GXO results a port in a global logistics storm

“We’re pleased to have delivered an exceptional performance in the second quarter, including double-digit top- and bottom-line growth,” said CEO Malcolm Wilson. “We increased our market share in the quarter, and we raised our 2023 profit guidance. We’re one of the few companies in our industry expecting to grow this year.”

The company said it signed a record $500 million in new business wins in the quarter and grew its y/y sales pipeline to $2.1 billion.

On a Thursday analyst call, GXO executives said that business remains strong as more businesses outsource their logistics operations for the first time and existing customers deepen their relationships with the company. 

“We are seeing more brands modernize their supply chains at a greater pace and scale than we’ve seen before,” said Bill Fraine, chief commercial officer. 

Fraine said deals are becoming bigger and moving faster, adding that GXO is “seeing the return of the $100 million deals.”

More than 50% of revenue came from companies outsourcing their logistics operations for the first time. That percentage is a “phenomenally high” number, Baris Oran, GXO’s CFO, told FreightWaves.

Still, the company isn’t totally immune from macroeconomic pressure. Organic revenue fell from 7% in the first quarter as moderation in consumer-facing industries such as omnichannel retail offset strong growth in the aerospace, food and beverage, and technology sectors. 

Projects that GXO defines as having a high level of automation command a 200 to 300 basis point margin expansion over projects with less automation. Oran said the company attaches strict productivity thresholds that high-automation projects must meet. He defined projects with high automation as those in a facility that has so much technology that it resembles a “factory more than a warehouse.” Not every relationship qualifies for that title.

The company will consider M&A opportunities in verticals and geographies where its coverage is limited, executives said. Verticals include health care, European aerospace and the maintenance and repair segment in North America. Limited geographies include Mexico, Canada and Germany, the latter where the company just announced an expansion. 

However, Oran said that sellers are not plentiful and that multiples being demanded remain too stretched for GXO’s blood. “Multiples have come down, but not by much,” he said.