New business wins pace strong second quarter earnings for GXO

Second quarter 2022 earnings for Greenwich, Conn.-based global contract logistics services provider GXO Logistics saw strong results, the company reported yesterday. This was GXO's fourth standalone earnings release since it was spun off from XPO Logistics in August 2021.

Second quarter revenue saw a 15% annual increase, to $2.2 billion. Net income came in at $51 million, topping the second quarter of 2011 by 78%. Adjusted EBITDA—at $176 million—topped the $161 million recorded a year ago.

“One year ago [yesterday], we became GXO, creating a pure-play logistics leader with a mission to accelerate growth, advance our technological leadership, maintain a robust capital structure, and drive value for our stakeholders,” said Malcolm Wilson, GXO CEO, in a statement. “In our first year, I’m proud to say that we’ve delivered on our promises. We posted record operating results, completed the strategic acquisition of Clipper Logistics, grew market share by accelerating automation, maintained our investment grade balance sheet, set the industry benchmark for ESG, and established ourselves as the go-to logistics provider to the world’s leading blue-chip brands. We continue to benefit from durable tailwinds, and the demand for our cutting-edge automated solutions is only growing stronger as customers increasingly look to GXO to help navigate supply chain complexity, elevated inventory levels, and high inflation.”

The company added it has more than $1 billion of incremental revenue contracted for 2022, which is the equivalent to 14% of 2021 revenue, adding it has roughly $500 million contracted for 2023 and $200 million for 2024. What’s more, it said GXO’s sales pipeline is at more than $2 billion, well above 2021 levels.

And GXO said it took in $475 million in quarterly new business wins, its highest ever for a quarter.

In an interview, GXO CIO Mark Manduca told LM that organic revenue growth was relatively evenly split between existing customers and new customer wins over the prior five months.

“So, you have this business that is compounding on its wins that it was winning from last year, and existing customers are staying with us for longer and longer periods of time,” he said. “And, at the same time, you have this wonderful pipeline of new business, which has been converted into a very healthy win rate. This is a business that aims to take the best of those contracts and take market share in the process.”

Addressing the current state of global logistics, Manduca acknowledged there has been a lot of talk about slowdowns, with the caveat that GXO is not seeing that same level of pain in the market.

“What we are seeing is a customer that wants to do business with us,” he said. “They want to save on their variable costs and save efficiencies on their inventory per SKU. This is a customer base that’s wanting to come to us. There is a very even and level playing field, in terms of bargaining power, so we are very comfortable about the new business wins.”

As for the existing growth side of the market relative to GXO, he explained that it is clear in the broader market that a change in discretionary spending is happening, in the form of fewer items being purchased compared to during the pandemic, in tandem with a shift to more experiential items, for things like luggage and clothing, among others.

And he said that across a number of different sectors, there has been what he called an element of buoyancy out there about the economy from companies, with companies indicating that they are aware of and hear economists indicate things are getting worse, but these companies are not seeing it in their own businesses.

“Our customers want to do business with us,” he said. “These are healthy, fast-growing big global blue-chip customers that are doing amazing things for their customers. And we are helping them be more efficient and more accurate and faster into consumers’ hands. There is a big demand for our services.”