GXO Logistics, Inc.

Welcome to the GXO Third Quarter 2025 Earnings Conference Call and Webcast. My name is Shamali, 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 forelinking 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 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 the 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, action 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 will now turn the call over to GXO's Chief Executive Officer, Patrick Kelleher. Mr. Kelleher, you may begin.

Thank you, and good morning, everyone. Welcome to the call. Also joining me on our call today are Barish Orin, Chief Financial Officer, and Christine Kabaki, Chief Strategy Officer. This is my first opportunity to speak with you as the CEO of GXO. I am looking forward to discussing our third quarter results and sharing some early reflections from my first 90 days with the company. I'd like to begin by thanking my predecessor, Malcolm Wilson. Our transition has been very smooth, enabling me to hit the ground running. I've visited many sites across the US, UK, and continental Europe. Malcolm played a pivotal role in establishing GXO as the global leader and I am so energized to build on the strong foundation that he set. That strong foundation is evident in our third quarter results. GXO drove record quarterly revenue of $3.4 billion with organic revenue growth across every region. Adjusted EBITDA grew 13% from last year to $251 million. New business wins of $280 million were up 24% year over year, including a fully automated win in the U.S., with one of the fastest growing global sportswear brands. Alongside significant wallet share expansion with existing customers, our visibility to growth continues to improve with nearly $700 million of revenue already secured for 2026, an increase of nearly 50% compared to this time last year. I want to recognize and thank our GXO teammates for these results. Our people make the difference with attention to detail and a passion for providing the very best customer service. And I want to welcome the Wincanton teammates to the GXO family. The Wincanton integration is underway and primed to unlock growth opportunities for us across Europe, most notably in the industrial and aerospace and defense sectors. The Wincanton and GXO business units were integrated in October with back office functions following this month. We are actively collaborating on a range of strategic customer tenders and have already realized our first win as a combined team. Synergy realization remains on track. Looking ahead to next year, further growth in new business wins, coupled with the WinCamp integration now underway, gives us confidence that we'll see growth and margin expansion in 2026. Barris and Christine will discuss our results in the new business wins in more detail later in the call. Since I joined in August, I've been on the road under the hood of our operations and culture. I've connected with our leaders and operations teams engaged with investors, customers, and prospects, and done a lot of listening to understand what's working and where our opportunities exist. As many of you know, logistics is in my blood. Over the past 32 plus years, I've held operational, commercial, and management roles across every facet of the supply chain, which has given me a unique view of the operational and commercial landscape and opportunities within it. I've kept a close eye on GXO since the spin, We are a category-defining company that put contract logistics on the map and one that I'm honored to lead. A personal motto that has fueled me and the teams that I have led is, even more, even better. And it exemplifies the opportunity that I see at GXO, an impressive track record of growth, nearly doubling the size of the business since the spin, and with the attitude of a high-performing team, a clear opportunity to achieve even more. Profitable growth is the priority. Organic growth is a critical element of this, and every decision and action will be taken with an eye to accelerating this engine. I see clear opportunities to expand margins as we focus on profit market verticals and geographies, leverage technology to drive performance, and share in the value that we generate for customers. I'd now like to take a moment to share some more detailed views on these two key areas. Number one, first, where I see the opportunity to drive even more organic growth, and second, to ensure even better execution behind it because the two go hand in hand. Despite our global scale, we hold less than 3% of the global TAM, so there's a long runway of growth ahead. With a sharp commercial strategy on where to play and how to win, there are clear near-term opportunities to accelerate in North America especially and across high-growth customer segments and verticals globally. First, North America. GXO is a strong and well-established position in the UK and Europe with meaningful opportunities for continued growth. North America represents a similar opportunity for us, one of the largest and fastest growing logistics markets globally with a total addressable market in excess of $250 billion. We are energizing our approach to meet its dynamics and opportunities. Michael Jacobs joined us this week as the new president of the Americas and Asia Pacific region. Michael is a 30-year industry veteran whom I've known for more than two decades. He brings terrific experience from Ferguson Enterprises and Keurig. He has a proven track record of managing complex supply chains, increasing productivity through automation and robotics, improving cost and service. To further capitalize on the North America opportunity, we are strategically reallocating resources towards sales, solutions, and digital marketing, all to accelerate organic growth. Second, Regarding customer segments, technological innovation continues to redefine what's possible within the warehouse. As I visited our sites, I have seen firsthand use cases of AI in large retail operations, including volume forecasting and proactive replenishment. These highlight the opportunity to further improve our cost to serve. This is already a differentiator for GXO, but greater focus in this area will enable us to grow our market share, especially with midsize companies. market opportunity in excess of 100 billion TAM. Lastly, within our verticals, we are leaders in retail, luxury, technology, and CPG, to name a few. In recent years, we've made strategic inroads into high growth sectors like aerospace and defense, data centers, industrial, and life sciences. In aerospace and defense, as an example, we have deep competency in North American. Following our acquisition of Wincanton, we are one of the leading supply chain providers to the UK defense industry. We can leverage our relationships and expertise to export this capability to other markets. In life sciences, our landmark $2.5 billion 10-year deal with the UK's NHS supply chain went live flawlessly last month, and we are already exploring opportunities to expand that relationship, as well as our overall growth in the life sciences space. In short, we have all the ingredients for growth. You'll see us doubling down on what differentiates us and being disciplined about where we play and how to win. Turning to operations, execution is one of our greatest strengths. As I visited our sites, I have seen countless lighthouse examples of operational excellence. And as we accelerate growth, our operating model must keep pace with our growth ambitions. I see significant opportunities to benefit from sharing solutioning best practice globally, increased site-level productivity through our technological leadership, and a clear, rational, and global approach to customer relationships and pricing. That's why we've introduced the Chief Operating Officer role to take the very best of what we already do so well and scale it consistently across our global operations. We believe operational discipline will not only drive margin expansion but also accelerate profitable growth by making us even more competitive. In closing, we are embarking on a new era of growth. GXO is a fantastic company operating in a fast-growing, highly fragmented industry with a path towards higher organic growth, structurally higher margins, and strong free cash flow. There is a fantastic opportunity to generate strong shareholder returns, and with this in mind, I will be focused on allocating capital to generate the highest possible returns with organic growth as the priority. Under my leadership, you can expect a sharp commercial focus, strong operational discipline, and clear, consistent communication about our progress. I look forward to sharing our strategic plan to deliver long-term value for our shareholders in future quarters and at an investor day in 2026. With that, I will hand the call to Baris.

Thanks, Patrick. Building on the strong momentum here today, GXO's third quarter performance reflects the power of our resilient business model. With record revenue, higher margins, and robust free cash flow, they are delivering on our commitment to drive profitable growth. In the third quarter of 2025, GXO delivered record revenue of $3.4 billion, up 8% year-over-year, of which 4% was organic. Every region delivered organic revenue growth, highlighting the value of our contractual business model throughout a dynamic trade and macro environment. We now have about $800 million of incremental revenue secured for 2025, which in combination with a retention rate in the mid-90s puts us in excellent shape to achieve our full-year organic growth target. We delivered adjusted EBITDA of $251 million, up 13% from last year. Our margins expanded by 100 basis points sequentially and were up 30 basis points year over year. The margin increase was driven by improved site-level productivity and the sizable automated startups we discussed last quarter, which matured faster than expected. We recorded net income of $60 million and adjusted net income of $91 million. Our diluted earnings per share was 51 cents, and our adjusted diluted earnings per share was 79 cents. Our free cash flow in the third quarter was $187 million, and we are on track to deliver our target adjusted EBITDA to free cash flow conversion for the full year. We remain disciplined in our capital expenditures and working capital management, which allows us to continue to invest in our business with high returns. Our operating return on invested capital improves further and remains well above our target, driven by improved operating performance. Our leverage levels improved to 2.7 times net debt to adjusted EBITDA, even after executing $200 million share buyback in the first half of the year. As Patrick mentioned, the integration of WinCanton is moving at pace, and we are on track to deliver the run rate cost synergy of $60 million by the end of 2026. We also expect to gain significant revenue synergies over the coming years. We remain laser-focused on disciplined capital allocation. We continue to prioritize investments that accelerate our organic growth and drive the greatest returns. Our focus for the remainder of the year will be to deliver strong free cash flow, further deliver our balance sheet, and set the foundation for 2026. Given our excellent operating performance year-to-date, we are reaffirming our full-year guidance. As a reminder, for 2025, we expect to deliver organic revenue growth of 3.5% to 6.5%, adjusted EBITDA of $865 million to $885 million, adjusted rooted earnings per share of $2.43 to $2.63, and adjusted EBITDA to free cash flow conversion of 25% to 35%. With strong operating performance, a solid financial foundation, and a robust sales pipeline, GXO's resilient and predictable business model continues to deliver exceptional value to both our customers and shareholders. With that, I'll pass the mic to Christine. Christine, over to you.