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GXO Logistics specializes in offering supply-chain management solutions. Founded in 2021, the company serves a wide range of industries including technology, food and beverage, and e-commerce. GXO operates in over 1,030 facilities and provides warehousing and distribution, order fulfillment, reverse logistics, and other services.

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Q4 2024

GXO Logistics (GXO): Company Profile, Stock Price, News, Rankings

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GXO Logistics

gxo logistics

Welcome to the GxO Second Quarter twenty twenty five Earnings Conference Call and Webcast. My name is Shyamali, 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. 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 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 Investors 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, Jamali, and good morning, everyone. Thanks for joining us this morning. With me in Greenwich today are Boris Oran, our Chief Financial Officer and Christine Kubecki, our Chief Strategy Officer. We're pleased to have built on our momentum from the first quarter and delivered a great second quarter. We saw new business wins of $3.00 $7,000,000 up 13% year over year, including with the likes of Axo Norbelle, Boeing, L'Oreal, Nestle, Pratt and Whitney and Thermo Fisher.

Our new business wins for the first half of the year total over half a billion dollars. We delivered record revenue of $3,300,000,000 and $212,000,000 of adjusted EBITDA, up 13% year over year. In June, we raised our full year guidance for organic revenue growth, adjusted EBITDA and adjusted diluted earnings per share. And today, given our better than expected performance in the 2025, we're again raising our full year adjusted EBITDA guidance to a new range of $865,000,000 to $885,000,000 an increase of $25,000,000 vis a vis our initial range. This quarter, we received final regulatory approval for our strategic acquisition of Wincanton.

This will unlock growth opportunities in the industrial and aerospace markets for GxO across Europe. The GxO and Wincanton teams are already collaborating on a range of strategic customer tenders across both the aerospace and defense verticals. We'll be kicking off the integration of the two companies in the coming weeks, and we still expect to deliver the lion's share of the run rate $60,000,000 of synergies by the 2026, which is ahead of our previous expectation. On top of that, we also expect to gain significant revenue synergies over the coming years. With that in mind, I'd like to take a moment to welcome our new colleagues from Wyncanton.

It's a stellar organization. And like GXO, it's clear that the high caliber of their people is why Wing Canton has been able to build such an incredible business. Also during the quarter, we launched GxO iQ, a software platform that we designed in partnership with Google Cloud specifically for the complexities of supply chain operations. GXO iQ leverages AI to provide a modular, scalable means to start up customer operations more quickly, run them more reliably, and access a broad suite of value added software applications. GXO IQ reflects the best of GXO's innovation and progress we've made over the past few years.

We're operators first with a relentless focus on adding value to our customers' global supply chains. I'm extremely proud of our great second quarter performance. This week marks GxO's fourth anniversary since we became a publicly traded company, and it's worth putting our accomplishments in context. In the four years since the spin, we signed nearly 4 and a half billion dollars of new customer contracts, undertaken three very successful acquisitions and nearly doubled the size of the business, all while remaining an investment grade balance sheet company. Our customer satisfaction scores are at an all time high.

We're in the process of finalizing a nearly twenty year expansion of our business with a top 15 U. S. Retailer. We will now operate with this customer in all three regions. We've also renewed and expanded with two of our top customers, including H and M into a multiyear agreements across multiple geographies.

These long term global partnerships speak volumes about the value we create for our customers and our ability to solve complex challenges when they need it most. GxO remains the market leader in automated fulfillment. We've more than doubled the number of robots deployed in our operations over the past four years, increased the percentage of our revenue that's processed by automation to about 50 and made groundbreaking advances in warehouse AI. Our sales pipeline remains robust at $2,400,000,000 exclusive of the Wincanton sales pipeline. It has grown by more than onethree since the last full year prior to the spin, and it's more diverse than ever before.

Reflecting our new business wins to date, GxO is very well positioned to drive profitable growth into 2026 and beyond. Before I turn it over to Barish, I want to say a few words about the additional news we announced yesterday. Barrish plans to step down from his role as Chief Financial Officer to pursue new opportunities. He will remain with GXO serving as our CFO until a successor is named. I've deeply appreciated Barrish's partnership over the past four years.

He has been dedicated not only to the performance of the company, but to our customers and our people. He's been instrumental in instilling capital and cost discipline while maintaining strong momentum on new business wins. GxO is well positioned, thanks in large part to his valuable contributions. And with that, I'll turn it over to Barish. Barish, over to you.

Thanks, Malcolm. It has been an honor to work with you and the team to build GxO into a true industry leader. I feel this is the right moment to embrace new opportunities, and I do so with immense gratitude and pride in all that we have accomplished since the spin. It is gratifying to know GxO has a bright future ahead. Now turning to the quarter.

As Malcolm mentioned, in the 2025, JXO delivered record revenue of $3,300,000,000 growing 16% year over year, of which 6% was organic. This was our highest quarter organic growth in nine quarters. Organic revenue growth accelerated sequentially in each region, highlighting the value of our contractual business model, which proved resilient throughout the dynamic trade environment. Our strongest organic growth in the quarter was in the omnichannel retail and technology verticals. We now have about $800,000,000 of incremental revenue secured for 2025, which, in combination with our retention rate in mid-90s, puts us in excellent shape to achieve or improve upon our full year organic growth targets.

We delivered adjusted EBITDA of $212,000,000 Our margins expanded by 90 basis points sequentially as a sizable automated startups and productivity initiatives we mentioned last quarter matured more quickly than expected. And we saw improved space utilization in our shared network. We continue to leverage our SG and A more effectively due to our central efficiencies programs. We recorded net income of $28,000,000 and adjusted net income of $66,000,000 Our diluted earnings per share was $0.23 and our adjusted diluted earnings per share increased to $0.57 Our free cash flow in the second quarter primarily reflects the payment for the onetime regulatory item we booked last quarter. We are on track to deliver our target of 25% to 35% adjusted EBITDA to free cash flow conversion for the full year.

Our operating return on invested capital remains well above our target. We remain disciplined in our capital expenditures and working capital management, which allows us to continue to invest into our business with high returns. Our leverage levels remain steady at three times net debt, even after repurchasing shares during the first half of the year. In the second quarter, we repurchased 2,600,000.0 shares at an average price of $34.86 In total, in the first half of the year, we have repurchased 5,400,000.0 shares or about 4% of the total shares outstanding at an average price of $37.34 This represents a 26 discount to our average share price over the last thirty trading days. And in June, Moody's upgraded GxO's credit rating.

We are proud that we have now hold investment grade ratings from all three major agencies for the first time since the spin, which reflects the scale and resilience of our contractual business model. We remain laser focused on our capital allocation and continue to prioritize investments in technologies and services that drive the greatest returns. Our focus in 2025 will continue to be on accelerating our organic growth and the integration of Vincanton. We expect to see accelerated growth opportunities coming from our acquisitions. As Malcolm mentioned, given our excellent operating performance in the 2025 and following our guidance update in June, we are raising our full year EBITDA guidance again.

As a reminder, for 2025, we now expect to deliver organic revenue growth of 3.5% to 6.5%, up from our initial guidance of 3% to 6% adjusted EBITDA of $865,000,000 to $885,000,000 up from our initial guidance of $840,000,000 to $860,000,000 adjusted diluted earnings per share of $2.43 to $2.63 up from our initial guidance of $2.4 to $2.6 and adjusted EBITDA to free cash flow conversion of 25 to 35%. We are excited about our increasing momentum. We now have greater visibility than ever of the benefits we will be capturing as we bring Wincanton and GxO businesses together. These benefits will begin to be realized during the remainder of this year and will materially ramp up throughout 2026. And we are already on our way to capturing the strategic growth opportunity we have targeted with this acquisition.

Given our strong operating results and our effective capital allocation, GxO remains well positioned to deliver outsized value for our customers and our shareholders. With that, I'll pass the mic to Christine. Christine, over to you.

Thanks, Behesh. Good morning, everyone. We're very pleased with our results for the 2025. I'd like to first touch upon our value creation strategy, which is a part of our long term growth algorithm that makes GxO resilient across all parts of the cycle. This strategy focuses on GxO's ability to use our global scale, our deep tech and operational expertise, and our obsession with our customers to capitalize on the secular tailwinds that we believe will drive the future of fulfillment.

As Malcolm described, the tailwinds driving the market align with our core competencies. We've made meaningful progress on growing our global relationships with blue chip customers, operating best in class automated operations, and expanding into high growth verticals. This is what GXO has proven we do best. Just to touch upon a few of our most immediate opportunities. First, we've discussed before how we use AI in our operations, but we're also playing a significant role in the cloud and AI value chain.

The logistics market opportunity for technology is estimated to be $28,000,000,000 today. And as infrastructure need for AI grows, our opportunity will only continue to expand. Second, we're making inroads into the healthcare market, which is a $34,000,000,000 opportunity. We're about to start operations for our landmark deal with England's National Health Services supply chain, our first significant win in healthcare and our largest contract win of all time. Third, we're seeing strong demand from customers in Germany, the largest economy in Europe.

We launched a flagship, highly automated omnichannel fulfillment facility for Levi's last year, which has established our foothold in this total addressable market of $72,000,000,000 And finally, the largest opportunity of all. We continue to see momentum in our industrial and aerospace businesses. This was one of our fastest growing verticals throughout the first half of this year. We're already collaborating on 12 RFPs with the Wynn Canton team, and our pipeline in industrial manufacturing, including aerospace, has doubled in the last eighteen months. As we grow with our existing customers and expand into new geographies, our technology advantage becomes more valuable.

Our industry leading automation, software and AI solutions, as Malcolm mentioned, provide the foundation for our long term profitable growth strategy. And with that, I'll pass the mic back to Behrs.

Before moving to Q and A, I want to take a moment to express my appreciation and gratitude to Malcolm as he concludes his tenure as CEO of GxO. Under his leadership, GxO has flourished. We have nearly doubled the size of the business, completed three transformative acquisitions and emerged as the global leader in warehouse automation and AI. He leaves us on a high note record quarterly revenues, groundbreaking automation and AI developments, record customer satisfaction and an investment grade balance sheet, with a clear line of sight to profitable growth for years to come. His leadership has shaped not just our results, but our future.

It has been an honor to be part of the chapter with them. And with that, we'll turn it over to Chimali and we'll transition to Q and A.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue.

For participants using speaker equipment, it may be necessary to pick up their handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Stephanie Moore with Jefferies. Please proceed with your question.

Hi. Good morning. Thank you. And, Malcolm, it was it's been great to work with you over the last four years, and you will definitely be missed. And we wish you the best of luck as you move on to your your next endeavors and in life going forward. So great working with you.

Thanks very much, Stephanie. Much appreciated.

So pretty really nice acceleration in organic growth as really the second quarter progressed. Can you maybe highlight what has changed from a geographic and market perspective just as the first half progressed and the nice acceleration in growth from 1Q to 2Q? Thank you.

Sure, Stephanie. Let me give you a bit of an overview of what we're seeing on the ground right now. And probably a good starting point is just to look across our three big regions here in North America, Continental Europe and The UK. So first and foremost, when we think about our Continental Europe business and our UK activity, we saw growth in volumes through the last quarter. UK definitely improving trend in quarter two compared to quarter one.

Like quarter one in North America, really it was our strongest region in terms of volumes, which was largely due to the customer mix. In North America, we have a strong exposure to aerospace and technology infrastructure customers. These have all been performing very, very good, better than we could have anticipated. We've also seen some stronger than expected performance in consumer verticals here in North America. When we think about inventory levels across our business, nothing really to speak about in that regard.

So at an inventory level, the incremental levels of inventory that we were seeing in the earlier part of the year, they've all now really dissipated and we see normal levels of inventory in the warehouses, normal customer levels of inventory, everything that we would expect to see right now just as we're starting to prepare for the holiday season. What I can also add is when we look into Q3, we're already a third of the way through Q3. All of the trends that we've seen in quarter two have remained pretty consistent. So what I mean by that is when we look at the existing volumes, what we're forecasting on the go forward, the certainty that we can see in new business start ups. So Christine mentioned about the business in the health sector in The UK, but there's a plethora of large new contracts all starting up for us, all well planned, all in good order.

So all of these things are giving us a really strong view for the second half of the year. Company is performing very well and we're benefiting as we have done from those secular demand trends that we've seen historically in e commerce, but no more in healthcare, aerospace and importantly in the defense industry. And of course, AI and the cloud infrastructure benefits that we're seeing are all playing a part. I think one thing to add, we're already in the deep detail of planning peak holiday season with our customers. And while the operating environment is definitely dynamic, we can all say that, We definitely remain in a very balanced outlook for the rest of this year.

We're seeing customers really preparing in earnest for what will be a good holiday season. They're committing costs, so that's a strong sign of their belief in the second half of the year and the pace of ramp up that we normally experience in that period of time. So we've got a strong level of confidence in delivering the full year organic outlooks that we've talked about. Also taking a little early look at '26, the level of new business that we've actually signed this year has been incredibly strong, a strongest ever. So this strong view we have on new business momentum, the phasing that's taken us into '26 is meaning that we really have a significantly high level of incremental revenue already booked for next year.

That's bigger than we've ever had before. So overall, a very good outlook. But I do want to kind of say one last point. As a management team, I think we've had a reputation for being prudent and that's sometimes it's never the bad thing to be. And I think it's for all of those reasons that we're choosing right now to maintain that conservative view for the rest of the year.

We're maintaining that organic growth midpoint guide of 5%. Of course, there are a lot of opportunities right now for us to do better than our plan. But right now, we're all of the opinion it's better to maintain this conservative approach for the remainder of the year.

Thank you, Malcolm. Well, you answered my second question, which was around peak season. So I will just pass it on from here. Thanks again.

Thanks, Stephanie. And it's been a pleasure to talk with you. Thank you.

Thank you. Our next question comes from the line of Chris Wetherbee with Wells Fargo. Please proceed with your question.

Hey, thanks. Good morning, guys. And congrats, Malcolm. It been a pleasure working with you. And congrats, Barrish, too.

Looking forward to still, I think, having you around maybe another couple quarters here. But obviously, it's been a pleasure working with you both.

Maybe just following up on the last question, I guess, as you think about the pace of organic revenue growth, it seems like things are beginning to fall into place, particularly as it pertains with the Wincanton deal, maybe some of the verticals that opens up, you have the healthcare opportunities coming online as well. So I guess as you think about the organic revenue pace, you've obviously increased the range for this year. I guess as we maybe take a step back, look out to '26, maybe beyond, do you think we're at the point, obviously economically dependent here to some extent, that we could see organic revenue growth kind of reaccelerate back into those upper single digit ranges? Does sort of things feel like they're starting to fall in place in terms of the pipeline and the opportunity set that you guys are seeing to support that?

Chris, let me give you some update on that. I mean, I think in general terms, I think we definitely have been through a couple of years of slow growth, partly down to the economy, partly down to transitioning new customers. When we consider Wincanton, definitely that's going to be a big contributor in terms of revenue growth, but also bottom line. Remember, there are around $60,000,000 of cost synergies alone baked into the Wynn Canton deal. We'll see roughly about $40,000,000 of that this year and we'll see the lion's share of the combined $60,000,000 between now and the 2026.

So that's going to be a big driver on the EBITDA. It will help our margin recovery for sure also. But Wing Condon in its own right, it grew its top line by 10% in the second quarter. It's performing incredibly well. So with the integration starting in the next few weeks, our teams are already right now collaborating on just a ton of new major customer tenders and particular in verticals that we've never operated really with any scale in North America, defense, aerospace, we're very strong in it.

In Europe, almost non existent. For Wincanton, it has some stellar customers in these areas. And I've got no doubt, it will be a springboard for the business growth in those areas. And I think also right now, we are starting to see the extra sales that we're seeing right now through 2025. I think a testament to the changes to organization that we made at the start of this year and later parts of last year, where we changed our sales organization.

You'll remember that we brought in a new Chief Revenue Officer, Richard Costan. We changed around some of our sales organization and the metrics that they perform about. So all of these things play very much for a stronger growth. Of course, we have to have one eye on the wider macro economy. I think right now, we're adding out of the uncertainty window of tariffs that customers are stabilizing down in the thinking about that.

So I think really future is looking very, very good for the business. And of course, I can't not mention the fact we've got a stellar new CEO joining us in just about a week's time. And I'm really looking forward to welcoming Patrick. He's going to bring his own style and his own style of Dynam into the business, which I think will be incredibly good for GxO for the future.

Okay, very helpful. Certainly seems like there's opportunities here. One quick follow In terms of buybacks, I guess, do you think about that opportunity going forward? Noted the price that you bought shares at relative to where we are today. Is this still something that you want to lean into as you look forward?

Is this capital allocation take a little bit of a different sort of approach as we move forward into the second half?

Hi, Chris. It's Boris here. As you recall, our Board announced about 500,000,000 shares repurchased in February, and we repurchased shares both in first quarter and second quarter. Second quarter at $34.86.2600000.0 shares and a total of 5,400,000.0 shares, about 4% of the shares outstanding, at a discount of 26% to our average share price over the last thirty days. We've been very careful about maintaining our credit metrics, and I'm pleased to note that after receiving an upgrade from Moody's in June, GXO again holds investment grade credit rating from all three agencies for the first time since the spin.

We continue to see our shares as attractively valued, but as always, we have balanced our share repurchase against our capital allocation priorities, including organic growth and leverage levels. And we do have a lot of organic growth to go after ahead of us.

So that suggests that maybe the organic growth opportunities are a little bit more outweigh the buybacks in the current environment?

At the moment, the return from organic growth is very high. That has been always our number one focus. But we'll take a look at share buybacks as prices become more attractive and balance it against the credit metrics.

Okay. That's very helpful. Thanks for the time this morning. Appreciate it.

Thank you. Our next question comes from the line of Ravi Shanker with Morgan Stanley. Please proceed with your question.

Great. Thanks for the time. And welcome again, congratulations on your tenure and good luck for the future. So maybe also thanks for the color in response to the first question. Maybe to a follow-up there, very few companies in this environment are raising the guidance, let alone twice in two months.

I'm not sure I fully understand again what is driving that rate of change. I think you said in your response that inventory levels are normal right now, so it can't be companies stocking up. So how much of that pace of improvement that you're seeing on a relative basis is structural related to supply chain shifts? Is it just companies being excited about consumer demand over the next twelve months? What is driving that increased rate of change?

Ravi. It's Boris here. As far as our profitability is concerned, we are seeing a sequential improvement. We've seen a sequential improvement in Q2, and we expect to see another sequential improvement in the second half versus the first half. This is driven by our strong momentum on the site level efficiencies, increasing maturity of our start ups in the second quarter, which we expect to continue through the second half of the year.

On top, we have better space utilization in our shared user network and we have tight cost controls. These give us confidence that you'll see the margins improve in the second half of the year. As far as the revenue is concerned, for the second half of the year, we expect to have more contributions from net new business wins, and we have taken a prudent approach on our expectations for the contributions from our existing operations. This is all embedded in our guidance, and we also expect slight improvement in customer retention to further improve compared to the first half. I mean, this is our momentum, and as you would recall, since 2017, our organic growth has been slightly over 8% CAGR, so we are getting the momentum faster and faster to get into a higher growth, both on revenue and EBITDA.

Right. And the question was, is that because the macro is just improving or you guys are doing an awesome job? Or what is driving that acceleration?

It is primarily driven by EBITDA improvements are primarily driven internal actions on strong momentum on-site level efficiencies, maturity of the startups and better space utilization. Those are the things we've been working on for twelve months, and you're seeing the results now.

Understood. And maybe as a quick follow-up. The A and D space has been really hot for the last year or so. Can you just share a few more details on your business here, kind of US versus Europe, the size of the business, the growth rate, etcetera?

Hi Robbie, it's Christine here. Thanks for the question. I think Malcolm mentioned and talked about the opportunities, and I think really linking the A opportunity, as Malcolm mentioned, we have a great presence in The US with some great blue chip companies that we've been growing with. But we haven't necessarily cracked the market into Europe and The UK. And really, our acquisition strategy is at the foundation of this, and it is a massive market.

It's hundreds of billions of dollars of TAM in terms of total industrial and aerospace and defense. And just to give you a contextualize that in terms of what it's meant for our pipeline, we today have about five 100,000,000 in our pipeline related to industrial and A and D, and that has doubled over the last eighteen months. We really are just at the starting gate with WinCan. We've just begun the collaboration with the team there with the 12 RFPs that we have with them. As we begin the integration, this is just gonna continue to unlock, and we're really excited about the opportunity set that this means not only for '26, but into the end of the decade at least.

Thank you. Our next question comes from the line of Scott, Sanberger with Oppenheimer and Company. Please proceed with your question.

Thanks very much. Good morning, everyone. And and Malcolm, best wishes. Congrats. Had a great career. Really enjoyed working with you.

I guess first one probably, Malcolm probably for you. This quarter heavy on the mix of new activity, over half came from new activity and that's been just the contribution of new activity versus outsourcing versus via competitors has really moved around recently. Could you kind of speak to what we should see going forward and maybe a little bit about what's behind that? Thanks.

Yes, for sure, Scott. I mean, second quarter was a very strong quarter, but actually we saw really strong momentum in e commerce. And obviously, we've always been in a kind of leading position in terms of supporting e commerce customers generally. But more than half of the wins that we had was coming actually from the e commerce area. The percentage of revenue coming from e commerce really pretty much balanced across all of the big three regions that we're operating in.

But definitely e commerce and we also saw outsized growth in reverse logistics. And again, this definitely pointing to the kind of structural strengthening of e commerce activities, always been a growth engine for our business. I think economically wise, it slowed for a couple of years. It's definitely now on the return and we've seen that with strong strength over the first half of the year. And when we look at the sales pipeline, I'll come on to that in a second, definitely see that going forward. We've also in the last twelve months started up several very large scale automation e commerce size. So those are including some of the ones we mentioned earlier on in the call, Levi's is a good example, but also big automated facilities with people like Puma, Zalando, where we're actually operating the largest e commerce facility in France. So generally, things are on a good trend on that. And last thing I think to say is, it's widely reported that while today we can kind of think about sales in e commerce that number is definitely going to rise in the future.

E commerce really lends itself incredibly well to reverse logistics, where we enjoy slightly improved margins, but also automation. And I mean, in automation, I think we're in a great place. Maybe Christine, you want to just jump in and add a little comment on this. But I think automation is a space where we've made it our own.

I think we're pretty much in a leading position now across the industry. Christine?

Thanks, Malcolm. Hi, Scott. It's Christine here.

Just to talk, reverse logistics represents over 10% of our current pipeline. But looking at the activity and the new wins around e commerce, that certainly is going to drive the demand for reverse logistics. And AI is enhancing our reverse capabilities and driving that opportunity for future growth. As you know, about a third of e commerce orders are returned on average, which really reflects the material drag on our customers' margins. And returns are an extremely complicated, complex operation.

And if we can help unlock with AI the opportunity to rapidly resell products and help our customers unlock further margins. Some of the AI tools that we've taken on the inbound side around proactive replenishment, we're actually using that same tool on the back end side for reverse logistics to help with those capabilities. So I think it further differentiates our tech offering and will help drive our reverse logistics opportunities in the future.

Great, thank you both for that. I guess I'm embarrassed to get you involved here too. Could you discuss ERP system implementation across your three main geographic regions, and just discuss kind of timing of what we should expect to see and maybe financial impact across the P and L and the cash flow statement? Thanks.

Sure, Scott. We have gone live with our first Phase two of our ERP implementation. First is UK. It's on live and everything is working well. They're paying, they're collecting.

So far everything is good, which will create a lot of synergy and a lot of cost reduction. And next we will go to U. S. We will start building The U. S.

Capabilities and from there, we will go to Continental Europe. This is going to give us a lot of productivity at the back office level and we will accelerate synergies from our acquisitions in an accelerated way and that will be you will see the impact in our EBITDA, reduced SG and A and bottom line. We're very excited about it. It's going to take us to the next level.

Thank you. Our next question comes from the line of Ryan Ossenbeck with JPMorgan. Please proceed with your question.

Hey, good morning. Thanks for taking the questions. Malcolm, congrats and best of luck in your next adventures, wherever that might be.

So just to start with you, a question on Wincanton. It sounds like there's some good RFPs going already. Cost synergies sound like they're on track and ramping up, but is it too early? I guess when will we hear a little bit more about the revenue synergies and the opportunities? Is this something we should assume is sort of like Clipper and what that ultimately yielded?

How are you thinking about that and when should we hear a little bit more about quantifying what that might mean?

I think, Brian, I think if thinking about the Clipper acquisition, it took us broadly around eighteen months to start really realizing significant revenue synergies. And actually, the large contract, the largest the company has ever signed with the British National Health Service, in fact, that's a direct result of that Clipper acquisition. So broadly, you can see it's taking on average around two years and that's a combination of, of course, customers generally are already contracted. So they will go to tender and obviously, they will loop more favorably on a Wing Canton in the future as it becomes integrated in GXO because it has a much larger business offering, multi geography, very different than the original Wing Canton organization. The focus areas, think as Christine touched on, aerospace, they have great business in this area.

Defense in particular and defense, I guess, it's likely to be an industry that's going to do incredibly well everywhere around the world in the coming years. So I think it's a very opportune time that we will gain a strong foothold in defense area across all of Europe. It's not just those two though, Wincanton is highly exposed to infrastructure projects, nuclear industry, lot of civil activities and some healthcare as well. So it's actually a real plum level of business that we're bringing on board. And as I mentioned earlier, our teams are already actually collaborating on a number of very, very large bids in defense in particular, in aerospace.

I think I would definitely be watching this space towards the 2026 and early twenty twenty seven. That's about the right time where we should anticipate new contracts starting to fall and there'll be big ones in the same thought process as the National Health, because that's the nature of how these big activities in defense are contracted across Europe. So very, very positive way forward. As I mentioned earlier, we'll be starting the full scale integration of the two companies. Maybe just one last thing to comment on Wing Canton, because I wouldn't want it to be overlooked.

As part of the regulatory approval, we did agree to dispose of a very small amount of the Wing Canton business, broadly around 5% of the total Wynn Canton business. I know it might sound crazily small, but nevertheless, that was part of the agreement that we finalized with the CMA process. That process is underway. We're confident that we'll achieve success in that. But in fairness, I think those customers just like so many of our customers, they're minded about the holiday season.

GXO Logistics (GXO) Q2 2025 Earnings Call Transcript

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