Welcome to the GXO Third Quarter 2023 Earnings Conference Call and Webcast. My name is Darryl, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the Company regarding forward-looking statements, the use of non-GAAP financial measures and the Company's guidance. During this call, the Company will be making certain forward-looking statements within the meaning of applicable securities laws, which by their nature, involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those projected in the forward-looking statements. A discussion of factors that could cause actual results to differ materially is contained in the Company's SEC filings. The forward-looking statements in the Company's earnings release or made on this call are made only as of today, and the Company has no obligation to update any of these forward-looking statements, except to the extent required by law. The Company also may refer to certain non-GAAP financial measures as defined under applicable SEC rules during this call. Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the Company's earnings release and the related financial tables are on its website. Unless otherwise stated, all results reported on this call are reported in the United States dollars. The Company will also remind you that its guidance incorporates business trends to date and what it believes today to be appropriate assumptions. The Company's results are inherently unpredictable and may be materially affected by many factors including fluctuations in foreign exchange rates, changes in global economic conditions and consumer demand and spending, labor market and global supply chain constraints, inflationary pressures and the various factors detailed in its filings with the SEC. It is not possible for the Company to actually predict demand for its services, and therefore, actual results could differ materially from guidance. You can find a copy of the Company's earnings release, which contains additional important information regarding forward-looking statements and non-GAAP financial measures in the Investors section of the Company's website. I will now turn the call over to GXO's Chief Executive Officer, Malcolm Wilson. Mr. Wilson, you may begin.

Thank you, Darryl, and good morning, everyone. With me in Greenwich today are Baris Oran, our Chief Financial Officer; and Adrian Stoch, our newly appointed Chief Automation Officer, first for GXO. We're excited to have him update you on our automation strategy and how it will lead to further growth and higher returns for GXO. Turning directly to the third quarter. We're pleased to report that we delivered record revenue of $2.5 billion, growing 8% year-over-year, of which 3% was organic growth. We've talked to you many times about the resilience of our business model, and we're demonstrating just how beneficial that is proving to be this quarter. While the macro environment is uncertain, we're performing strongly in those areas where we do have control, new business wins, profits and free cash flow. Baris will give you more detail on our updated full-year guidance in just a moment. Our adjusted EBITDA grew to $200 million, and our adjusted diluted earnings per share was $0.69, both coming in above expectations. On top of that, a few weeks ago, we closed the acquisition of PFSweb and the incremental benefit during the last part of the year allows us to raise both our adjusted EBITDA and adjusted diluted earnings per share guidance for the third this year. The results this quarter demonstrate two key strengths of our business. First, it illustrates that our model is working exactly as designed to. We're effectively managing all aspects of our long-term contractual business to deliver consistent margins and drive adjusted EBITDA growth. Second, it shows an acceleration of the structural trends that are driving our growth. Customers are coming to us more than ever, and our value proposition for them is only growing stronger as they look to us to drive improved productivity, optimize their working capital and improve their services to the ever more demanding end consumers. This is clear from our new sales wins and our pipeline. We closed over $180 million of new sales wins in the third quarter, nearly half of which came from companies outsourcing their operations for the first time. These fantastic customers included Carlsberg, Daikin, Farfetch, SodaStream, and Versace. And in October, we've begun an exciting new partnership with The Quality Group, a great win for us in Germany. These customers joined the exceptional blue-chip brands that continue to rely on GXO for their logistics needs. Also, in the last couple of weeks, we've entered into a significant new long-term contract for a fully automated warehouse project with a leading global sporting brand. We're thrilled to partner with this brand to enable their long-term growth ambitions across both e-commerce and retail. We're positioning the brand to optimize their inventory and costs by leveraging GXO's industry-leading expertise and technologies. Adrian will provide more detail on exactly how we do this for our customers in just a moment. It's exactly why we've created this new role of Chief Automation Officer. We're not only proud of our results this quarter but also excited about what's ahead. We've secured more than $0.5 billion of new business for 2024, tracking ahead of where we were at this point last year. Our average contract length remains strong at around five years. GXO is winning market share from our competitors. Our total new contract wins in the quarter are up 15% year-over-year even after our record-setting second quarter. Our pipeline remains solid at around $2 billion. It's distributed evenly across our operating geographies and it's well-diversified across both consumer and industrial verticals. We're excited by the opportunity to continue to grow our market share. I mentioned earlier that one of the key milestones this quarter is the acquisition of PFSweb, a premier e-commerce fulfillment provider based in the U.S. PFS serves over 100 of the world's most iconic brands, including L'Oreal, Pandora, Procter & Gamble, Yves Saint Laurent, and the U.S. Mint. It has a great track record of profitable growth from its premium service offerings. We believe the combination of GXO and PFS strengthens our book of business by bringing exposure to key growth verticals, including health and beauty, jewelry, and luxury goods. PFS continues to deliver robust growth and is winning great new contracts with brands like Glossier. We'll build on this momentum and leverage PFS vertical expertise to complement our existing business and grow into the massive addressable market on a global basis even faster. We celebrated closing the transaction with the PFS team in Dallas the week before last, and the level of excitement was palpable. On a personal note, I'm delighted to be working with this team. Like GXO, it's clear that the high caliber of the people is why PFS has been able to build such an incredible business. And lastly, on that note of people, we're proud to have won numerous awards for employee satisfaction and inclusion this quarter. I'm very pleased that our constant efforts to create the best possible workplace for our people and to make GXO the employer of choice in our industry are being recognized. In summary, we're confident that we're positioned to capitalize on the immense growth potential within our industry and the continuing tailwinds of automation, outsourcing, and e-commerce. Now, I'll hand it over to Baris to walk you through the numbers and our updated guidance. Baris, over to you.

Thanks, Malcolm, and good morning, everyone. This quarter, we delivered a strong set of results, including great new sales wins, resilient adjusted EBITDA, and outstanding free cash flow conversion. As Malcolm mentioned, we delivered a record $2.5 billion of revenue in the quarter. This represents 8% year-over-year growth, about 3% of which was organic. Our top-line performance clearly reflects the impact of near-term macro headwinds on customer volumes, and as we highlighted in prior quarters, all other areas of the income statements reflect credible stability in our business and our continued strong management execution. Our operating income was up 25% year-over-year in the third quarter. We delivered adjusted EBITDA of $200 million. We are delivering consistent adjusted EBITDA margins as a result of our resilient business model, despite the headwind of 90 basis points from pension and FX hedges. And they have improved 20 basis points sequentially since the second quarter while these headwinds have increased. This margin strength is driven by our continued focus on cost discipline, specifically the productivities we are driving in our site-level operations and in our central efficiencies initiatives. We also delivered net income attributable to shareholders of $66 million and adjusted diluted earnings per share of $0.69. Our return on invested capital was once again robust at well above 30%. Our accelerating new business wins year-over-year highlight the ample opportunity for our business to continue to reinvest and generate these levels of returns in the future. I would like to particularly highlight our free cash flow, which was a record $191 million for the third quarter, helped by strong cash collections and methodical deployment of capital. We are on track to deliver our free cash flow conversion target of approximately 30% of adjusted EBITDA for the full year. We reduced our net leverage to 1.6x as of September 30. We have no debt repayments due in 2024. Our balance sheet remains rock solid and investment grade after our acquisition of PFSweb, and we expect to end the year with net leverage of around 1.7x. On PFS, I'd like to take a moment to welcome our new colleagues. The strength of talent of this team is just phenomenal. We are thrilled to have completed this deal. Plans to accelerate our growth together are already underway, and as Malcolm mentioned, we believe this is positioning GXO for continued and accelerated growth. Our acquisition of PFS exemplifies our approach to M&A. We are highly selective in our targets, and we have established a track record of pursuing companies that bring opportunities to expand our presence in key markets and further enhance our offerings for new and existing customers. In PFS, we bought a double-digit growth trajectory at a very attractive valuation. Going forward, we will continue to deploy our excess cash in the best interest of our shareholders, which includes either share buybacks or accretive M&A. Turning to full year, you'll see that we are revising our full year 2023 organic revenue guidance from 6% to 8% to 2% to 4%. For this holiday season, we are seeing lower customer volume growth than anticipated, particularly in consumer-focused sectors; in many cases, and in contrast with last year, the global brands we are serving are prioritizing pricing over volume. This is resulting in a more uncertain peak. In addition, some seasonal Christmas pop-up projects will not recur this year because of lower customer volumes. This is a one-off impact in the fourth quarter, causing our organic growth to be softer. Our adjusted EBITDA and free cash flow remained robust due to the structure and predictability of our customer contracts, which helps to insulate our financial performance from volume swings. The incremental benefit from our acquisition of PFS gives us the confidence to upgrade our full year adjusted EBITDA guidance to $730 million to $755 million. We are also pleased to upgrade our guidance for adjusted diluted earnings per share to $2.55 to $2.65. And finally, following our free cash flow results this quarter, we are reiterating our full year free cash flow conversion target of approximately 30% as well as our return on invested capital target of about 30%. Looking ahead, our long-term growth is underpinned by our continued new business wins. This reflects the value of the services that we are providing to our customers, helping them to manage their businesses more efficiently in the current environment. We won $841 million of new business year-to-date. We've got $520 million of incremental revenue booked for 2024, and nearly $200 million of incremental revenue booked for 2025. In the third quarter, almost half of our new business wins were outsourcing. We're making more headway into our $0.5 trillion total addressable market. At the same time, we continue to produce profits and cash flows throughout the cycle. Our margins are resilient, and our free cash flow conversion is rock solid. We will continue to manage GXO with a rigorous focus on contract governance, cost discipline, and capital allocation to serve the interest of both our customers and our shareholders. And now I'll pass the mic over to Adrian, who was named as our first Chief Automation Officer in July. He'll brief you on one of our most important levers for growth and value creation, our automation strategy. Over to you, Adrian.

Thanks, Baris. Good morning, everyone. I've been at GXO for over two years, and I've been working in supply chain and operations for more than three decades. I moved into my role as Chief Automation Officer last quarter. I've had the pleasure of meeting some of you during site visits while I was in my previous role as Head of our North American Consumer division. Today, I'd like to put some texture around our automation and AI differentiation as well as how we're going to accelerate our existing strategy. By unifying our global technology agenda, we will shape the future of the industry, drive better outcomes for our customers, and improve our employees' experience. GXO is already the market leader in supply chain automation. Today, about 30% of our revenue comes from automated operations versus the industry average of less than 10%. Additionally, we've accelerated our deployment of post-go-live adaptive tech, and this has increased the proportion of our revenue from these sites from 5% a year ago to 11% today. The overall amount of tech actively deployed across our footprint has increased by almost 70% year-over-year. At every site where we deploy this technology, we provide outsized benefits to our customers. As a result, we grow faster, increase our market share, and deliver margins that are 200 basis points higher than the group average. We are at a critical inflection point in the automation of warehouse operations. Up until now, the focus has been on automating tasks that are repetitive, laborious, and require heavy lifting. Because significant advancements have been made, today, we have multiple finely tuned solutions that can address this problem. The vision of what's ahead is what is truly exciting. The next phase of automation includes seamless integration of existing discrete solutions combined with AI to solve significantly more complex problems than merely replacing manual tasks. This will enable operations to be performed faster and more reliably and free up workers to focus on the value-added services that are critical to our customers' dynamic and complex supply chain needs. Let's bring this to life. In my previous role, we conducted a major site retrofit for a household name apparel retailer, where we implemented several additional technologies that transformed the warehouse into a completely integrated end-to-end flow. This increased productivity, reduced cycle time, improved our safety performance, which is already well above industry average, and drove an overall reduction in cost per unit of 18%. It was a game changer for the customer and without question, deepened our partnership. While the consumer team led this specific example, there are myriad other successes just like this across our organization. Part of my mission is to unify our efforts and deploy technology that optimizes each of the core warehouse process paths. We will create global standards and best practices, which will accelerate deployment and ultimately lead to better margin performance. This is the embodiment of continuous improvement that has been the cornerstone of my operations experience, and now I'll bring this philosophy of continuous improvement to automation. In tandem, we're partnering with innovators across the globe to guide and validate their solutions in multiple sites within the consumer division we successfully deployed AI combined with a goods-to-person robotic solution to increase the number of barcodes traveled by around five times per bot stop. This increased productivity tremendously, resulting in significant value creation for the customer and a huge step-up in ROI. The opportunities that AI unlocks for warehouse automation are staggering, and we are partnering with hardware and software vendors alike to identify the most suitable platforms to meet our customers' needs. In addition, we have been the first to adapt mature solutions from other sectors into the logistics industry. For example, we implemented a high-volume, high-precision storage and retrieval solution that was originally developed for the pharmaceutical industry and adapted it for a specific customer's needs in consumer electronics. The financial benefit of everything I've just described is extremely compelling, but there's a multiplier effect from the results we drive that also includes cycle times, improved quality, reliability, agility, and workforce safety. This intersection of taking operations is the secret source that makes us the partner that our customers turn to, and they are doing so on an increasingly global basis. My role in all of this is to identify, prove, and accelerate the right technologies to customers' needs. In turn, we will grow our 2% market share in this $0.5 trillion industry. I look forward to updating you all on our progress. And with that, I'll hand you back to Malcolm.

Thanks, Adrian. We're very pleased with our performance this quarter against a softer macro. Our teams have delivered substantial contract wins, as well as strong and predictable adjusted EBITDA and free cash flow. We've closed another great acquisition. As a result, we've raised our profit guidance for the third time this year. Our mission remains to enable our customers to run their businesses more efficiently and cost-effectively. We are succeeding and we're also growing our market share. Our heightened focus on automation will help fuel our growth and bolster our resiliency, and we'll continue to optimize our operating model, drive high returns, and allocate our capital in the best interest of our shareholders. With that, we'll hand the mic back to Darryl and transition to Q&A.

Our first question comes from Stephanie Moore with Jefferies. Please go ahead with your question.

I was hoping you could just help us understand what about the macro change since the last boat to drive kind of such a material cut in organic growth guidance for the year? Or have you been seeing some of these kind of moderating or temporary trends really since the first quarter? I'd love to get your thoughts there.

Stephanie, it's Malcolm here. Let me give you first the big picture and then more detail. So when we look at the regions that GXO is working in: our Continental European business, in the big countries, France, Netherlands, Spain, and Italy, actually doing all care; we've seen a slight recovery and going well. Our U.K. business, we think that's probably at about the bottom, with actual early signs of green shoots. And here in North America, we think we're quite close to the bottom. So that's the kind of macro picture that we're seeing. For this last quarter, it's interesting. We've delivered organic growth across every single region, and that's despite a clearly softening consumer macro environment. We can see in some of the verticals that we're working in, technology, aerospace, food services, they are in a good trajectory. They're doing quite well, but that's countered by definitely a slower, softer consumer-related business. If we think about our Q4, what we expect to see looking ahead, we're not expecting to see many of the seasonal pop-up type of short-term warehousing activities that we've seen in previous years. We think that's a consequence of inventory levels generally normalizing and actually how many of our customers are approaching the holiday season. We've seen that several of our customers are choosing to focus on holding price versus a kind of volume type of environment. And we're also hearing that evidence that the consumer themselves are putting off holiday shopping, looking later into the season for maybe bargains and so on. We should contrast that, though against very, very strong sales, in quarter three. Very strong sales, $181 million, that's up 15% year-over-year. And as we mentioned in the call, quarter four is off to a great start with a new very long-term fully automated contract in its life of contracts worth around $1 billion. So we're very, very pleased about that. In all the areas where we do see softer trading, it's also worth to remember that the contract model that we have, we've often talked about the resiliency of our contract, the pass-through of inflationary pressures. That's protecting us and allowing our profitability to remain very good. And you see that in the guidance that we've just been talking about. This uncertain macro, it's kind of environment where GXO thrives. It really helps us to better demonstrate to our existing customers, but importantly, new customers. Remember, of $180 million, roughly half of that was coming from new first-time outsourcing customers, and they're benefiting from working with GXO, benefiting from how we help them improve productivity, and improve their services. We're transforming operations for them. And technologies play such a big part of that, and I'm so pleased now that we have Adrian in his new mission. And then the last thing I would say, just a couple of interesting points, but nevertheless, it's a summary of the environment. Wage inflation has really moderated. We're seeing that wages pretty much have caught up to broader inflation, and that's helping the consumer. And the last point is, we are seeing equally in the real estate environment, it's really kind of moderated. We're not in the difficulty as we would have been six months ago of having to look long and hard to find real estate. It's a much easier market. So all of that as we see the picture right now as we will be exiting Q4, a lot of these kind of one-off type of impacts that we're seeing right now, we think will recede, and we should go back to a growth environment in the first half of next year.

I really appreciate all the incremental color. Just as a quick follow-up, and you kind of touched on this a little bit, I'm trying to understand the raise in the EBITDA guidance for the year and kind of the puts and takes, despite the cut in organic growth. It sounds like FX was a little bit worse; that's likely, but that's slightly being offset by the PFS acquisition. So maybe just talk about what were the underlying drivers to still be able to raise the low end of that EBITDA guidance on this core business.

Stephanie, let me ask Baris to comment on that.

Sure, Malcolm. In Q4, our margin will continue to expand, excluding FX and pension headwinds as you would recall these were roughly about $15 million per quarter. We expect to continue moderate margin expansion, excluding FX and pension in Q4, and this company is delivering on our promises as we highlighted many times in the past, even when the volume comes down, we continue to generate profits and cash flows due to our strong contract governance. Furthermore, we will have a low single-digit contribution from PFS in Q4. We have been getting a lot of headway into our integration and restructuring benefits and they will contribute even more to Q4, getting into a $40 million at the end of the year as we start into next year; that's going to be helping our next year operating profitability. The impact of those in Q4 will be roughly about $10 million incremental versus the prior year. So all in all, contracts are working well. Productivity benefits are delivering on their promises, and even in this volume environment, we will continue to deliver strong results.

Our next questions come from the line of Chris Wetherbee with Citigroup. Please proceed with your question.

Maybe picking up on that last question, particularly around the fourth quarter and the EBITDA guidance. I think normal seasonality the last couple of years has seen EBITDA accelerate from Q3 to Q4. I know there's a range here, and I think there's a lot of factors kind of at play, but the range bookends the third quarter, both up and on the downside. So could you talk a little bit about how you think this might play out? And what sort of would be the factors potentially offsetting that normal seasonal uplift that you have? I think you've talked a little bit about some of the seasonal activity maybe not being quite as good, but a little bit of finer point on that would be great.

Chris, this is Baris. First, regarding organic revenue growth, we now anticipate guidance of 2% to 4%. In Q3, we achieved a 3% growth, but for Q4, we expect some challenges due to reduced pop-up activities, a slower ramp-up of new facilities, and importantly, lower volume from our existing facilities. However, we are offsetting these challenges with business wins and effective inflation and pricing strategies. On the margin side, we are maintaining steady EBITDA margins. As I mentioned, we anticipate a small increase in our margins, excluding foreign exchange and pensions, which will face a $15 million headwind in Q4. We expect around a $10 million benefit from our productivity initiatives, integration advantages, and restructuring efforts we have implemented. This year, we took significant steps, such as optimizing procurement, outsourcing noncore tasks, and cutting about 10% of our nonoperational staff while streamlining organizational layers to improve efficiency. These actions are contributing positively in Q4, enabling us to navigate this lower volume environment. Central to this is our contract structure; as we discussed a year ago, our contracts are designed to perform well even during downturns, which will be evident in our operations.

Our next questions come from the line of Jason Seidl with TD Cowen. Please proceed with your question.

I wanted to touch a little bit about your outlook for '24. I think before you mentioned that you saw maybe a turnaround coming in late one half. How should we assume that runs throughout your geographies since you mentioned green shoots in Europe? Should that be hitting Europe first and then maybe North America in the second half of the year? How are you looking at it?

Let me walk you through some of the elements of Q4 because it impacts 2024 as well. We're seeing right now 2% to 4% growth for 2023, which is the middle range implying a flat growth for Q4. We delivered 3% organic growth in Q3, but heading into Q4, we're seeing more volume headwinds. And when you put in components, the first is you see seasonal one-off impact from reduced pop-up activities, these are Christmas-related warehouses we have been operating. It's about 1% to 2% impact, slower ramp-up of new facilities. They are not immune from the current volume environment, about 1% to 2% impact. And lastly, number three is reduced volume from our existing facilities, which is about a 5% impact. All of this is roughly making 8% to 9% headwind balanced with our business wins and pricing pass-throughs, inflation pass-throughs that we have in our business that come to our flattish growth in Q4. Now looking into 2024, our business has already banked $525 million of incremental revenues from contract wins. We won a large contract win with the U.S. sporting goods, a 15-year contract due to start in 2025, but when you look into the environment, you will probably see a gradual increase over time. Customers’ volumes will likely remain subdued at the start of the year and improve throughout the year, and we expect to get back into revenue growth in the first half and even acceleration in that in Q4. And during this time, we expect our margins to hold steady and we continue to get support from productivity initiatives we highlighted, which is going to give us about a $40 million run rate into 2024. Remember, we are ending this year about $25 million, $26 million of benefit. So a lot of new wins supporting next year improvement into the first half, more into the second half, and some of these activity headwinds you're talking about in Q4 are seasonal in nature.

Yes, it is a significant opportunity, Brian. And we've been very active on this program that we call adaptive tech. In the deck, actually on Slide 11, it describes how we've increased the number of technology units by 67% year-over-year, and this has predominantly been through our adaptive tech program. And so some examples in the space of wearable tech, collaborative robots, vision technology, where the site, it doesn't really matter whether the site is manual, partially automated, or highly automated. There is always the opportunity for continuous improvement through the adaptive tech program. And part of my remit is to formalize and standardize our best practices, and where we've seen ROI in existing implementations is to take those to other sites. So I see this opportunity as very compelling and extremely significant.

So in terms of the 200 basis points and do I see further opportunity? I do both from a growth acceleration perspective but also in terms of margin improvement. I'll give a specific example. So we recently piloted and we're still in the pilot phase, but we're seeing significant benefits from an AI program on being more predictive with respect to labor planning in a site where we've been able to be more precise by a factor of close to 5%. And so the reason why I'm very optimistic on the ability for automation and AI to help improve our margins and our efficiencies is because when we have a successful pilot, and there are many of these just this is one example I am mentioning. We have the opportunity to then standardize and take it to our global sites close to 1,000 sites. So absolutely, I do see it both as a growth lever and a margin improvement lever.

Our next questions come from the line of Amit Mehrotra with Deutsche Bank. Please proceed with your question.

For my first question, I'd like to delve deeper into the discussion about organic growth from earlier in the call. Malcolm, I want to understand better that while the organic growth is expected to be around zero in the fourth quarter, you have won several contracts, including the Sainsbury contract, which I believe is significant for you. However, the challenge is that the core business is experiencing a notable decline, either due to reduced volume or increased churn. I'm curious if churn rates are indeed rising, as it seems logical given the current environment, but I'm not certain. Could you help us gain insight into the customer perspective regarding churn?

Amit, it's Malcolm. So it's mainly a volume issue. So if you think about churn, churn is pretty consistent with previous quarters. But definitely, what we're seeing is on our consumer-related businesses, and it's not universal on every single customer. But as a broad brush, we can say our consumer-related business is those two facets of a lot of our customers are choosing to not discount. So maybe we can say inventory levels over the past few quarters have normalized and inventories being elevated probably over the past couple of years starting with the pandemic, starting with supply chain disruption, starting with different aspects of manufacturing problems. But now we can see inventory levels generally normalized. And as a part of a result of that is basically the customers are not necessarily choosing to discount product; they're choosing to sell at a better price. Now for that, that's good. You see in the numbers of many of the organizations we work in, they're actually faring well. But obviously, in our business, it's more a volume aspect that travels through our warehouses. So that's probably the most significant point that you're seeing in our quarter four numbers. And it's compounded a little bit by traditionally, quarter four is always a very important quarter for our customers. It is this quarter. Quarter four, it's going to be very important. We're all focused on it. But again, because of the volume typically, historically, we might be implementing several smaller overflow warehouses, just to court with those extra volumes that happened in the last quarter. This time around, we're not seeing any evidence of that. And I guess the last thing I mentioned earlier, I think there's definitely signs that the consumer themselves are putting off starting the holiday season shopping. They're putting it off to later in the season, basically in the hope that some of that discounting will occur. So that's the kind of backdrop that we're seeing. Maybe I can ask Baris just to comment on the fine detail on the numbers for you, Amit, because it's really important.

Yes, that's fair. And then one sneaky one, if I could. I know I'm over my allotment, but I wanted to talk to Adrian for around the automation. So Adrian, everything you said was really compelling and there are a lot of buzzwords in there in terms of automation and AI. I think the problem that we've had on the analytical side is kind of converting that into what it actually means for the model. And so as you take on this new position of Chief Automation Officer, what are the KPIs for you that kind of allow you to move? Because there's a lot of anecdotal evidence of automation, but the problem I've had is that the Company still has a huge amount of direct labor costs, and I'm trying to balance those two. So as you think about this new role, like every quarter or every month, whatever it is, how are you judging the success from a KPI perspective that we can maybe follow to?

Amit, thanks for the question. So I'm going to answer it in two different categories. The first is around operational or tactical metrics, and the second is more strategic and financial. So from an operational perspective, we're going to look at the amount of adaptive tech that we're redeploying as a success measure because, of course, the more we're able to establish those best practices and best case scenarios and then roll them out to other sites, the more we get the leverage of that from a global perspective. So, the extent of adaptive tech expansion. Secondly, of course, we'll measure very tactically the execution of plans in terms of what each of the regions will be targeting with respect to implementations. And so from a tactical perspective, but I think what's more relevant for this audience is around the more strategic and financial indicators, which will be focused on the revenue derived from automation and the margin that we get from the automated operations. Those will be the two primary financial metrics that we'll be talking about.

Our next questions come from the line of Jason Seidl with TD Cowen. Please proceed with your question.

So moving forward, you would expect the conversion rates of the pre-pipeline to increase?

That is the hope and intention, yes.

Thank you. Ladies and gentlemen, that is all the time we have for questions today. I'd like to hand the call back over to Mr. Wilson for any closing remarks.

Thank you, Darryl, and thanks for hosting our call today. We really appreciate that. We've delivered a robust third quarter. We've upgraded our 2023 adjusted diluted earnings per share and adjusted EBITDA guidance every quarter and now taking into account our strong operating results and the incremental benefit from our recent acquisition of PFSweb, we're very pleased to be raising this guidance again. Set against a softer macro, we continue to deliver strong new business wins, profitability, and free cash flows underlying the resilience of our business model, the deep expertise of the team, and a secular growth story. With that, I'd like to wish everybody a great rest of the day, and thank you for your attendance. We'll bring the call to an end. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. Have a wonderful day.