GXO Logistics, Inc.

Welcome to the GXO first quarter of 2026 earnings conference call and webcast. My name is Sachi, and I will 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 and 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 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, 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, Patrick Kelleher. Mr. Kelleher, you may begin.

Good morning, and thank you for joining our first quarter 2026 results call. Joining me today are Mark Suchinski, our Chief Financial Officer, and Christine Kabaki, our Chief Strategy Officer. Before we get into the quarter, I want to take a moment to welcome Mark, who is joining us for his first earnings call as our Chief Financial Officer. Mark's decades of experience driving enterprise performance through labor productivity, contracting, and pricing improvements, as well as deep expertise in aerospace and defense, which is one of our most important growth verticals, is exactly what we need as we accelerate growth and expand margins. His track record of driving value creation aligns directly with where we're headed in this new era of growth, with Mark on board we have the right team in place to deliver on our strategic priorities. A big welcome to you, Mark. Thank you, Patrick. I'm truly excited to be part of the GXO team. And we are thrilled to have you. Now turning to the quarter. In the first quarter, we delivered revenue of $3.3 billion, up 11% versus prior year, and adjusted EBITDA of $200 million, up 23%. Adjusted diluted EPS increased 72% to 50 cents. Organic revenue growth was 4% in the quarter with every region contributing, demonstrating the resilience and global strength of our business model in a dynamic geopolitical environment. We entered 2026 with strong revenue visibility. We have continued to build on that momentum. In the first quarter, we added $227 million in new business wins across key verticals including notable contracts in aerospace and defense, several technology wins, including further growth in AI cloud infrastructure with hyperscalers, and an expansion with the NHS in the UK. In consumer, we secured a meaningful new partnership with L'Oreal in Europe. We are also seeing encouraging momentum in North America with our largest win in the quarter coming from our rapidly expanding aerospace and defense business. These wins demonstrate strong commercial momentum and give us confidence in our ability to accelerate organic growth in 2026. We now have $870 million of expected incremental new business revenue already secured for 2026, up 19% compared to this time last year, giving a strong line of sight into the balance of the year, and we are already beginning to build visibility into 2027. Mark and Christine will discuss our financial outlook and new business wins in more detail shortly, but I'm pleased to announce that after a strong start to the year, we are raising our full year guidance for adjusted EBITDA and adjusted EPS. We now expect a 22% increase in adjusted EPS at the midpoint of the range. Now let me walk you through what's driving that confidence. We're focused on three strategic priorities. sharpening commercial execution, strengthening operational discipline, and leading in AI and next generation automation. These are the levers that will accelerate growth and expand margins. To execute on these priorities, we brought in new leadership across commercial, operations, and our Americas and Asia Pacific region. That team is now in place and delivering results. First, on commercial. We're diversifying into strategic growth verticals. Karen Balmer joined in January and is focused on three key areas, bringing a unified global approach to account management that mirrors how our customers operate, pricing that reflects the value that we deliver, and faster, more consistent commercial processes. And we are already seeing momentum. Our total pipeline now stands at the highest level in GXO's history. And in the quarter, 40% of wins were in our strategic growth verticals, aerospace and defense, industrial, life sciences, and technology, particularly data centers. Our sales pipeline is accelerating, up 20% from the fourth quarter, of which more than a half a billion dollars is in our strategic growth verticals. We also saw positive year-on-year volume growth in these verticals, helping to offset softer volumes in retail and consumer. We have seen the momentum building specifically in North America, one of the largest and fastest growing logistics markets globally. Our new management team and targeted marketing investments are gaining traction. In the first quarter, win rates notably increased and the pipeline grew 35% sequentially, giving us increased confidence in the opportunity ahead. In the region, we continue to benefit from our leadership position in B2B verticals, particularly aerospace and defense and data centers, while also seeing broader momentum emerging in consumer verticals, including consumer staples. During the quarter, we launched the Defense Advisory Board in the US and established the Taurus Defense Supply Chain Alliance in the UK, a significant move that positions GXO as the leading supply chain provider to the UK defense industry and building on the expertise and relationships Wincanton brings to our platform. Second, in operations, we have begun to implement the GXO way, our new global framework for standardizing and scaling excellence across the full operational lifecycle. This gives us the platform to drive more consistent, repeatable execution at scale, which will make GXO even more competitive as a growth partner for customers and drive margin expansions. Third, in technology, we are making clear progress on our automation and AI strategies. GXOIQ reached an important milestone this quarter as we began to scale the platform, launching several new sites with the rollout expected to accelerate throughout the year. We are targeting more than 50 sites by year end. The deployment of automated solutions continues to advance as well, including a fleet of autonomous mobile robots, in the Netherlands and our first autoload solution in Europe. This will not only enhance how we deliver, driving greater efficiency and productivity for our customers, it creates ongoing value and strengthens the durability of our partnerships. On humanoids, we will launch more pilots across the US and Europe later this year. Our first mover advantage is real and we are building on it. In closing, GXO is off to a strong start in 2026. The underlying business is showing positive momentum. Our strategic priorities are beginning to gain traction, and our team is fully focused on driving long-term value creation. I look forward to sharing more on our long-term strategy and progress at our investor day to be scheduled after the third quarter earnings. With that, I'll hand the call off to Mark.

Thank you, Patrick. And good morning, everyone. Again, it's a pleasure to join you for my first earnings call as CFO of GXO. In my first five weeks, I've had the opportunity to meet with our site teams, our customers, and colleagues across the business. My initial takeaways are very clear. We have a strong foundation and a significant growth opportunity ahead of us. GXO has built a formidable enterprise. one with significant global scale, a competitive advantage in automation and AI, and a caliber of customer base that very few companies in the world can match. My priorities are fully aligned with Patrick's to operate as a single connected global firm, powering our commercial growth strategy, leveraging the GXO way to drive consistent global execution and optimizing our cost structure. We will also ensure disciplined capital allocation that drives long-term shareholder value. I look forward to sharing more on each of these areas in the quarters ahead. In the first quarter, GXO delivered revenue of $3.3 billion, up 10.8% year over year, of which 4.1% was organic. Every region contributed a clear demonstration of our breadth and resilience of our contractual business model in a dynamic macro environment. We delivered adjusted EBITDA of $200 million, up 22.7% from this time last year. This resulted in an adjusted EBITDA margin of 6.1%, up 60 basis points year over year. We delivered net income of $5 million and adjusted net income attributable to GXO of $58 million, up 70.6% year-over-year. Adjusted diluted EPS was 50 cents per share, up 72.4% from the first quarter a year ago. We generated $31 million of operating cash flow in the quarter. While free cash flow was an outflow of $31 million in line with typical seasonality. We are managing working capital efficiently and investing in the business at high returns. Turning to our balance sheet, we ended the quarter with $794 million in cash on hand and a strong liquidity position of $1.6 billion. Our leverage levels held steady at 2.5 times. Our investment-grade balance sheet is strong and positions GXO for profitable growth. We remain focused on disciplined allocation of capital to enhance long-term value for our shareholders. The integration of Wincat is progressing at pace. We remain on track to deliver run-rate cost synergies of $60 million by year-end 2026. We also expect to capture significant revenue synergies in the years ahead. Turning to the outlook for the full year, we over-delivered versus our guidance for the first quarter. We saw strong underlying performance from our core business as well as benefiting from certain contract termination costs that had been anticipated in the first quarter and are now expected to be incurred over the remainder of the year. As a result, for our full year 2026 guidance, we are maintaining organic revenue growth of 4% to 5%, raising adjusted EBITDA to a range of $935 million to $975 million, raising adjusted diluted earnings per share to a range of $2.90 to $3.20, up 22% at the midpoint, and maintaining free cash flow conversion of 30% to 40%. with strong operating performance, a record sales pipeline, and solid financial foundation, we're well positioned to accelerate growth and expand margins in 2026 and beyond. With that, over to you, Christine.