GXO Logistics, Inc.

Welcome to the GXO fourth quarter and full year 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 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 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 meeting 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 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 Investors section on the company's website. I'll now turn the call over to GXO's Chief Executive Officer, Malcolm Wilson. Mr. Wilson, you may begin.

Thank you, Rob, and good morning, everyone. I appreciate you joining us today for our fourth quarter and full year 2024 earnings call. With me in Greenwich are Barry Shoran, our Chief Financial Officer, and Christine Kabecki, our Chief Strategy Officer. In 2024, we had some great operational highlights. We delivered record revenue and adjusted EBITDA. Notably, our adjusted EBITDA grew 30% year over year in the fourth quarter. We drove organic growth acceleration every quarter throughout the year. We had a stellar sales year, caused over a billion dollars of new business wins for the second year in a row, grew our relationships with our customers, and won a landmark $2.5 billion deal in the health sector. For the fourth quarter of 2024, we generated revenue of $3.3 billion and we delivered adjusted EBITDA of $251 million in line with our expectations. For the full year 2024, we generated $11.7 billion of revenue, growing 20% of which 3% was organic. I'd like to highlight that closing the year at $11.7 billion means we've nearly doubled our revenue since 2020, which was the last year before we spun off from XBO. We entered 2024 expecting to deliver $760 million to $790 million of adjusted EBITDA. During the year, we updated our guidance to take into account our acquisition of Wincanton, and we're very pleased that we've delivered $815 million of adjusted EBITDA for the full year in line with our expectations. 2024 was the second year in a row that GXO caused over a billion dollars of new business wins. We've won exciting contracts with new brands like Levi's, LG, Puma, and the German coffee chain Chibo. We also grew enormously with our existing customers in the year. Our land and expand strategy has been a cornerstone of our long-term partnerships, and we expanded into new geographies with more than 40 of our legacy customers, including Boeing, Guess, Michelin, and Nespresso. Also in the fourth quarter, we won a major new contract, a long-term $2.5 billion total lifetime value fulfillment operation in the healthcare sector. This opportunity came through a legacy relationship we gained from our acquisition of Clipper Logistics in 2022. The Clipper deal also gave us a foothold in Germany And I'm pleased to report that we've grown our revenue there by 60% year over year as of the end of 2024. Germany is now our fastest growing market. These accomplishments are proof positive of our successful M&A and commercial strategies. On that note about M&A, in 2024, we completed our acquisition of Wincanton. This is a growing business that will bring us expertise in key verticals like aerospace and industrials where we plan to accelerate our growth. Turning to our outlook for this year, we expect to deliver 3% to 6% organic growth with $840 million to $860 million of adjusted EBITDA for the full year 2025. Our guidance range reflects our strong core business growth, which is netted against capacity realignments by a small number of long-term customers where we have worked together to adjust their footprints to fit their future needs. Our guidance also reflects the impact of the current FX environment and our prudent expectations on the timing of in-year integration benefits from Wincanton. We expect to have an interim update on the CMA's regulatory review in the next week. Before I pass the mic to Baris to cover the detail behind our financial targets, I'd like to touch upon the key drivers of our growth in 2025 and beyond. First, the fundamentals of our business. The structural tailwinds of outsourcing, automation, and e-commerce will continue to drive our long-term growth. Brands around the world are facing unprecedented supply chain complexity. And we're bringing the benefit of our scale, expertise, and tech-enabled solutions to help them solve their most complex problems. Second, Leadership in technology continues to be a key differentiator for GXO. We've long been the leader in tech-enabled fulfillment. And in 2024, we made rapid progress towards our vision of the AI-enabled warehouse. I'll ask Christine to give you more details on that in just a moment. Third, we strengthened our sales organization in 2024. Not only in our traditional verticals, but in new verticals and geographies. These investments have already begun to bear fruit. We closed more than a billion dollars of new business wins in 2024, including in strategic growth areas like the health sector and a range of verticals in Germany like aerospace and defense, food and beverage, and omnichannel retail. In North America, we won significant business in the technology sector, including a major contract managing data centers. Our pipeline is up 15% year over year as of the end of the fourth quarter, and our pipeline in the Americas is up 20%. This momentum will continue to drive our long-term growth. With that, I'll hand you over to Baris, who will walk you through the financials and our guidance.

Baris, over to you. Good morning, everyone. Before reviewing the numbers, I would like to particularly highlight the strong sales year we have had. First, as Malcolm mentioned, we won more than a billion dollars of new business in 2024, with an average contract length above our long-term average of five years. including a massive win in the health sector, which is a target growth vertical for us. Second, we noted last quarter that demand for new e-commerce facilities was growing, and we are pleased to note that we finished the year with about 60% more new business won in e-commerce year over year. And third, we finished the year with a robust pipeline, giving us confidence in our long-term growth. For the full year of 2024, we generated revenue of $11.7 billion, growing 20%, of which 3% was organic. Our organic revenue growth accelerated sequentially throughout the year, led by our omni-channel retail and consumer goods business, We delivered adjusted EBITDA of $815 million, growing 10%. Our adjusted EBITDA margin was 7% for the full year. Our adjusted diluted earnings per share was $2.80, up from $2.59 for the full year of 2023. Our operating income for the full year 2024 was and we delivered net income of $138 million. In the fourth quarter, we generated revenue of $3.3 billion, growing 25% year-over-year. We delivered adjusted EBITDA of $251 million, growing 30% year-over-year. Our adjusted diluted earnings per share was $1 in the fourth quarter, up from $0.70 in the fourth quarter of 2023. Our fourth quarter operating income was $101 million, growing 16% year-over-year, and net income was $100 million, growing 37% year-over-year. Our operating return on invested capital 46% remains well above our long-term target. In 2024, we again converted more than 30% of our adjusted EBITDA to free cash flow. We delivered an outstanding $127 million of free cash flow in the fourth quarter. We remain laser-focused on capital effectiveness and continue to prioritize investment in technologies and services that drive the greatest return for our customers. Our balance sheet continues to strengthen. Our net leverage was 2.7 times as of the end of the fourth quarter, down from the peak of 3.1 times following the acquisition of Vincanton in the second quarter. As we focus on deleveraging and integration throughout 2025, M&A is not on our short-term agenda. Now turning to our guidance. For the full year 2025, we expect to deliver organic revenue growth of 3% to 6%. We anticipate a sequential acceleration of organic growth throughout the year, similar to what we have seen in 2024. Given the phasing of new business wins and the customer capacity realignment impacting the first quarter, Our organic growth trajectory is underpinned by our strong sales performance, where we closed more than $1 billion of new business wins for the second year in a row. We have $627 million of incremental revenue booked for 2025, which is 10% higher than where we were at this point last year. And at the same time, our pipeline has grown 15% year over year as of the end of 2024. Our investments in our sales organization are creating the momentum for our long-term growth. We also expect to deliver $840 million to $860 million of adjusted EBITDA. As Malcolm highlighted, our guidance range reflects a sequentially increasing adjusted EBITDA throughout the year. This improvement will be driven primarily by the maturity ramp-up of new startups, progressively offsetting the impact of a few customer capacity realignments in the first quarter. Double-clicking on the realignments, post-peak season, we have worked with a few of our large customers to realign their footprints to fit their future needs. You will note from our revenue guidance that we have been able to almost completely offset this rationalization impact through new wins. But due to the maturity curve of startups, we'll see improved profitability throughout the year. This means that these realignments will predominantly affect our adjusted EBITDA in the first quarter. We expect our full-year adjusted diluted earnings per share to be in the range of $2.40 to $2.60, reflecting our guidance on adjusted EBITDA and an increase in our effective tax rate in 2025. At the midpoint of our range, we expect to convert about 30% of our adjusted EBITDA into free cash flow, in line with our historical performance. We expect our growth to continue to accelerate sequentially throughout 2025. We are working on a number of measures to improve our operating profitability, including continuous improvement measures at the site level, and when we begin the integration of Wincanton, our results will accelerate faster. I'll pass the mic to Christine. Christine, over to you.