GXO Logistics (GXO) 6 Aug 242024 Q2 Earnings call transcript

Company Profile

Participants

Malcolm Wilson	executive
Baris Oran	executive
Kristine Kubacki	executive
Stephanie Benjamin Moore	analyst
Scott Schneeberger	analyst
Christian Wetherbee	analyst
Brian Ossenbeck	analyst
Ravi Shanker	analyst
Jason Seidl	analyst
David Zazula	analyst
Kevin Gainey	analyst

Call transcript

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Operator

Hello, and welcome to the GXO Second Quarter 2024 Earnings Conference Call and Webcast. My name is Dana, and I will 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.

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

made as call law. may as non-GAAP statements, except refer call. statements made The defined to measures non-GAAP update company company to measures forward-looking in under the these earnings obligation company's The forward-looking this comparable of such release financial rules earnings release most contained Reconciliations SEC has on the financial and no of this are the website. its today, extent in financial are also of on only company's to any made applicable to and the the during or measures related required certain GAAP by are table the

all and reported in assumptions. inflationary factors affected be believes be remind you filings appropriate market call are global in and stated, the unpredictable in fluctuations dollars. exchange company business otherwise incorporates what results The date guidance company's this results trends would reported The on to it foreign that consumer may also are States factors, inherently chain United to including Unless various its SEC. by today exchanges and conditions supply constraints, global and the spending, rates, and and detailed demand labor in economic many pressures with materially its

to predict differ for demand actually company its therefore, the for guidance. from materially could possible actual and not results is It services,

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

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

Malcolm Wilson

second Officer; today earnings I joining Kristine us quarter With Financial Kubacki, in Chief Chief Baris Oran, morning, appreciate Thanks, me and Donna, Officer. for good are everyone. Greenwich XXXX our Strategy and our call. you our

second our out first year XXXX quarter, delivered a be today. reaffirming half, guidance GXO full pleased we're rounding to strong great has a and

million $XXX of about signed we quarter, wins. new the During business

of We're grew XX-month the seeing to opportunities. who look chain. duration of high-quality partner scale supply contract standing consecutive a with global outsource $X.X third for customers pipeline quarter manage at complexity also their the to new trusted a as Our billion high of can increase,

progress We're proud largest of been the our growth of the which in strategy European Germany, particularly part economy, since our spin. has

retailer the May. with signed relationships our we've long-standing contract customers with Boeing, During live deal we've XX-year quarter, this distributor, new the & Tchibo, and pleased announced we and German and leading We're with several expanded Marks that have a on coffee $X a quarter, in nearly Raytheon. including to also gone billion Levi's Spencer Guess,

one and than a of land expand strategy more growth about grown our plan. of to our we've long-term serve And tenet in revenue core comes Our today, customers from remains organic half country.

our key in we new contracts to sign our of win million year, New won $XXX the first increasing the growth business our this growth. business. given to of we're underpinning and on Through half, pipeline, than new record 'XX amount a beyond. track we've are more And

outsourced chain strategy. their reduce fourth returned cycle, we volume industry demand strong for believe supply to improve. beginning to as as the the for beyond of trends we part the point, signed last bottom newly mentioned, an inflection we've of e-commerce As seeing saw sustainable About We're we're customers contracts the of cycle throughout that were we've productivity, level, has activities. their At and in structural has quarter complexity and this remained quarter of the half recognize inventory Customer growth. look year. outsourcing improve to

U.K. presence the our we've deal our including In across in acquired strategy. a aerospace to of Wincanton Wincanton, industrials. defense completed We're the second also platform This and in pleased expand and Europe, M&A quarter. exemplifies and target acquisition have verticals to our

have We U.K. This new acquisition Europe done organic along this more confident we our to forward and and growth an our seeing with bodes our larger have our launch future acquisition look markets, at future we're with grow attractive with both We Germany. well growth, as and In accelerating customers valuation. our Wincanton. acquired Wincanton for expansion of in projects.

North record of half while currently wins we're In demand signed business the for we've America, year. first seeing goods, softer this new in

$XX long-term billion billion gives $X.X adjusted in delivering EBITDA. and targets $X.XX billion $XX.X our us model confidence business to of billion Our contractual of XXXX of revenue to

quarter. that, I'll with to Baris, to And you you. pass walk the over through you to Baris

Baris Oran

morning, generated of year-over-year, everyone. organic. of $X.X Good was we billion, Malcolm. second In record which X% XX% revenue quarter, the Thanks, growing

business, organic growth and our including Our supports storage aerospace, led supply by by of omnichannel parts in data center strength retail, chain. diverse was cold driven

quarter million, adjusted Our $XXX EBITDA million this we flow. delivered $XX cash of was and free

invested our organic return capital in continue on above XX% projects, remained high-return fulfill operating growth. Our at to invest as our target we

committed rock are maintaining sheet. Our we to balance remains position investment-grade and financial solid, our

net second leverage as end the X.Xx Our of the was of quarter.

the next We end than X.Xx by year year. are of of about Xx less by leverage expecting the and the levels end of

due no coming have in XXXX. We debt

acceleration growth organic seen revenue that in have in sequential an inflection in the reflects point Our our quarter second we business.

acquisition Wincanton our completed also we mentioned, this of Malcolm As quarter.

are an synergy well on of business to have valuation, at to targets and our acquired positioned million. $XX quickly deliver We thrilled we are attractive this

once will to accretive integrate acquisition the accretion to companies. diluted share the per X adjusted expect earnings this year, We we double-digit earnings fully be with

Europe, with leveraging U.K. synergies, our to strategy. in cost in Wincanton's will and aerospace M&A accelerate forward in Beyond expertise to growth the look our the defense and line verticals we and industrial

guidance. our to Turning

of our year. mentioned, for the reaffirming rest we are the view Malcolm As

conversion deliver and share year adjusted growth expect $X.XX. EBITDA million, XXXX, to For $XXX flow to XX% X% the cash free EBITDA earnings of X%, to organic of $XXX diluted $X.XX of full revenue of XX% to adjusted we of per to million to adjusted

XX%. of to expect capital an also deliver operating above invested We return continue to on

seeing growth expectations. improving near-term in reflect the of continue are trends business, tone to our customer in prudence we conversations many While our

to executing long-term the from synergies the Wincanton strategy. automated profitability. to solutions the we expected on underwriting integration and well are Looking GXO drive increased XXXX, is

a are highly positioned ahead And business a due runway model, us. growth long-term contractual we to We our have in industry. of multiyear uniquely organic fragmented

We organic strong best M&A. our of in growth and cash to flows, continue are generating interest the enabling we our allocate strategic us in invest will And free to capital shareholders.

Kristine, I'll that, to the With mic you, hand Kristine. Officer. Over Strategy new to our Chief

Kristine Kubacki

already, April everyone. Good on sell on keeping and as building we side. to to Baris. the I forward look GXO prior the morning, previously Strategy to how XX Thanks, you supply have you met chain of many in Chief Investor years I'm worked joined I've I Officer. updated that, spent in excited are Relations and of future. the

and tech market. the key in for that Malcolm and reviewed is already automation leadership, adding GXO in our have differentiator expanding going like our to I'd our to value the excellent we're that our to keep the on ways enable Baris and drill customers. progress the quarter down lead

different now our automated several in sites I've countries. of visited highly

is and engineer is by recognize differentiator. because an what our our of it The the by solution combination automation of developing expertise excited value I training, and our difficult in how both As level I'm to clearly approach to tech do automated proposition because we the do. I our understand operations,

plays helped modern role for continue in shape economy. the the industry has years, we and to GXO logistics redefine the

this alongside piloting robotics the highlighting You morning, our progress work to seen associates. video released in humanoid may we our have

shape We supply leading the our humanoid are sites. this the developers today technology deployment, deploy helping away future. a first while is chain full in robotics is from with And live years to engagement few the of our

we're insights changing We're by operations. from to the also AI fulfillment deploying run creating enormous across The optimize value we our gaining sites. our applying way AI are

many AI of deployment XXXX year. implementations with sites for last XXx versus Our are in skyrocketing, as

shape in practical of as supply with focus cases their developers technology incubator. to is and financial Our cutting-edge We and help research partner development prototypes role address to results. a automation of chain use operational on with an serve them

combination which returns value Our will which we disciplined create deliver capital technologies operational that and expertise of operational won't. identify and can ones financial and deployment means

while our delivered It return invested of is innovation first-mover focus allocation and us opportunity trial XXXX and GXO on capital underpins derisks disciplined is our without consistently capital delivering innovation, capital operations. targets. the part This strategy our operating it and that of to approach on technologies this emerging a XX%, our our above on disrupting allocation. has affording efficient advantage confidence

in earnings creation today's release, our on an we our with also including framework, automation by focus leadership on customers. and a updated secular Along and value driven tech investor presentation global our our issued which scale, growth outlines tailwinds, our laser long-term website,

for GXO. today's strategy, a with tell fundamentals As the are focus our in from on model announcement, and allocation relentless you growth strong, business compelling long-term algorithm GXO's of results core these combined priorities, our capital can

it We you on with I'll look that, back forward Malcolm. to progress. keeping our to updated And turn

Malcolm Wilson

We've in second quarter. built the pipeline about line have year, our confidence the underpinning first momentum and our With quarter sign on clear we new in and a 'XX our to XX-month of our from record a at high, record a sight of amount business Kristine. this Thanks, revenues delivered beyond. accelerating growth

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

Operator

Stephanie [Operator Jefferies. Moore coming is of first Instructions] question from Today's

Stephanie Benjamin Moore

particular? you maybe see seeing the levers that. U.K. for more could Europe. U.S. you remains to is maybe then recovery weaker What in you you're you other with a some U.S. can the and would about was that little thoughts think other that a just apologize your what hoping maybe when customers to starting about pull the I I talk or in bit that environment? driving expect of kind given improve And

Malcolm Wilson

Stephanie, here. it's Malcolm

point then. Let me that cover just

out, in generally remain right though all customer modest and X/X When year-over-year. But volumes to seeing Europe, stronger. when the we remained in areas improvements regions, relatively as fact, in business. So do U.K. across, what our some got quarter. coming they've through. can of now the regions you of It's volumes is look about Core last we look improvements we're where we definitely sluggish we definite compared point see different flat our have now, Continental

we in market, yet a of new uncertain. tremendous activity. not while North to And still amount return seeing the seeing is that it's we're business little a American growth What are

In for we signed more American than a business business fact, North recently our time. new long in

think activity signings. I business our American for in on North for new we're target record a

started we also, those returns. definitely levels see Inventory to

point season. the low I for really all Customers to So levels year's inflection was holiday I from already Definitely, for inventory back. across the point levels think, investor of this coming that end year, we're know regions. the that prepare seeing last of think starting, of

Most the pleasingly, quarter, been improvements been tangible year-over-year. as last has over just seen about, we and -- sales we've talked strong. fact, in It's

In terms every region. of

convert contracts are of The Duration getting pre-pipeline, sales is they're bigger. quick. Deal really very getting Our pipelines, strong. time very, sizes bigger. are to

going and coming recent in the live automated our the So now announcements large made we and deals, transformative we're Levi's the these contract, commissioning about are we more and into a more sales seeing of of pipeline. side, more that Germany, where deals of for kind right more operation

$X.X the year, of this bodes that top which closed billion the of year well really on the into going the of our in that new this and So XXXX. of second second half for indeed, during growth half we've business promising, year, one and already

important And the point, just an point. I think last -- it's

come wide we're alongside across with of tech, applications. real initiatives we're in range the very bringing now. business. into innovations, really our humanoid of robotics, way going, are technology trials our particular, back them Just a catapulting and across we're these range We're to latest of on of deployment that across accelerating of AI-driven we wide all operations the lot coupling a pleased them these the really very And a the

definitely, later North see us. I we'll we an uncertain, And we the Continental growth. in is Europe, second the the into do in little not business of we've least half still that that the So all very the U.K., a year trajectory also of America and situation a 'XX. year, in the the in signs really, good bit feel holiday fact ahead that season is see but think improving of of got

much year Last with now, are they a disappointing our this that period in we year, will consumer-focused for holiday planning a season. we than we'll feel holiday very know plan cycle although Right's customers, more to August. better out particularly can see, year's the now very year. of customers, But can by last the be customers, the period us season. starting really for the we this end early it's And our for was see

Stephanie Benjamin Moore

detailed appreciate it. I Very answer.

bit unchanged, -- Just of half imply half. my a maybe for but for the wanted talk I free cash does the a second it follow-up half? the has in through remained Baris, you if here. guidance second flow some step You could realized the first versus considerations up

great. puts could and through some if would be those of takes, that walk So you

Baris Oran

QX, million flow year-over-year. million Our up in $XX was free cash $XX

a strong XX% our flow Our free which first million track puts EBITDA $XX to achieve up year-over-year, cash to on was us half, conversion. to XX%

strong capital and half more and working continues accelerate, cash tends more to for as we our investing our year. XXXX comfortable that Our management expect And will flow are be you in but we to are be in we that recall, year. second with the would every automation tilted guidance

So our that. is guidance reflecting

Operator

move to of next the Schneeberger We'll on from Scott question Oppenheimer.

Scott Schneeberger

like keeps follow sluggishness on you're you in cautious geographical there's I up sounds still want a a bit that volumes. difference to North of where the transactional It seeing America.

last it the sounded year, to still question. and sequential that just we it in maybe see improvement Baris, quarter quarters you. consideration of as between fourth well? answer what back quarter? the to But the third trend regard to I it's to That's X like with should the how guess a year-over-year for Is

a guess, you for just I to like you'll maybe this You concern follow but is broader season, then than mentioned Malcolm, that, get holiday month, the sense that. later how your if want America? lack sounds it in visibility there And is North of much

verticals So maybe in America. some other touch on North

a In of kind it retail or the that's on just has is little thing addition you that to retail, bit pause. if

Malcolm Wilson

numbers. Malcolm, first. Baris me you second on cover let hand of Scott, then This the cover to your I'll the part detail question the is to over and

So in fact, you're right.

European a of further business. And we Wincanton. going expose us still the to bodes well. have that's our stronger for of had strengthen new year think number it's concluded obviously, all on Clearly, That outlook just we've verticals. M&A I going into to a because

very that. very, pleased we're So about

think America, are Euro-based I that industrials our business, North still things In uncertainty. is tech to we're of somehow what I a our linked the business, guess degree there's generally, business, seeing directly in consumer

do was are very anticipate the on year I more levels this season they are when 'XX growing think year, of back We we our for levels they I in -- customers, holiday inventory, pronounced we're everyone. warehouses. saw of of a have talking to that what inventory in to than 'XX disappointing, This improving going think, our

is and won. our actual -- highly taking of planning place now remembering one is can think our control, things of in new business North business been predictable I we implementing the wins within for also that's right new that but us the that directly we America And the that have see strong. that very

here has uncertainty, directly the a whilst us. by and really now of controllable that So degree

that new that implementations, of we the So much that's business and won pronounced. how those we've and the timing will more implement

second So us better of it the half feel give for the does a year.

now change that new I going don't to quarter we're at is a see right change be I quarter but look significant X, X over seeing hearing implementations definitely maybe, noticeable as do X what as quarter detail of will we what facilities, we're our customers when were. we bit can from and believe momentum we Baris, little our business, a our think a see in put exit it this and year more we do 'XX around. But as in I you into move

Baris Oran

of QX Sure. last down, are then the impact, the volumes at compared network you to look existing less year. When were fourth you facilities quarter our and our they still consolidation into and down and look but include macro

support are as of We Malcolm reflected feel a we this which peak confident in we low. really, the to have highlighted, seeing are was expecting really compared our that better past environment already -- we XXXX, are bottom, and we And that profitability half, the in especially QX had Remember, we our we half, see current back easier QX, in new QX. the growth especially in continued QX business. business highlighted, Furthermore, in wins the will comps. back higher as Malcolm

Scott Schneeberger

Great.

and follow-up, delve into For pipeline bit to I my duration contracts. a want the of of the

duration -- quarter years. think, the of a average in and second -- deck, So think that I contract the you I months X in was the it deck, new X cited, new something

that's impressive. so And

assume Levi's in I is that. And

just duration the that of the And long-term is this back Malcolm, long-time contracts. or how curious, assuming driving so quarter, does that's lot this what's of if just all-time as portfolio far look overall a is So very longer lot curious, high in a contracts as out pipeline high Levi's, high you second

at You you of total a the a Because? now long-duration And of -- see these longer have looking how importantly, portfolio that bunch it more up winning the do them been much did that more just years contracts has ago? is to looking than and moved pipeline, few

come

Malcolm Wilson

Yes, the And just of into gradually designing driving technology is Scott. solutions is customers. what's that goes the think we're that sign for contracts duration larger. the length we're Definitely, that that what getting we of I seeing amount is

So look that's very very new tech-forward -- because us -- at trusted they us, many thinking. customers are well, a coming see partner they to

them benefit efficiency, more they're the automation comes future very deep that robots, in to with indeed, that whether batch from we of So eager generally technology, seated to that's for driving higher robotic that in solutions be building person, really can or goods more collaborative design latest robotics. the technology, will humanoid activity quality, of productivity, type what are

because with us we're of very business next seeing Already this So a what's gives planning it driving decade. business into the that's It's customers a generally, continuity us out good stretching now, longer-term for huge horizon. duration. as right

more Customers that's scale what I themselves, larger So of increasing just size, deal outsourcing. they really more are a done duration, seeking traditionally think contract and getting of outsource have amount to and bigger. might driving

into feeling even a midterm level We've lot that news this business one the of to we're really the we It's from lot 'XX business coming us of plans out So 'XX strong, and It's when confidence that's the for a something just we're very of us gives 'XX a planning year. of good new really and about why got very confidence very that 'XX. announced aspect. us. coming as a it's beyond confident earlier reasons business, our sheer

Obviously, we're what improve the economic and we're where entering it control when right actually comes in is new customers. good to hopeful our core under business our a to the deal into now, of it is with regions all we're will from that business environments the just referring but directly that

Operator

from question Fargo. is Chris coming Wetherbee next of The Wells

Christian Wetherbee

I a the seems make from for I maybe a understand is thought to lower little little just sort we particularly than cadence of the EBITDA have guidance talk were wanted now It a guess what were maybe been sure the have XQ contribution the bit XQ bit I year, and we like an about perspective. weighted of might than previously. and rest could more little

you can that should bit before? different So Presumably, which bit what of of quarters? a maybe see what different course talk little seasonality, Wincanton got a the seen of has through sort couple we little And next maybe over seasonality. drives is I of what slightly guess we've than the

Baris Oran

Chris, this Baris is here.

period PFS peak contribution more There we has going to right. Wincanton are an also an in our You're sizable is to also, business that's And from a seeing impact. a peak that's wins. impact. have going have new

we that year. really That's period grow really had year to of didn't In coming low the we QX. peak our the new from an going this we in QX, to -- expect we a quarter, to X% QX, and wins, remember, in roughly towards growth And X% have of impact. last had business end

reflected our having in comps of are year. this numbers. in we really So That's easy QX

Christian Wetherbee

pull port with that tariffs disruptions, of forward are playing we're a concerned whether a perspective. European That's your maybe into of more in a potential on There's of some demand factors on activity right. if opine of from And or then from about some helpful. you could other not season than we're extent or people its issues seeing is guys kind peak there U.S. All question. maybe it is Okay. is if question thoughts effect in. the seeing went early what This And to sort August. some

customers U.S. is talking are curious, perspective, feel kind Or at of about imports, like just persists? something think you of from So relative you your that forward? a all the pull that do strength particularly

Malcolm Wilson

different here. Right parts and pull nearshoring is Malcolm saw forward. as activities result I tangibly don't different in this in in perspective product from actually earlier, see mean verticals. last of that some inventory and the in earlier we bringing a seeing we it's now, customers safety industries there's that in early example, of we're in Chris, our of a like a that. an I year, terms in levels year, in tangibly products of different other fact, mean activities bringing

now, support kind for clearly, elevating level normalized terms business return very cycle customers But our holiday an seeing getting just think having. inventory a are right in to our to of a season. early we're we our holiday which of of will be I business, are of I consumer-driven planning season, holding normal a in naturally warehouses traditional And the that think input right seeing now, ready inventory more

I know you possible disruptions. disruptions, mentioned port about

Our now in environment. a disrupted lives accepts industry, I think, and

outside customers think with I them they're that the able -- are working about that And really the in of well we have of experience familiar think they is, being partner with working a a think to GXO, assist in our huge that very have clearly, cause. with fact box. to

and that much a the window does are allow volume lot of of us one important businesses deploying in technology automation we a ton a our time. of again, actually of into transact shorter And aspects, to

So it's into for an our season. customers head as safety degree added we of the holiday

Operator

coming Brian Ossenbeck The next is question of JPMorgan. from

Brian Ossenbeck

to the the margins about wanted wins that for bit that little rest costs with the just ask a I how start-up of of year things next composition and and So the year. impact into more recent might like

quarter to one. this new So portion the it compared last looks a were like of smaller book wins business

like lot it looks outsourcing. more a So

an Is in contract? specifically, you you of I some those impact costs And the here? and of quarter-to-quarter? Are changes why more because earnings start-up the shift guess Does investments? underlying have the on the cadence when behaviors here about X appreciable seeing just it that think between lumpiness

Baris Oran

the is contracts in-house delta outsourcing These coming an from took that facilities over are The from the we are here. automated large operation, have we Baris large we automating. and signed. is this Brian,

the vastly the higher. is in activity higher And from new And a roughly contribution time and these facilities. trend, take play these do our we see has the the as demand, in a the automated automation. delta Overall, outsourcing, the of half first that from quite you'll of over lot see business solutions is coming as for but on of as site especially course, been we new demand well in ramp-up from The of e-commerce margin facilities.

And we are still gaining into more for customers market share from some getting operations. of the of smaller seeing -- our scaled players network as we opportunities are consolidating

share So smaller as gaining we market well. are the from players

quarter, So quarter is this I a would itself. say, unique by

Over new more robust been place see especially in somewhat pipeline term, but as and seeing takeover e-commerce. the for lot The longer facilities recently, still continuing, should has well. see demand our the in we we're the e-commerce in facilities, a you

higher, reflected we that's them So facilities is contribution, next as we'll going profitability them as the into of and this we quarters to on balanced automated couple have course, as forward. in ramp The be year well. of and more look next up

Brian Ossenbeck

Got it. helpful. That's

that's to going maybe can go because of start ultimately, XQ second to you're as but you how the the you They're turn XQ? a a getting there's wanting tailwind into the seasonality about know returns expect more much in the How Just those quarter? sort some talking those sales in to been bit as little Baris, I see of XQ, from implemented? again, just talk follow-up. force that year? a about investments have productivity to How how impacted you

Baris Oran

Thank you.

We teams. sales we are sizable in have -- invested our

In operationalize, up QX up fact, are to a basis opportunity. that in These XX around drag up seeing some our but ramp time a huge do it was points. take and margin facilities we

robust. benefit is investing Therefore, as very a pipeline and in well The Our results our we numbers are sales our have seeing yet. not our capabilities. -- well in teams as The of faster as are definitely turning our win huge pipeline rates is our improved.

them couple see will vividly next of the years. more You in

Operator

Morgan from coming is question next of Shanker Stanley. The Ravi

Ravi Shanker

area of you the -- playing can a does which with supply on start How to who can new humanoid ramping Kind these the question How that a future humanoids? out? pretty lots coexist do with of who are I you with a as referred out because the of and you do few cobots? see Maybe on kind this How you that and there. of of players what there research automation? interesting it's developments call times see

Kristine Kubacki

Ravi, and here. recent where they're functions, matured and years, -- robotic perform in. Existing they really it's specific limited that can come is solutions in the only have Kristine what in humanoids somewhat they this can

operational associates. They to morning, and human-like incubator had really they suitable our humanoid. will video leaning work space we're that progress and next human way, performing along repetitive the heavy our a also even this category just program. on making perform humanoid a dynamic tasks lifting the in we're They're of capability to developed into make therefore, the some it We've are tasks the decisions. believe humanoid with really explode over via highly the couple with We of short for really type And released that years.

space. So certainly And and to drive the We're accelerate it's going we're going this excited about end opportunities. it's in There's that the very would stay tuned. GXO's say a for of at excited really, day, on efficiency to lot going our growth. I about customers, the and

Ravi Shanker

follow-up. Great a Very more here. for exciting. now to mundane And

mass of there. kind some that of consumer have weakness consumer what heard your message out brands, you're customers from is market a there confirm out to bit brands your like even Because there? on you Just some of seeing

You are retail see it the of some pretty that results in weak.

you the a is You're situation little saying in and to bit the did going look do back that softer. the you aren't say half? message on seeing what U.S. that that I as is What you the mean environment inventory much. is demand like think

Malcolm Wilson

Yes. here. it's Ravi, Malcolm

on some comment cover I'll of it. me and also Baris Let to that, ask

here X This there's now. things think and kind I to of consider.

So work to It's consumer. of And is obviously, about the consumer season, our with we holiday within business XX% half for of really second the the roughly customers clearly, our this focused. directly year. that,

for it's bit we're with even bit year, last more be planning the unlike and a to the here that's holiday they the activity, here-and-now a in are half see season. this be Maybe discussions there in is now. So can maybe of of promotional that year, will the that going a What who year, customers, thinking. we having knows. regard, little But definitely, influenced by second discounting,

are aspect do. of a into future. coming of arrangement the think not longer-term much so We're is about, we've business, of kind really a with customers. transactional I really we these new But as talked our long-term business the a -- we're is what other just the high lot GXO, levels of projects And that kind for

looking out aspect our 'XX, I beyond into So strong. into think, business, very is of 'XX, 'XX. we're That

really redesign our these clearly, So of saw And supply replan that's We at heart many kind big to of out the their we're own that. chains. having the customers of blue-chip and customers.

Baris, add? can you

Baris Oran

new business that, growth negative QX an for because reflecting of a a for But half we easier the that which assumptions, similar the growth QX, revenue volume accelerating versus the negative. network environment our year. consolidation a trend again, year, are And into -- coming QX, Despite and will QX us. in The Yes. delta And wins. last the in network was -- clearly, the comp of in of somewhat and implementing. easing our that you reflects the we QX, we new is we entire look wins forecasting of the and is were bottom up from year, underlying second primarily this in into the are when volume consolidation expect we

Operator

next The TD coming Seidl Cowen. is of from Jason question

Jason Seidl

the to contract wanted little length. delve I into a bit

lot I think predictable for more over expanding power a earnings your time. it makes

some signing are of outsourced customers. those you of think out longer also, that about think the structured? the there of deals in of years. about as how that well? signed mentioned term term, the contracts contracts we as newly And sort difference how you're customers longer we half any the should pushing they're the of are profitability in double-digit You Are these or Is those

Baris Oran

it make it automated you an have it does to make quarter, feasible, and putting new economically time a that of and takes need wins It this well. to a came operate number up. Roughly, Because you resources. longer-term lot have outsourcing, of to business to a Yes. of set you're automated as work, the time from include Then facilities half it takes to contract. facility

work the to and have benefits. hardware to software, together sure achieve You people make

up end to us. for basically those and are trusting achieve the And with contracts higher-margin trusting -- our customers brand relying profitability. and those And their their us on do high-value expertise objectives and them

Jason Seidl

some higher costs? margin start-up but over So time,

Baris Oran

Higher margin time. over

once a period is a Of level, comes it quite efficient. it's But course, profitable very of there's ramp-up and automation. mature it at

Jason Seidl

I great. up wanted follow sounds just Okay. here. to That

sort look which because of your steady I as everyone beverage, some category? more everyone to food As the of markets, but state. grew, on me that that end think What's of would into and one that's was in interesting going

Baris Oran

robustly performing. market the far been has in reflecting nice the are seen in as basically companies the network the frozen our a which noise as on we omnichannel It's on quite pickup have consumer our moment. But other concerned at retail hand,

are So it's now. living the basically that consumer we reflecting in right environment

still facing comp effect. of And into we because our negative QX, of QX consolidation ease our that because extending get impacts, volumes in wins. as the despite that, and plus will are we we network Remember, are growth

Jason Seidl

in will like back be of year? positive sounds and food the it half beverage So the

Baris Oran

outcome And at do the our from a of We network robust quite moment. is food customers back frozen the expect our the and better beverage at year.

Operator

from is David question Barclays. of next The coming Zazula

David Zazula

in know I'm structure. discussed margins the Wincanton second impact wondering the they you open little talk on half. briefly the a a book bit, before, of if I I primarily you've contract could know have acquisition

that to So conversations least structure in contract initially? place, want as far their customers And how gone expecting how to have how they impact? at with as keep your you're

Baris Oran

is Baris. This

process the can take will refer question, margin contribute the I Malcolm moment. on Wincanton at regulatory to limits there me what and the total we what we because can discuss and Let are to on

in is size open to book an Wincanton GXO. compared business, smaller

the and return regulatory start a it's process the peak Although the is integration high we have a start capital, margin integration. on it's completed temporary invested the Once until process. drag they we over,

and slightly the XXXX, into and once given targeting our into and Wincanton we operation. turn is $XX drag synergies This at to I our expect million more cost are Wincanton. QX a This drag in as tailwind we increase consolidating will period was roughly the quarter, it process start margins a of to QX that of more integration

anything As to far would you process, like the add? Malcolm, regulatory as

Malcolm Wilson

Yes. it October, as into U.K. GXO We is in at holiday it during it the process process, does undertook the straight existing that Clipper Thanks, the Well, a very have regulatory being that September, in Baris. time, business, of know deal. it's complete holiday season the it's with terms Wincanton indeed season, season. process well. normal a the regulatory Clearly, and We very positively We anticipate holiday

as integration really and X And actioned our of by course likely of basically. majority will the that the benefits into businesses during Baris it's year the during through onwards. year the see synergy of -- numbers our So January from full indicating, I was we'll coming the being think commence next full-blown quite the

Wincanton, U.K. a about global some like very from our Wincanton we've very good, much to primarily They be been had that business. terms of we're members I fact We're those In with very we've part team feedback organization. our larger Today, positive it's into -- members contact that superstars. of well incredibly business. other team had pleased the points mean welcoming a becoming The the customers. is

right a areas These present expenditure, today, Verticals not activity. aerospace, in of public different now is although coming overall, GXO that around in of to in too it's are prelevant So is operates number numbers far in. lot a anticipate growth such industrial realizing synergies, verticals. Europe. as Wincanton do as putting existing healthy also, importantly, very But defense, not the revenue verticals that soon some start GXO we from

global will fact, these customers. portfolio. it help balance are, many So out in But our customers of

we clearly on into the business. far, future, just with. unable Continental a type with America of and lot aerospace not or of because some particularly U.K. really working transporting North take industrial can the they're and of relationships, of But across in even working -- Europe So Wincanton benefit business opportunity here those with U.K.-centric to see of a customers that they're

with it's U.K. alignment very overall, the rules, which for teams. know teams, this they're forward will done. deal and year benefits really to end our able the in X of very the of business being exciting the right we that coming operate know the looking So together interesting, towards whilst to been that I separately has come regulatory a maximize time out is now, do I

David Zazula

Very helpful. one just I could more. If squeeze in

some the you're could flow you cash time, I second it expecting the At think flow you sounds for X cash in volume the Maybe half. acceleration. reiterated maybe flow like how good as expecting modest guidance, You back sequential in calls square same are the in the acceleration which to cash half?

Baris Oran

the Our tilted in half. tends second cash flow be generally to

year-to-date a So than far, year. better basis, are last on we

So achieve this that of we'll to of free us confidence range guidance to conversion. a flow cash gives lot the able EBITDA be

is very, I be far and as QX And as highlighted, was levels, low QX. out the seen last year, concerned, -- We've as volume and really the in inventory impact them are inventory low going volume low very levels bottom. we comping to

QX business beyond in that's from organic So expect operational higher contribution well. do going But the we as coming an are be expecting our range our to that, in we new wins QX volume. growth from into acceleration remember,

second year. looking we positively of the half are the into So

Operator

coming next Thompson, The Company. is from of Gainey Kevin Davis & question

Kevin Gainey

go if the are are maybe guys What's doing. on that line the demand of the there's talk what to the you customer into for is capitalize integration? guys planning is you of -- that And what that? to sight wanted guys about there? for you maybe opportunity I deployments a how like AI And

Kristine Kubacki

here. Kristine it's Kevin,

use Just existing within year-over-year AI, AI AI in a for to in as our are XXXX. bit value we're And cases add is And about little operations. really point AI up GXO. a an our I deployment XXx mentioned, to talk using exciting of variety

replenishment managing optimizing predicting cycle which, the that about those dramatically and of cases flow, capacity our reduces some think all and SKU of modes I really earlier. this really improves talked picking, And customers and for our efficiencies improved inventory include time, Malcolm

this power AI -- existing sites, solutions. the we're just and will But that I I automated leader getting the of is would started. further say run we way we're on AI So really, the really -- GXO, enhance AI, advantage. already predictive And in changing think we're our this the chain will supply

say this progress more We'll would certainly lot forward. we space. So you watch have update as go on a our I to

Kevin Gainey

does make you affect wholly? subsidiary? that is do you those maybe -- then how them style you if do you typically guys Or And them a acquisitions, more you guys question. guys how still M&A businesses? When this integrate consider like run And

Malcolm Wilson

our our a here. best teams. feel have as we all we're Malcolm to of Obviously, best we customers. for a Yes. our the of business, our them tend with whereby working No, strategy think I our environment the drives all we of very good Kevin, integrate environment because very well business that for It's way it's known members. team associates, for

kind year promoted talent This new roles, was. into around we've already as of it alone, X,XXX people homegrown

coming new benefits, the as company, first -- all but of well. all as new gaining foremost, businesses, integrate employees, of we when into course, and these colleagues So

successful. very been We've

record. very We of making it to track strong what smooth very a have We integrations do we'll when comes we say do business.

But the leverage of we means things -- and confidence. that do a doing disrupt strength We we're doing we're powers the that's that buying synergy of value thoughtfully. smartest that in business to one that particular don't most the degree improved in have what it also, of we in customers efficient cost gives all fact the to Our high that's that business. any geography, most benefits synergy way, And the drives what able way. achieve, procurement us able in

January savings really I will come degree times. will synergy this And done the in from onwards, that what's terms of us from, a It's confidence that start high integration Wincanton believe, of the We've several in in giving purposely very best customers, it's the well, our and of course, very of earnest, end, the our to members team ultimately shareholders. sure and, and our done but the make of interest we'll effect smoothly, in best deal.

Kevin Gainey

allocation on for could in are back the thinking I you then And more Appreciate if Malcolm. Baris. about squeeze the the in that, How guys half year? of capital one color

Baris Oran

are focusing cash. generating We on

in Our process we enterprise opportunities, first deleveraging. to our to growth organic in are business of the is a priorities growth. new continue And invest

we getting about Once the but for working growth. ready we'll will us together aerospace first. regulatory process, business in go the we excited are Wincanton, And that, create integrating and is more organic new in regulatory the Everybody start and approval be to the opportunities, would bodies cost working priority can first need defense. teams industrials, synergies. the -- we we through Our capture for get from really

So our growing priority and debt. be would down paying organically integrating,

Operator

today Mr. Ladies questions. gentlemen, the call would and for to to Wilson, back that Malcolm CEO, I you. over Thank all comments. for like the time have we is turn closing

Malcolm Wilson

that call through you, the really quarter. pleased second our and that. progress the Thank We hosting We're appreciate made today. Donna, with we've thanks for

strong of bigger to a of second business half return looking forward more our even in projects seen through sites larger, complex the this we're on to delivered exciting sales wins, our pipeline, look and into also year. sales of live come We've forward a to We've number pipeline. more going new

type with and a the proven latest pleasing As of batch to see. Baris innovative number of We're robotics. e-fulfillment a lot our leading which very game-changing projects. It's mentioned, of the technologies, of sites, in return of including now the are also of industry right type being humanoid all growing

Kristine whole that's of a norm It's a host exciting really time all facilities. as mentioned, becoming a in our just for in very while, our working business. of AI And initiatives, teams the

continue to returns excited these from us. the that's company, to of we're growth exciting shareholder a ahead As deliver great

us wish So the you. of our call. your rest and much joining very and everybody for I'd thanks with day, on that, a like great to attendance Thank

Operator

concludes and participation. gentlemen, this you conference. Thank Ladies your for today's

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

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