GXO Logistics, Inc.

Welcome to the GXO first quarter 2024 earnings conference call and webcast. My name is Camilla, 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 the company's guidance. During this call, the company will be making certain forward-looking statements within the meaning of applicable securities laws, which by their nature involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those projected in the forward-looking statements. A discussion of factors that could cause actual results to differ materially is contained in the company's SEC filings. The forward-looking statements in the company's earnings release 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 extent 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 earnings 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 important 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.

Thanks, Camilla, and good morning, everyone. I appreciate you joining us today for our first quarter 2024 earnings call. With me in Greenwich are Baris Oren, our Chief Financial Officer, Richard Causton, our Chief Revenue Officer, and Christine Kubecki, our new Chief Strategy Officer. As you will have seen two weeks ago, we issued preliminary results for the first quarter of 2024 in conjunction with our bond offering to finance the acquisition of Wincanton. These results reflect the resiliency of our business model and the acceleration of our growth. Today, we'll walk you through our first quarter and discuss our outlook for the remainder of this year, as well as for our longer-term 2027 targets. GXO had a strong start to 2024. We generated revenue of $2.5 billion, up 6% year-over-year, and adjusted EBITDA of $154 million. We delivered positive organic revenue growth for the quarter and continued to gain market share. When we last spoke, we said that the fourth quarter was the bottom for organic growth, and that's reflected in the sequential improvement in the first quarter, as well as the sales and pipeline activity we're seeing. We signed approximately $250 million of new business, up 55% year over year, including new contracts with Boeing, Guess, Michelin, Puma, and WH Smith. More than half of these new contract wins came from customers outsourcing to us or partnering with us for the first time. Earlier this week, we announced a landmark new 20-year partnership with Levi's in Germany. where we have been building our presence following our acquisition of Clipper. This will be a highly automated, newly outsourced operation with a lifetime value of nearly $1 billion. This is just one example of the trend we're seeing where customers are looking for longer term partnerships to address their fulfillment needs. To that end, our sales pipeline is growing and ended the quarter at $2.2 billion, a 12-month high. We've more than replenished the pipeline after converting a quarter of a billion dollars of new wins. We're continuing to see larger deal sizes and longer contract lengths. Additionally, the turnover of the pipeline is accelerating, creating more new business opportunities. Another highlight of the quarter was the announcement of the acquisition of Wincanton, which we closed last week. Wincanton exemplifies our M&A strategy. It expands GXO's presence in strategic growth verticals in the UK, including aerospace and industrials, providing GXO with a springboard to offer these services across Europe, and it will be accretive to earnings per share in 2024, excluding synergies on a pro forma basis and double digit accretive, including full run rate cost synergies. Wincanton builds upon our proven track record of leveraging newly acquired platforms to drive growth through revenue synergies. For example, since the Clipper acquisition, we've executed on our strategy to establish a meaningful operating presence in Germany, the largest economy in Europe. As of the end of the first quarter, Germany is the fourth largest pipeline in all of GXO and one of the fastest growing. We're converting it with high-quality deals like Levi's. Similarly, when we acquired PFS in the fourth quarter of 2023, we set out to leverage the combination of GXO's global footprint with PFS's leadership position in health and beauty, jewelry, and luxury. Since the acquisition, we've integrated the two businesses and expanded legacy PFS customers like Glossier and Refi Beauty across multiple geographies. This is proof positive of our execution of our M&A strategy, and especially of our ability to capitalize upon the strengths of companies we acquire. We're speaking to major global customers every day, and as Richard will discuss in a moment, a consistent thread in our discussions is the expectation of a gradual recovery of consumer goods demands. Businesses are building for the future, planning their fulfillment strategies to meet their expected needs, and we're positioning ourselves to take market share by providing best-in-class solutions. One way we're doing this is through our intensified commitment to leading the market in automated and AI-driven fulfillment. Automation is a key tenet of our value proposition. And we're a first mover in trialing the integration of cutting-edge automation like humanoids and AI inside the four walls of the warehouse. We've recently introduced some exciting innovations in AI. First, the warehouse optimization pilot we mentioned last quarter was a success, driving a productivity increase of approximately 15% and we're rolling out the app across our sites as we speak. Second, we've recently piloted a proprietary workforce management tool, which we've developed in-house. Our tool makes more than 15 million decisions per minute to streamline inventory replenishment, adding about 7% of capacity at no additional cost. We'll be deploying this solution broadly across our operations starting this year. All this to say, I'm delighted with the way our business is performing, and we anticipate continued acceleration in organic revenue growth throughout 2024 and beyond. With our growing pipeline and accelerating pace of new business wins, Our focus on automation and sales excellence and the pace of outsourcing in this $450 billion total addressable market, GXO is set to take significant market share over the long term. Now, I'll hand you over to Richard to update you on what we're hearing from our customers. Richard, over to you.

Thanks, Malcolm. Good morning, everyone. I've had the pleasure of meeting some of you over the past few years as the leader of GXO's European business. In my new role as Chief Revenue Officer, my mission is to convert the significant market opportunity Malcolm just mentioned into outsized growth for GXO. And we're off to a great start of doing just that. As Malcolm highlighted, our new sales win signed in the first quarter totaled $250 million. which was an increase of 55% year on year. And we're on track to outperform our $1 billion of new wins from 2023. We serve the bluest of the blue chips. And what we're hearing from our customers, both current and prospective, is the need to build efficiencies into their operations to support their future growth. As a result, we're seeing demand strengthening. I'd like to underline a few of the sales highlights from the quarter, which underpin our confidence in our growth trajectory. First, our pipeline stands at $2.2 billion, up quarter on quarter. We added more than a billion dollars of new opportunities in the first quarter alone. Second, our customers are making faster decisions to outsource their supply chains, reflecting returning confidence in their long-term outlook. As a consequence, Sales cycles are shortening, and our pipeline is delivering results faster, with deals getting larger and contracts getting longer. Third, significantly, more than half of our wins in the first quarter were with customers outsourcing or turning to GXO to support them for the very first time. And finally, in addition to new logos, we're also expanding our relationships with existing customers. We serve more than a quarter of the Fortune 100 companies, and the success of our land and expand strategy is evident in that half of our revenues come from our customers we partner with in more than one country. We're seeing these trends develop across our regions. For example, this coming Friday, we'll be cutting the ribbon on a new warehouse that is the largest building in the state of Maryland. We're supporting personal care and appliance manufacturer Conair in this 2.1 million square foot facility. This solution consolidates three sites into a single automated operation that handles all of Conair's brands across retail and direct to consumer, enabling their growth and combining fulfillment with high value-added services like product testing. We've also recently expanded our 13-year partnership with global apparel company Guess, originally in Europe, across the ocean to the U.S., turning it into a global partnership. Guest had previously run their North American operations in-house, and they've entrusted us to help them unlock value in their supply chain by outsourcing. We now operate three sites for Guest in Italy, the Netherlands, and now the US. These are examples of our consultative approach where we engage with our customers at the highest levels of leadership to design a solution that fits their needs. In Europe, as Malcolm mentioned, we just announced our landmark Levi's win. We're delighted to take on a newly outsourced, highly automated operation for an iconic global brand. I was in Germany last week to visit the site, which is Levi's Super Hub, allowing Levi's to supercharge their omnichannel growth strategy. It was extremely exciting to kick off the partnership. The ambition and the momentum on both sides are palpable. This is Germany's greenest warehouse. with phenomenal sustainability features that raised the bar in the logistics industry. This new win is especially significant because it exemplifies why a brand such as Levi's partners with GXO to transform their operations and drive a competitive advantage through their supply chain. As Malcolm mentioned, in the past few months, we've scaled up our sales and account management teams while intensifying our focus on high growth verticals and geographies, to really capitalize on the opportunity. We've had an excellent first quarter. And our investments and our team strategy and processes are already translating to pipeline growth and new partnerships with blue chips across the globe. This is why I'm confident that we'll deliver strong growth in new sales wins in 2024 and beyond, taking share of our enormous addressable market. And with that, I'll pass the mic to Baris to take you through our detailed financials, our 2024 guidance, and our 2027 targets.