GXO. means $X

a the capacity appropriate same-day wins One solution integrated contract with a technologies sports for to and plan. is global the of units completely the fulfillment enable X to the flow million customer's of biggest week. a provide them selected per European This through to brand, It growth XX-year designed is with warehouse. end-to-end up we've key where

automation the GXO to complex in Our driver deep level our for and in this the contract success experience and domain continues primary of expertise with market. differentiate this winning was

the with more industry brands type a point global pursuing inflection transformation. an whole nearing of forward, is Looking more this and as

automated large-scale significantly of average, We have On longer a $X.X large-scale nearly duration. these billion carry sales contract opportunities. automations

Our profitable. automation levels, margins stickier portfolio than above points basis more growth our delivers also more and our XXX group business making

solution retrofitting in thresholds, in level the and new our mature it innovations to then both sales, our deploy momentum heavily improve performance is productivity. driving we team regularly to addition if In our automated across and involved We meets new site pilot network. technologies

total which saw In our requiring that we included out tick a XXX errors. in points. XXXX, minimizes margin warehouse we optimizes highly operations across rolled investment. our this an basis XX% It's of expansion operations without that validation increased technology order automation efficient doubling by average implemented of units capital and can The significant Vision tech, where numerous verticals be

the identifying applications productivity also increase of [ our and that and out practical trialed to application approximately excited and the dozens for [ sites Pick We're a We're Pick AI actively in XX%, delivered solution of have existing ] for we're in productivity successfully workforce XXXX. rolling ] operations management. now solutions

procurement We're position, beginning scale price a continues various in global grow day. benefiting solutions and expanding is categories. already to unrivaled GXO list meaningful savings. technology that to our the reductions achieve rapidly in industry given has need and Finally, to leadership ecosystem our built for our significant from we're every

and reach major scale materially of supply Our in I'll impact beyond tomorrow. role and of with shaped lies to to back building ahead landscape the Malcolm. that, chain and And warehouse you, excited the we're pass automation the as what GXO's have

Malcolm Wilson

that Thanks, in business that flow strong and margins, billion customers' expanded our through won our competition new automation year was model for the high-return great business resilient the Adrian. we growth of investment our and increasing outsourcing. the meets with EBITDA cash surpassed adjusted with We proved demand expectations. gap our $X This that

the employees we our close, XXXX. their that delivered a throughout tremendous with for Before engine and peak and hard work great want to performance commitment continued thank I our for during truly GXO. Their to year values

Looking this we're forward beyond, momentum. to XXXX building and

customers their Our stickiness growth global more with is efficient. and operations automation to driving make profitable leadership looking

a won driven new accelerate we wins We of expect to with year our ahead for where by tracking were growth XX% XXXX incremental revenue nearly ago.

about very strong generating on and growth to excited are customers returns our We we for focus as best solutions the possible trajectory our delivering shareholders. our

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

Operator

moment, [Operator pull while your Instructions] we One for questions. please,

come questions you line with Stephanie Jefferies. check Moore can please. Stephanie, if the first from of Our muted, your

you are us? to Stephanie, hear able

Stephanie Benjamin Moore

sorry, hear I'm can Sorry you about that. now? me

Operator

We you. can hear

Stephanie Benjamin Moore

could that XXXX XXXX. and verticals Baris, volumes for growth comp thank so you're if maybe much discuss confidence across the you what for you But the seeing and give and of that kind from geographies can revenue you results XQ? early outlook and accelerate

Malcolm Wilson

It's Malcolm here.

Let me cover some points on that.

landscape but into shoots. some I our U.K. -- in think we're days, different business recovery starting business, North broad So Green seeing through and Pleasingly, business. if Continental well. where see American we've a and It's early right XXXX. that macro similar we're year, now in last actually business. always that's recovered moved seeing we GX seeing Europe middle look of -- trends as to we've It definitely, left than at we're part the to continued do we're as operating 'XX, the

we deal electronics, business, I we different all ] broadly they're the and retail at the related packaged and highlights. categories industrial we slower omnichannel technology, that our say look can beverage consumer say our consumer, would food goods. is manufacturing, with, that products of [ When really

environment. So a goods, money still at the can there's But see it's We metrics, services. under sluggish consumers no doubt spending on pressure. consumer still look we that

part with all I think it's we've the last across macro, pronounced the the starting and with the trend Staying seen of of different one trends during we're is latter of geographies. a year, 'XX

managing been carefully inventory customers have levels. Our

we It's price prioritizing the 'XX to We've I organizations And definitely seen what do levels in People trading to were than also, for inputs our our volume. for XXXX. that for adjustment a our results volumes. we've early valued our an been smartly. working last you more generally into gives trajectory January, days, think feel proactive there's a with customers been a I seeing indicating than super account managed And have would stronger customers in but last on have generally, that and say was quarter. that. take think quarter inventory I sluggish they're

XXXX, the speaking, the would expect signs. they to activity to their talk early half what like, definitely we bit a judge customers, will all to it's look encouraging first So I When but directionally of year broadly say half be slower second through a as that's moving a I in we're increasing line half. first we're of seeing faster every moment. probably at the sequentially think kind with And with commentary that

really us of business a business, great for underestimated. new for pleasing What's billion We $X had finished we've just not 'XX. that that against slower new is should macro, be season

we're So that. pleased very with

of lot a implementations year. going on big-ticket mentioned, Adrian As this

maybe held and a our projects one pre big We that, pre year-over-year, automation. lot is our up projects pleasing It's strong. the don't lot is for incredibly But that aspects require strong. pipeline. a lot. is of pre us about of about And a coming are our pipeline there of talk XX% pipeline now Our most will right pipeline transformative into

So XXXX. as all GXO 'XX, we that comps through. perspective, as progressively we from gives easier And our a obviously, a move feeling considerably good about of us through go become

how think, on year growth right the pan about what we're substantial the it's the and So and with degree is going I confidence 'XX out. -- we're into going of pipeline, a to now, seeing

Stephanie Benjamin Moore

tremendously No, level your we a as there conversion. a expect similar higher for guidance of a to I free free on your conversion or expectations Great. just as helpful. like then follow-up change Is to basis? flow guess could XXXX. was cash And it structural cash that the flow a there looks go-forward

Malcolm Wilson

Yes.

Stephanie to you detail. that for hand Baris, me Let over

Baris Oran

collection excellent we Stephanie, cash we free capital had flow. had record and efficiency, and

forecast to balance QX level to for EBITDA back of geographies XX%, shareholders a capacity strong helped which free ahead year-over-year, through the allocated XX%. in our was be year, roughly through rate to XX% million $XXX $XXX end flow And buyback. creating to of of comfortably pace, or potential cash of XXXX, around be deliver flow with to of of million either roughly cash in capital this Xx us free billion the returning the entire conversion a accretive our that Our debt all M&A QX over by sheet up we $X evaluate and disciplined was

incremental we by that's efficiency. capital cash in our investing will technology automation create driven So and beyond excellent and collection and flow

Operator

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

Chris Wetherbee

for down about guide new you the a volume implied break I maybe terms looks wins, weak. bit out, what fourth you the parts, to XXXX. Also plays wanted that see little guess in how I could revenue importantly, maybe hoping to I attrition organic was what sort seems business talk of volume fairly of quarter like.

get to you the that of want a of I see So sense up how 'XX. over ramping course

Baris Oran

it's here. Chris, Baris

Let take that. me

growth in million higher expect XXXX, we and $XXX which sign nearly already continue business in new We to of signed will grow. impact we expect business XXXX. to more We

pipeline our in in opportunities opportunity outsourcing throughout good see been there this geographies all year, really the a Given outsourcing we great now. has right

are services high in Our demand.

in We to start the look roughly impact pricing underlying X% customers X% steady lower at customer their some lower which for and the growth at see will expect from levels turnover. given of from least to be our continue us gives footprint the inventory lower There to positive, contribution of XXXX. organic but year

the results as our customers, customer in look trading projects Our talk earlier confirmed. ramp-up that accelerate, into And our we growth will January we and and view have we easier is to year-over-year comp. of as given

Chris Wetherbee

through little based assume turning should somewhat to forward clear, maybe sort XQ of though, what positive still Or move on side? the year I'm of are still we you negative the on as Okay. part we January? the you to And negative first a turn positive in able just see so

Baris Oran

the that. trading QX, improvement and earlier definitely In us showing an over QX, results expect are we

Chris Wetherbee

just takes sort just flowing the we some Okay. see can the some as Helpful. to a puts of to the 'XX, for kind maybe I there? and going of the follow-up think And you would 'XX the about you'll degree a are where side. to then you there. maybe that efficiencies potential margins, from translating guess, that expansion be about I know little 'XX there. is EBITDA of be cost year about bit moving of able guess, talk I on curious I'm PFS? the parts have incremental

Baris Oran

Sure.

again Our how prove business yet margins model this is. strong

million. we margin expect with a around percentage in EBITDA Nominally, million steady $XXX midpoint will Our $XXX million be XXXX. to of $XXX

contribute by will robotics, growth will organic Our outsourcing our is expansion. well margin deployment trading of contribute. and and automation PFS supported to

benefit, Our central and provide the we've efficiencies -- which have an details in the earlier million we in detail, highlighted call. will gone through program, incremental $XX we

and our selling well, our see in capabilities sales our organization, development through our potential And where build opportunities, in and really, the teams and future. we performance and always systems, is business focus our investment turning phenomenal investment balance our really our this automation growth with in which including our into cloud-based

Operator

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

Scott Schneeberger

A Chris' guess, drivers question. Could takes couple at primary on puts some kind maybe we're up of XXXX I 'XX? one, looking of outlining following a are Baris, first What of big the questions. and of you adjusted for versus the in year-over-year? bridge speak EBITDA year-over-year that to you

Baris Oran

on Sure. our the our and component through one. detail, To a our moving working are projects as part party forward and functions and on outsourcing all on part have we some third with of highlighted, in will organic those activities. This continue cloud, more expect we give and to [indiscernible] our lot investments a million, accelerate this early and organization. continue enabler technology, win our non-core what Board, was software We're on is we that automation results. Central we will the that HR, efficiencies, $X our on and we across both progress, PFS robotics you year centers systems throughout plans. and financial, those automation to our capabilities both a in and largest we investing the which and are to is in [ XXXX development actively ] gone is and sales of to a and huge contribute trade we The that are business growth, are. contribute invest implementation in highlight well we teams, support robotics will teams, in plan, in data outsourcing further to moving IT

of as you recall, over of we a year to would in our was full you million Day Markets $XXX those, going [ XXXX. highlighted ] by All and Capital what give was FX

Scott Schneeberger

anticipate outsourcing of getting a chain primarily, average, the driver from It and of probably of above GXO rate and/or substantially type Malcolm getting? It are to gross And guess, supply I coming addressable their yet to reverse logistics? business kind your when Adrian, growth who outsourcing you but the have to don't type larger of what logistics multipart you is what with third-party today. sounds large do guys I that get year-over-year a And do highlighted rate accelerating? my growth years? clearly, what rate mean, over it really provider like this of run like big warehouse meaningful this you gets you And significantly you involved. question here of operations new market. trend, more a and then few target mix customers a win a also is -- mix, are follow-on, type is anticipate it's of as increased sounds contract win guess I reverse so outsource

Malcolm Wilson

Scott, it's Malcolm here.

on ask to the some Let Baris then that, me comment I'll of first numbers. and take the part of

sales with activities. it's at see when of to Reverse high look reverse single starting right. area our for represent growth it's combined a logistics. coming of the [indiscernible] I absolutely pipeline, digits it's our high a logistics, now, business. a And through of projects across number there's huge degree of company, element huge very to clear You're Right our

More always GXO, about our back talked business real their that companies outstripping that of can coming even. absolutely. wins we action. of from right absolute more own Well, That's the beginning big probably see logistics. expectations remember tailwinds. growth, you 'XX, If our category. a outsourcing to we those XX% And in and

automation plays time, also We people about catching Adrian the sometimes but contracts, And of is talk automation those part and way of people that. it, a playing And it's are that. for again, still again, big that We for e-fulfillment. because to on of outsourcing they're And already us has up, first lastly, simple drive activities. one touched much part then don't everything. a fastest-growing And is automation our it about huge talked recognizing outsourcing a automation it. so efficiency

we're in And to 'XX. we've across to So We going business. those growth on see continue we're think really, the these to that as a we're seen capitalize think are our super I Baris? trends seeing engines position as GXO. in

Baris Oran

monetary growing investment you look Yes, in what grow and our and right again faster, human that's we when at And faster that where expect reverse are to revenue is XXXX. yet robotics, outsourcing, really, strategy, our is and well automation, capital sells capital. we now putting really

winning through differentiation This huge cycle and We are is is development its up talent beefing automation. on automation. in and our team in business GXO the and teams also implementation a

Operator

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

Ravi Shanker

some pipeline on in you a transformative I new Good said job there. that Can progress the elaborate business. with on think bit? behavior? run rates, that something? looking customer Malcolm, you little changes people like than to higher bit any you inventory Are of the a expand more? were you in little are also, before less Can with of seeing that projects there interest And because

Malcolm Wilson

Yes. here. Malcolm

and cover pipeline the I'll And Let come customers few Adrian on saying. shape are also ask of me in the to what those topics.

bring companies to into our how And a plays part becoming outsource, partners in leaning to been the new surprise, this huge no As that continue going at eager our And clearly, can GXO like we've see. help growth. wheelhouse. more that's looking customers seen the we in help of how efficiency. amount as the them able We've business in And that who huge of of XXXX. no automation marketplace again, for call, are pronounced I looking are of look to are mentioned surprise, time. It's more beginning of that. can task think own trend to one I It's an very organizations. a we innovator efficiency, a seen wins efficient improve, their in we're source point organizations of first a the And to really very to the bring big right

higher higher driving to to of just on the So metric people more to context useful in need that also. for inflation share interest automation Adrian, of look it some all rates, may efficiency. be

Adrian Stoch

Malcolm. Thanks, Yes.

they're automated trend, but -- from potential excitement this revenue that mind that from today in what because viewing to this occurring. So and need this today that to benefits And And position outsourcing the competitive the and digital Baris understand industry need lead reexamine how really have in our automation this future, they numbers that through at competitive is for very of supply understand they the Malcolm to chains need a what's the we is transformational we're of combo automation wins exciting the operations. And because and this flywheel and is transformation resilience morning What's they we get that in stay and resilience they're is point see doing organizations of Adrian. term. the for the from very both enterprise between over go just the chains supply will leading cited future. order the entire this increased industry in to predominantly be effect half to manual to because their for resilience companies this to in and elevate they in XX% long comes occurring still need keep and starting reexamination where for trend for outsourcing to not only that our need is

Malcolm Wilson

point. last one just Ravi, And

organization of asked guess saw really levels goods. levels. less inventory trends need selling last inventory was is less inventory the of People of You the they're suit about if we latter adjusting to sale in one part the I products. year

that starts no as doubt pick expect year. doubt, will that start saw of strengthen up. We No to start last return we missed as geographies that will to whatsoever. to We trend. those think that seeing. macro all the we general across really, volumes reverse So economies in But customer we're

looking that in something that's definitely, So for we're 'XX.

Ravi Shanker

kind guidance the here, M&A flow you and identified for the of balance it. follow-up targets the are kind any XXXX just of 'XX, there? of you're thinking cyclical, a more sounds kind free cash And as kind than of And priorities structural. given end how maybe sheet Got side? of and specific strong the about the It on

Baris Oran

But sizable creation. a Yes. actively very, on M&A a Ravi, all cost of lot growth about to savings. very We're of projects. pipeline verticals, all of top capture expect lot a targets have of incremental are number in additional in sensitive we of line working a we shareholder very want value also verticals. capabilities do geographies, We

in our always through for is pay buybacks excess is option. we So those cash. put weigh option. mind. Otherwise, Buying shares that creation back shareholder should shareholders. always company Investing then have and at We another our another our value double

Operator

come Brandon next Barclays. the of questions Oglenski with Our from line

Brandon Oglenski

last we of put a quite volume was higher context talk you we've time your if issue it discussed back And in the year Day, to going go sales wondering XX%, higher I a could call. was on we I outlook? the X% similar the And Investor growth revenue I year. to organic back little next maybe this can long-term fact, go pretty bit significantly you was bit CAGR you're if what this year. months. XX was get think your in if think like because contracted I to pipeline Because the for this pipeline think than which something at the just to the But is actually

that the just couple of back range it you for come actually exceed back, cyclical? And is should and next we So expect contracts the of the end as also years? come could volumes top

Malcolm Wilson

do Malcolm I it's Yes, in see think that's Brandon, we things. how nutshell, here. a

So warehouses. the a year. what in customer seen throughout inventories We've 'XX, been sluggish that's it it's we that volumes manage effectively,

stronger as eager can GXO bring existing some for coming customers which see lot and implementing. starting can can to dollars transform then of It's contract. -- see high-profile take year. And not we're a there of operation quite lead it's their still in time we that chain, in to eager again, aspects to a sales then that warehousing we see signs the tend And were going to several the the we on. in that kind importantly, of 'XX, large number looking activity business for an carry pipeline, through. kind automation during through is at but also actually progressively activities. we've and just take life And speed supply their of years, sales of the step a into the projects examples customer can that our takeover XXXX size last we're at if the pipeline up look actual but own a place. transform sales of seen own the the pipeline, throughout where to They're of -- vertical the automated we one So longer about we sites of Big of

calculation. building I business. in big really outsourcing, Investor are macro are really of proportion talked seen the addressable look think of that the 'XX, of about it we forward. future to was they see again, that we've all So even on tough signing part that in of 'XX. We we sales outsource We at our the that Day against long-term Lots That's blocks track. there, never activity, market that going in our high-quality saw choosing that our people really throughout pipeline of now accelerating and when

increases has much towards track. all driving automation so it's Adrian of driving -- XX% in business is year, of really well on mentioned, Baris Even robotics is And these and projects. more productivity the mentioned, last of just GXO. year-over-year the context kind of deployment the As project as

the for future feeling good outlook about really So GXO. we're year's

Brandon Oglenski

you're On margin investments Can about facilities capital Appreciate sorry, that, as us tell you up And Adrian. or went significant last think contracts profile you I and -- That's automated automation, quick pretty like a year. this potentially well? the of follow-up higher maybe XX% for Malcolm. year. these said

Adrian Stoch

Yes, absolutely.

that with and projects, So where XXX goes the our typically to to above other what points both we extent. And to certain the as this from automate, automation average proof a XXX retrofits the see dependency basis reduce we're this large-scale able coming is labor group the really dependency and on structure, comment see we modular more a reduced we automated do we the when those out thesis operations. of on automated elements of to cost the

always and what come we're bearing that suspected so And they're out the would that seeing from and efficiencies those we've expected opportunities in the automated and numbers. opportunities

Operator

come of questions line Poliniak-Cusic Wells from Fargo. the next Our Allison with

Unknown Analyst

around guidance. I wanted and Allison. Brandon's automation the follow question up organic for revenue growth on to on James

commented highly at the You've bit seems it the longer start times wins, this were like dated. and automated least that facilities in have lead these longer a quarter contract to

would any what fade like revenue that organic winning over to volume all pocket sort of end that's Just weakness through of because you're revenue of time? sort Or in just have its work out is weakness driving sort XXXX is growth in guide? of the an of dated -- sort long-term sort versus way of it market essentially really way sort that organic longer

Baris Oran

here. Baris

off Let help me you question. with that

writing we automation In of fact, and the reason contracts longer-term because we is are selling are more and technology. more

expect affordable of And years, years, XX the contracts are very customers Some longer that to rates, and interest for our the these of our we close sticky environment in for the high over to more are XX very, continue. customers. this contract, trend

up get and X it sometimes a takes highlighted, get XX takes full months at to quarters maturity you than them up takes It or and them As It running. margin capacity. to to while. more

contribution these in and the more implementations see 'XX we 'XX vividly. from will towards half So second of

Unknown Analyst

there in put I'm if half? what Got just could wondering front expenses any And it. Got that it. a of might be? associated with front-loading the around is those number to deals you

Baris Oran

of the contracts, automation the low Generally, over valid. for content, the very mature they that's time. started especially That's and maturity margins those

those systems, huge we However, sales for our well development and is teams. and we core via see are customers our impacting and capabilities our these because our and investments is as potential business helping what more automation more -- projects. margins our This is in our teams cloud-based robotics selling in in in investing

Operator

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

Amit Mehrotra

contract to with, high question Wall that's this want bigger for of seeing on almost numbers duration Journal of the picture Malcolm. is sublet. the feet for XXX the the Think customer I morning basically I guess, sublease. is Wondering think or how I capacity available for that end, million the available in Street strategic, sublease was one square start business? Because number more longer. obviously, impacts we're and U.S. a Malcolm, warehouse your

the don't warehouse and but in or I this I if X will capacity would for historical know impacts helpful. perspective the warehouse amount helpful be this a of of know little It a this business midterm? the market the U.S. more you've X, cyclical issue, decades. be to get it of in global So cyclicality near business of been bit in the sublease is maybe to how in the

Malcolm Wilson

of market. Amit, in also I've explain And is capacity business good our incremental question it's is contracts. your here our American to way Malcolm plenty about From is the here. ]. contracted, news perspective, the topical seen really reports a long-term core [ North of

to It's of warehouse. makeup. occupy tend fund the cost It's customers So a the makeup. part the contract part warehouse they of

customers in to you regard our you ahead We in the as benefits in though, see big neutral down GXO is see, terms levels What normally And a view. a and this inventory and well will levels in of of that pronounced more it's inventory lowering our seen see have brings of year. our ahead we one what to of point actually EBITDA EBITDA, is outlook. in our of that down, year do original up core aspect So is we quite 'XX, any inventory flex the came from our through were -- our full 'XX levels. actual

So manufacturing down customers, lowered new some takes levels. time inventory sales outlook, to they've it plans, gradually, to change reflect but

we see where we them proactively work in with warehousing environment us, consolidate to the that For activity.

our capacity. end you absolutely centers. all is exactly with that what at proactive a up is And what market, into main When contract interest in but it's our several being some we have we have those short-term warehouses, partner fully But we volumes back you're customers, to operate result our it. Those right. might large transient commitments progressively, GXO, for So of That's about. on in contracted for the of that's interest it's you estate warehousing and where look the real also might warehouses, customers' relatively kind end we've more done. empty

we're start our much see see do expect longer we no because really that stronger see it macro properly to to -- line goods. strong in services, Today, needed us, growth but expect see alignment we recover we for a in for don't already research as with goods. to back for We we So profitability. so our much And becoming in we top pretty would that invoicing. consumer volume, consumer it the it's for

see hope I business. gives as that So understanding it we of how an you a

us terms we exactly We the our our are what customer really judge in how profitability reported seeing impacting how of at not judge but relationships. moment, or is widely we

to to our it's those, For worth demonstrate our an customers. for us opportunity more

Amit Mehrotra

it. Got

at a buying the really helpful. very wanted up you I question Because quickly. M&A just markets in. about That's pretty presence couple already years, follow if the that on have companies last look the And M&A within I to really been it's of Okay. that strong strategy over

you then cost So and or on I U.K. PFS. Clipper synergies about verticals think out you're And you're geographies [ maybe generally, ] the have that the even significant taking business, underrepresented SG&A there's Nagel side. But in. also

of talking same and -- consolidate is, kind So this we great you like going if already have market, in presence as playbook, just structures? is your where about talk we new to and we about Are a Why we vertical. buy verticals hey, are M&A don't talking company can just be this which going the about we forward, geographies? cost focus about this think

Malcolm Wilson

me let answer, the on here. Amit, Malcolm carry Yes.

geography we we growing that when typically, a And on everything new there in it. new we're enter new be on are review vertical, So Clearly, we where focused want vertical. to verticals.

you play with very, driving and PFS. It's it's in synergy, look cost integrated to that But GXO. a into is see can but already good off PFS very we very, about So good example. great is, cost X a PFS bigger you out a businesses we about business doing and team aspects not If big of pleased course, it's with a the gain well. a we as there's like, we're of condition great synergy. play are put There where is It's it's and there driving that other start together, how a lot growth, -- to opportunistically there synergies. quality, have We're very business well. when

those. in also interested be we'd course, Of

about be be the say benefits. really and what Baris look I going at So accretive company, how to all of out time, delivering the the there at our market the mentioned, trying overarching got to in It's in interest in market. it's that as would we accomplish the of what's That's the to interest it's we're of shareholders.

Operator

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

Brian Ossenbeck

an there recently a or if sort of to expect contracts more or more same? Malcolm. thought structure? see So that the is we that tranche really year just air are the in might to for efficiency, from impact that should anything there's wanted supply on you of how durable seen you Is time? So through are think with this do more or after? More you, like the if to first automation, this now going in Do moving you forward change a outsourced stays to pocket disruptions next maybe question something think more starting lagged we should expect for that we've contracts will are the the several years less Or tech, more year a change be and people those continue? chain and and move if

Malcolm Wilson

'XX incremental a interest think, burdens had And don't supply years burden reason to several holds the companies of reason the all I I who consumer. to The a Brian, kind time at pressure, called pre trend that, that had that, way it and manufacturing fact inflationary reinforced, we've disruption. the severe put pass the see the said GXO is been the going correct. spin more on X.X XXXX, years their that is on right outsource continue. of chain that's many still we've really logistics. really I were to we rate pressure. That's in, those want and more out going organizations one, disruptions, It's think we pandemic, can of then of what even the through so trend that to now we Remember think, this of top back disruption, on

things how technology it's organizations, obvious differently, not So more warehouse. they can how they that. most when things probably do to the involves daunting do look into they efficiently. They're equipped the bringing very And the do solution at can generally

So in projects the time pure-play as reputation for for outsourced look partner. to being delivering logistics company our largest a logical a for contract with step market them it's And the big partner. an on these reliable

super. For GXO's wheelhouse. I playing this it's into all is mean, us,

deploying is future service we've very our expenditure that's set it's think organization, terms to about trend our well on trend automation reason it. That be stay. going very, of Adrian, a It's mentioned So we're I and Baris on to in very just years. down teams, in sales excited the going GXO very doubled the to

Brian Ossenbeck

Malcolm. Thanks,

something well. multi-tenant of slack? sort facilities a dent of bit single-tenant a more than expect direct for Just big to really dynamics to and does quick and and warehouses, the up usual, like not in these the of that's sort which expanded is offering been with Clipper that on sounds move you over make Or a them up time some enough consumer-facing down? side. the it as follow-up volatile of can Is normalize how that picking inventory how the GXO But sort that they've with that

Malcolm Wilson

that much us, customers we customers, consumer spending. months can same of immune direct But slower pretty it's of been for enough XX this the a just for not pace capacity Brian, have a impact. it substantial Yes, not make of, our of amount real the our to GXO last all think to as

So clearly, that. of we've business, all seen across our

of I our majority operate with the back fully we mentioned to back earlier, customers. As warehouses are that vast

in really So is world our the direct impact -- not our smaller proportion that on GXO any material sit not it's outlook.

Operator

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

Malcolm Wilson

Thanks, new driving course, across for always, free new our $X call the been 'XX, super of and efficiency our thanks existing for huge our a performing towards hosting delivered really appreciate business We again, of footprint. GXO. Yes. We've today. cash all as it's great for great billion year and really Darryl. are which That And the it. right flows. wins of incredibly acquisition is customers we both benefits game-changing and service our deploying through PFS, well. about technologies We're excited of end,

of growth fantastic by is manner and for more of opportunities we're growing the a for choice forward, we're about And our returns the looking in partner talking huge we've excited been call. Looking We're our in-house portion the this that to that's shareholders. which market on more increasingly future delivering outsourced.

in with So so that, the us the speaking Thanks of like day. future. on we'd your to look again great call a you wish rest attendance forward everybody much to for and joining to this and

Operator

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

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

GXO Logistics (GXO) 14 Feb 242023 Q4 Earnings call transcript