Virtual Investor Day
July 13, 2021
GXO will be the largest pure-play contract logistics provider in the world.
XPO expects the spin off its logistics segment to be completed on August 2, 2021. In advance, the incoming leadership hosted a Virtual Investor Day. Discussion included GXO’s investment highlights, operations, technology, financial performance and growth prospects.
Virtual Investor Day Highlights
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GXO Virtual Investor Day
GXO is expected to go public on August 2, 2021. GXO will trade on the New York Stock Exchange under the symbol “GXO”. Management covers investment highlights, operations, technology, financial performance and growth prospects.
We serve a highly diversified, blue-chip customer base characterized by long-term contractual relationships that provide visibility into future revenue and earnings. Although we have 885 locations in 27 countries and about 93,000 team members, we hold only a 5% share of the highly fragmented, $130 billion outsourced contract logistics market in North America and Europe. This gives us a vast runway for expansion through organic growth and M&A.
Ecommerce: The secular growth of ecommerce, which has substantially outpaced growth in the broader economy for years, accelerated during the recent shift in consumer behavior to online buying. GXO is a global leader in ecommerce logistics, with the largest outsourced ecommerce platform in Europe and an expansive platform in North America providing order fulfilment and reverse logistics. We serve a range of customers in this space, including pure-play e-tailers, omnichannel retailers and direct-to-consumer manufacturers.
Automation: Warehouses are becoming increasingly automated for speed, cost-efficiency and safety. Applications of robots, cobots, goods-to-person systems, automated sortation and wearable technologies are transforming logistics. We’re a global leader in integrating scalable software solutions for warehouse management, intelligent automation, predictive analytics, labor productivity and other capabilities valued by logistics customers. In 2020, we shipped about five times more product units using robots than we did in 2019.
Outsourcing: Supply chains are becoming more complex to meet demanding end-customer expectations for speed and precision. In addition, in 2020, many companies realized that supply chain management was not their core competency; this served to heighten the longstanding outsourcing trend. Rather than expose their in-house supply chains to vulnerabilities, companies are increasingly seeking to de-risk by using large third-party providers that have superior technological resources and know-how, such as GXO.
Our success with long-term, blue-chip customer relationships is due in large part to the mission-critical nature of the solutions we provide; they position us as a strategic partner, rather than merely a supplier. Our top 20 customers have, on average, partnered with us for 15 years. Our average contract length is about five years, and typically renews. Recently, our contract lengths have been growing longer as customers look to lock in future predictability for their supply chains.
One of our strongest competitive advantages emanates from our proprietary technology suite, which encompasses warehouse management, labor management, order management and demand management. We developed software tools that use machine learning to drive significant labor productivity in our warehouses, achieving a 5-7% productivity gain on average. The digital connectivity between our solutions and third-party automation enables us to stand up sophisticated operations quickly at scale, and flex them as needed. These are all critical differentiators that underpin our high profit margins.
We’re also differentiated by our diversity of expertise and the quality of our customer base. Our customers include many household names and market leaders—we collaborate with them on planning and forecasting, and we can provide assistance with supply chain optimization to meet specific goals, such as sustainability metrics. This multidisciplinary, consultative approach has led to many of our key customer relationships extending for years and growing in scope.
- Malcolm Wilson, chief executive officer; currently serves as XPO’s CEO in Europe
- Baris Oran, chief financial officer; currently holds this role with XPO’s logistics segment
- Mark Manduca, chief investment officer; currently holds this role with XPO’s logistics segment
- Richard Cawston, president, Europe; currently holds this role with XPO’s logistics segment
- Eduardo Pelleissone, president, North America and Asia Pacific; currently holds this role with XPO’s logistics segment
- Bill Fraine, chief commercial officer; currently serves as XPO’s division president, supply chain logistics for the Americas and Asia Pacific
- Neil Shelton, chief strategy officer
- Maryclaire Hammond, chief human resources officer; currently serves as XPO’s senior vice president, human resources for the Americas and Asia Pacific
- Sandeep Sakharkar, chief information officer; currently serves as XPO’s executive vice president, logistics technology
- Meagan Fitzsimmons, chief compliance officer; currently holds this role with XPO’s logistics segment
- Angus Tweedie, senior vice president, strategy; currently holds this role with XPO’s logistics segment
The separation will create two industry-leading, independent public companies with distinct investment identities and clearly delineated service offerings in vast addressable markets. As separate entities, each company will be better positioned to pursue its own growth opportunities as its customers demand faster, leaner, smarter supply chains to meet the expectations of their end-markets.
Furthermore, each company is expected to have greater earnings potential, with an independent corporate strategy and distinct profit drivers, and will be able to effectively allocate resources and manage its capital in line with its strategic priorities. Each company will have a separate equity currency that it can use to closely align incentive compensation arrangements with the performance of its respective business.
To the extent that these expected benefits of the spin-off result in greater investor demand for shares of XPO stock and/or GXO stock, it could cause each company to be valued higher than its current multiple, including higher than its publicly traded peers. Any such increase in the aggregate market value of XPO and GXO following the separation, over XPO’s market value prior to the separation, would benefit XPO, GXO and their respective stakeholders.
The expectation is that GXO will be rated investment-grade from day one, with XPO to follow.
- Issue debt for GXO and finalizing any required refinancing of XPO’s debt, subject to the satisfaction of XPO’s board of directors.
- Apply to list GXO’s stock on the New York Stock Exchange under the symbol “GXO.”
- Appoint a board of directors for GXO.
- Receive a tax opinion from outside counsel.
- Receive final approval from the XPO board of directors.
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