GXO Logistics, Inc.

Welcome to the GXO Q1 2022 Earnings Conference Call and Webcast. My name is Darrell, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the company regarding forward-looking statements, the use of non-GAAP financial measures, and company guidance. During this call, the company will be making certain forward-looking statements within the meaning of applicable securities 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. A discussion of the factors that could cause actual results to differ materially is contained in the company's SEC filings. The forward-looking statements and the company's earnings released or made on this call are made only as of today, and the company has no obligation to update any of these forward-looking statements except to extents required by law. The company also may refer to certain non-GAAP financial measures as defined under applicable SEC rules during this call. Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earning release and the related financial tables are on its website. Unless otherwise stated, all results reported on this call are reported in United States dollars. The company will also remind you that its guidance incorporates business trends to date and what it believes today to be appropriate assumptions. The company's results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes in global economic conditions, and consumer demand and spending, labor market and global supply chain constraints, inflationary pressures, and the various factors detailed in its filings with the SEC. It is not possible for the company to actually predict demand for its services, and therefore actual results could differ materially from guidance. You can find a copy of the company's earnings release, which contains additional information regarding forward-looking statements and non-GAAP financial measures in the investor section on the company's website. I will now turn the call over to GXO's Chief Executive Officer, Malcolm Wilson. Mr. Wilson, you may begin.

Thank you, Operator. Good morning, everyone, and welcome to GXO's first quarter 2022 earnings call. Joining me today are Baris Oran, our Chief Financial Officer, and Mark Manduka, our Chief Investment Officer. We have started 2022 with outstanding top and bottom line performance. Our revenue grew 14% year over year in the first quarter of 2022. And our organic revenue, which excludes the impact of M&A and foreign exchange, grew by 19%. This is our highest first quarter performance ever. Our adjusted diluted earnings per share increased by 59% year over year. Finally, our new business wins of $344 million is also a record for the first quarter, underscoring the growing demand for our best-in-class solutions. As a result of this continued strong performance, we are raising our full year organic revenue guidance. We are clearly in an environment where supply chains have become far more complex and will require much greater scale and innovation. Our role as a trusted long-term partner to global businesses is more critical than ever, which is why we continue to see record new business wins, a huge sales pipeline and increasing demand for customer first-time outsourcing. All of our verticals are growing, both organically and through new customer wins, and it's worth taking a moment to discuss where we are winning new business. While we continued to expand the scope of operations with existing customers and gain market share during the first quarter, first-time outsourcing, especially in the e-commerce and omnichannel sector, was again the largest source of our new business wins. Our first-time outsourcing contract wins included... BT, Carrefour, Decathlon, Raytheon and Zalando. We saw expansion of operations with several existing customers including Abercrombie & Fitch, Diversi, Ingersoll Rand and iRobot. In the short term, as physical retail reopens, we have seen some shifts from e-commerce back to brick and mortar retail. However, our customers continue to invest heavily with us in developing the direct-to-consumer channel. When you combine this with our high revenue retention levels, we have great confidence in the robust nature of our growth trajectory in 2022 and the coming years. In early April, we were very pleased that Clipper Logistics shareholders voted in favour of our offer to acquire the company. We anticipate that this acquisition will be highly accretive to GXO's financial results, our vertical expertise and our geographic coverage. At GXO, we are proud of the way we do business and we have made excellent progress establishing ourselves as the logistics partner of choice for forward-looking companies that share our commitment to ESG. As a new company, we have the unique opportunity to tailor our environmental, social and governance strategy to what matters most, our people, our partners and our planet. With the recent release of our inaugural ESG report, we're off to a strong start. In the report we provide updates on the progress towards our global targets, share details of how we have delivered against our stakeholder priorities in the first months as an independent company and we will preview our plans for the years to come. I will now hand the call over to Barish who will talk you through our quarterly performance in greater detail. Barish, over to you.

Thank you, Malcolm, and good morning, everyone. To start, I'm going to review our record first quarter results, and I'll discuss the durability and visibility of our contractual business model. In the first three months of the year, we delivered 19% organic revenue growth, our fifth consecutive quarter of double-digit growth, and secured a record number of new business wins. Net income attributable to shareholders in Q1 2022 was $37 million, which compared to $14 million a year ago. Adjusted EBITDA grew to $155 million, up from $143 million on a pro forma basis a year ago. And adjusted diluted earnings per share increased by 59% year over year. Our return on invested capital was stellar at over 30%. We are implementing larger and more complex solutions on an unprecedented scale. You see this in the investments we have made in the first quarter starting up these operations. This will drive full-year margin expansion, more visible in the second half of the year and into 2023. The average contract duration of our wins was approximately six years, which continues to extend our overall contract-wide. The strong secular trends within this business are demonstrated by the fact that we have raised our revenue growth guidance for the year. We have also introduced an adjusted EPS guidance of between $2.70 and $2.90 per share, implying a growth range between 29% and 39% year-over-year. Turning to cash flow. Our business in the first quarter typically sees modest cash outflows due to seasonality. This quarter was no different. $16 million in cash outflows in Q1 2022 versus $20 million in cash outflows in Q1 2021. As you may recall, we said that our growth capex to sales is approximately 2%. And as we grow and implement new business, we have a modest working capital drag. We remain very confident in delivering our guidance of 30% free cash flow conversion from EBITDA in 2022. Our investment-grade rated balance sheet continues to be rock solid, with leverage at under one time the last 12 months adjusted EBITDA. To conclude, GXO's high earnings predictability continues to be underwritten by a stellar new business pipeline, longer and longer contract durations, a highly variable cost base, inflation pass-throughs, minimum volume guarantees, and best-in-class revenue retention rates. Our first quarter results clearly demonstrate that this business is not just an exciting structural growth story, but one in which we expect to deliver outstanding profits and strong cash flows with great returns for our investors. I'll now hand the call to Mark, who will elaborate our record wins, technology investments, ESG achievements, as well as our raised growth guidance. Over to you, Mark.