GXO Reports Record Revenue of $2.3 Billion for Q1
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GXO Logistics reported its highest-ever first-quarter revenue when its earnings report was released May 9.
The Greenwich, Conn.-based contract logistics company posted net income of $26 million, or 21 cents a diluted share, for the three months ending March 31. That compared with $38 million, 32 cents, year-over-year. Total revenue increased 12% to $2.32 billion from $2.08 billion.
GXO ranks No. 6 on the Transport Topics Top 100 list of the largest logistics companies in North America.
“It speaks a little bit to the kind of industry that we’re working in and also the kind of customers that we work with and our business model overall,” CEO Malcolm Wilson told Transport Topics, “that we’re able to deliver a really solid set of numbers in what really is increasingly becoming a bit of an uncertain macro.”
Wilson noted external and internal factors contributed to the results. During the quarter, the company was able to lock in new contracts while expanding relationships across multiple verticals with the market increasingly favoring outsourcing and automation. But then it built upon those trends with internal efforts to bolster operational efficiencies.
“We’re a company that is absolutely benefiting from the market environment, and the market environment is one where more and more big companies are choosing to outsource their logistics,” Wilson said. “That’s a trend that’s been gathering momentum more over several years now, and if you think about it, the need to put more and more technology into the warehouse has the effect of improving quality, speed, efficiency and lowering costs.”
Wilson pointed to the high levels of wage inflation that companies have been experiencing over the past few years. The transportation- and warehousing-related sectors saw rapid compensation increases amid the high demand and labor shortages of the past few years. He sees these trends as helping to push companies toward outsourcing and automation.
“That plays really well for GXO because we’re an industry leader in it,” Wilson said. “We were the earlier adopter; we’re now approaching 40% of our sites running with either a fully automated or high level of automation and adaptive tech.”
Wilson noted the results also represent the early impacts of an initiative to improve internal efficiencies that launched last year. The focus has been to effectively streamline support functions by re-examining the organizational structure of the business, how it operates and what operations should be done more internally.
“I think that’s just a logical thing for us to do two years after the spin,” Wilson said. “That’s really typically what you’ve seen in our first-quarter results, an acceleration of internal initiatives to help improve our business, lower our costs, improve our efficiencies, and externally, the market itself is really creating an environment where GXO can really prosper because of our scale, our expertise, knowledge and experience in the tech-enablement environment.”
GXO has continued to establish new customer contracts into the second quarter. The company secured more than $800 million of incremental revenue for 2023. On April 12, Sainsbury’s became its largest annual revenue contract awarded in its history. The deal represents nearly $1 billion in lifetime value.
The results were mixed in terms of Wall Street expectations. Analysts were looking for 43 cents per share and quarterly revenue of $2.3 billion, according to Zacks Consensus Estimate.
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GXO gained most of its revenue for the quarter through the omnichannel retail vertical, increasing 17.3% to $968 million from $825 million during the same time last year. The technology and consumer electronics vertical revenue followed, with contributions rising 20% to $366 million from $305 million.
“Some of our consumer-related business is a bit softer now than it would’ve been 12 months ago,” Wilson said. “But when you bring that together with all of the other parts of the business that in many instances are recording record periods of trading, then overall what we can see is still our business is growing quite healthily.”
The food and beverage vertical revenue decreased 9.2% to $307 million from $338 million. The industrial and manufacturing vertical revenue increased 3.4% to $272 million from $263 million, and consumer packaged goods revenue increased 19.9% to $253 million from $213 million.
TD Cowen noted in a report that organic revenue growth through new contracts helped the results to come in above their forecast. As a result, GXO raised its full-year earnings before interest, taxes, depreciation and amortization (EBITDA).
“New contract wins led GXO to raise full-year EBITDA and EPS guidance, making them one of the few companies we cover that has raised guidance this earnings season,” Cowen analyst Jason Seidl wrote in the report. “A growing new business pipeline should set a higher floor for GXO going forward.”
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