Demand for automated solutions is growing stronger - GXO CEO Malcolm Wilson

GXO Posts $2.2 Billion in Q2 Revenue, Marks First Anniversary

GXO Logistics Inc. marked its one-year anniversary Aug. 2 by releasing its second-quarter earnings report.

The Greenwich, Conn.-based global contract logistics company also celebrated by ringing the opening bell on the New York Stock Exchange. The company was able to do the same thing a year prior when it launched.

“It’s been a super exciting and quite frantic couple of days, but nonetheless we are really enthused,” Chief Strategy Officer Neil Shelton told Transport Topics. “We’re delivering on financials, delivering on growth, and we’ve got a great springboard as we head into 2023.”

Wilson and some other executives were unable to attend the first bell ringing on the exchange because the coronavirus made travel complicated. He was on hand, though, to ring the bell marking the first anniversary.

“It was an absolute pleasure to be at the New York Stock Exchange,” Shelton said. “What a place. I was absolutely blown away. You felt like you were really being graced with being able to visit and see an American institution that the whole world knows about. It was really enjoyable and a massive honor to be there.”

XPO decided to turn its contract logistics business into a stand-alone company so it could better take advantage of tailwinds related to e-commerce, automation and outsourcing. The latest earnings report showed the company was able to do just that. The e-commerce, omnichannel retail and consumer technology vertical represented the strongest revenue stream as it increased 19.5% year-over-year to $1.19 billion from $999 million.

GXO noted in its earnings report that net income was $52 million, or 44 cents a diluted share, for the three months ending June 30. That compared with $14 million, 10 cents a share, during the year-ago period when the company’s operations were part of XPO Logistics. Total revenue increased by 15% to $2.16 billion from $1.88 billion.

Wall Street analysts polled by Zacks Consensus Estimate expected EPS of 63 cents and quarterly revenue of $2.11 billion.

“One year ago today, 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,” CEO Malcolm Wilson said in a statement. “I’m proud to say that we’ve delivered on our promises.”

“E-commerce and omnichannel outpaced the group rate of growth through the second quarter, and it’ll continue to outpace the group rate of growth given the wins that we’re picking up, the pipeline we’ve got, and the fact that our customers continue to want to deliver, not only a best-in-class consumer experience, but to do so very efficiently,” Shelton said. “You need high levels of automation; you need a lot of technology in order to be able to do that. And they’re depending on us across more and more of their footprint to help deliver that.”

The food and beverage vertical followed, with revenue increasing 7.7% to $336 million from $312 million. Industrial and manufacturing came next with revenue increasing 7.2% to $269 million from $251 million. Consumer packaged goods revenue rose 21.7% to $224 million from $184 million.

“I think the past 12 months has really been quite fast-paced,” Shelton said, “both in terms of our financial and operational growth but also the recognition that we’ve managed to achieve and the branding we’ve achieved in the marketplace already in quite a short period of time.

“It’s been some fantastic milestones achieved, but also at the same time delivering for all of our stakeholders, which we’re really quite proud of. We can’t rest on our laurels. We’re going to continue to deliver on that.”

GXO in its first year opened about 90 new sites, added about 15 million square feet of new warehouse space, won hundreds of new contracts from customers, accelerated automation and grew its head count by about 15,000. The Clipper Logistics acquisition also was seen as a milestone by company leaders when it closed May 24.

Cowen and Co. said the quarterly results came in above expectations as new business wins continue to spur growth despite looming uncertainty in Europe. The investment bank and financial services company also pointed out that 40% of Q2 new business wins were attributable to reverse logistics and that returns are a margin-rich subsegment of the e-commerce business.

“GXO continued to capitalize on trends in e-commerce and product returns [reverse logistics],” Cowen analyst Jason Seidl wrote in a report. “60% of 2Q new business wins were captured by highly automated sites as customer demand for tech-enabled solutions continues to grow. Going forward, the percentage of new contracts with a tech component is expected to remain very high, which is beneficial to margins due to the low variable cost structure of these service offerings.”