GXO Logistics, Inc.

Welcome to the GXO third quarter 2024 earnings conference call and webcast. My name is Rob, and I'll be your operator for today's call. At this time, all participants are in 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 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 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 the 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 on its website. Unless otherwise stated, all results on this call are reported in the 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 far-looking statements and non-GAAP financial measures, in the Investors section of the company's website. I'll now turn the call over to GXO's Chief Executive Officer, Malcolm Wilson. Mr. Wilson, you may begin.

Thanks, Rob. And good morning, everyone. I appreciate you joining us today for our third quarter 2024 earnings call. With me in Greenwich are Baris Oran, our Chief Financial Officer, and Christine Kebeke, our Chief Strategy Officer. GXO has delivered a stellar third quarter. We've posted record revenues and adjusted EBITDA We have increasing momentum in our business, including continued acceleration in our sequential organic growth. During the quarter, we signed $226 million of new business wins. We continue to grow with top brands like Guess, Gymshark, LG, and L'Oreal. We've recently expanded our partnership with Zalando and, together, opened the largest outsourced e-commerce warehouse in France, which is highly automated. Our sales pipeline has grown 30% year over year and now stands at over $2.4 billion of high-quality opportunities, its highest level in more than two years. As of the end of the third quarter, we've won about $750 million of new business year to date. We've got several major projects that we expect to sign in the fourth quarter. 2024 has the making of being a record-setting year for new business wins for GXO. Looking ahead to the fourth quarter, we're ready for the peak season. We've mentioned that we saw the bottom of the inventory cycle in the fourth quarter of last year. As we head into this year's peak, we're seeing inventory levels returning to normal and demand for e-commerce capacity is accelerating. Our customer service satisfaction scores are at an all-time high and our dependability has recently been recognized by Newsweek. which ranked us the top logistics provider among America's most reliable companies. As commercial activity picks up momentum, our technology differentiation through the deployment of automation and AI is creating a multiplier effect in the efficiencies we deliver for our customers. On the back of our real-world results, we are proud to have been recognized with a Supply Chain Excellence Award for our leadership in warehouse AI by Logistics Manager a few weeks ago. Our technology differentiation is also helping us win new business. Our ongoing strong sales performance coupled with our targeted M&A in key geographies and hard to penetrate verticals is driving our long-term growth. In Germany, We've jump-started the growth of our business on the back of our acquisition of Clipper in 2022. Our state-of-the-art site in Dormegen is at full capacity. We've had a successful start-up of the 20-year, billion-dollar contract with Levi's that we announced in May. And we have a strong pipeline of other opportunities in Germany. More recently, on the back of our acquisition of PFS in 2023, we've grown our beauty and wellness business with several leading brands, including Beauty Pie, Glossier, and L'Oreal. Similarly, we believe our acquisition of Wincanton will enable us to accelerate our growth in attractive verticals like aerospace, industrials, and public sector. We're pleased to note that we've recently signed a cornerstone deal in Europe with a leading U.S. aerospace provider. In light of this continued strong performance, we're reaffirming our full year guidance for 2024. We have clear evidence we're through the trough and we intend to build from here. Looking further ahead in 2025, we expect an acceleration of growth across all three regions. Continental Europe is leading the pack with our growth in Germany and the ramping up of several large automated warehouses. Our strong sales performance and our long-term contractual business model give us confidence in our multi-year growth outlook and 2027 targets. Baris will now walk you through the quarter and our reaffirmed guidance. Baris, over to you.

Thanks, Malcolm. Good morning, everyone. In the third quarter, we generated record revenues of $3.2 billion. Our year-over-year revenue growth of 28% means we are on track to meet our 2027 top-line growth target of $15.5 billion, to $16 billion. In the quarter, we saw organic revenue growth of 3%, which has accelerated sequentially throughout the year. The improving trajectory reflects the growing contribution of new facility startups each quarter, and we expect it to continue as we move into 2025. Our adjusted EBITDA this quarter was also record at $223 million, up 12% year-over-year. We have also seen sequential margin expansion throughout the year, and we expect this trend to continue as we see a margin uplift due to a better space utilization in our multi-tenant network. Our adjusted deleted earnings per share was 79 cents, up 14% year-over-year. Year-to-date, we have delivered $363 million of cash flow from operations, which is an increase of 6% year-over-year. Our free cash flow year-to-date is $124 million, and we are on track to deliver over 30% adjusted EBITDA to free cash flow conversion for the full year. Our operating return on invested capital remains well above our target at 38% as we continue to invest in high-return projects to fuel our organic revenue growth, in line with our capital allocation strategy. Our balance sheet is growing stronger. Our net leverage was 2.9 times as of the end of the third quarter, down from 3.1 times last quarter. We expect leverage levels of around 2.5 to 2.6 times by the end of this year. as we prioritize paying down debt after Vincanton acquisition and about two times by the end of 2025. Vincanton is performing above our pre-deal expectations, delivering double-digit revenue growth and reinforcing our excitement about this acquisition. Our focus in 2025 will be accelerating our organic growth and the integration of Vincanton. M&A is not on our short-term agenda. We are reaffirming our 2024 guidance. This year, we expect to deliver organic revenue growth of 2 to 5 percent, adjusted EBITDA of $805 million to $835 million, adjusted EBITDA to free cash flow conversion of 30 to 40 percent, and adjusted deleted earnings per share of $2.73 to $2.93. We also expect to continue to deliver an operating return on invested capital of above 30%. We are executing well on our value creation framework. As a secular growth enterprise, we deliver predictable operating return on invested capital and resilient growth in revenue, adjusted EBITDA, adjusted diluted earnings per share, and cash flow throughout the cycle. we remain laser-focused on creating long-term shareholder value. With that, I'll pass the mic to Christine. Christine, over to you.