Welcome to the GXO Fourth Quarter and Full-Year 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 law, 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 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 on 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. I appreciate you joining us today for our fourth quarter and full-year 2023 earnings call. With me in Greenwich are Baris Oran, our Chief Financial Officer; Adrian Stoch, our Chief Automation Officer. 2023 was a stellar year for GXO. We raised our adjusted EBITDA expectations through the year, delivering $741 million for the full-year. We converted a record 40% of that adjusted EBITDA into free cash flow. We signed a billion dollars of annualized new business wins positioning GXO for continued growth. We deployed a record amount of automation helping our customers to operate more efficiently and we acquired PFS, a premier fulfillment provider in high growth verticals. For the fourth quarter of 2023, we generated revenue of $2.6 billion, and we delivered adjusted EBITDA of $193 million in line with our expectations. We benefited this quarter from our balanced portfolio over 1,000 companies partnering with GXO across 27 countries where we operate. We handled record volumes for some while managing a softer peak for others. For the full-year 2023, we generated $9.8 billion of revenue, growing 9% of which 2% was organic. As you'll recall, our initial adjusted EBITDA guidance for the year was a range of $700 million to $730 million. We are proud to say we beat the midpoint of that guidance by a healthy $26 million, with our full-year adjusted EBITDA coming in at $741 million. During the year, we closed the tremendous $1 billion of annualized new business wins, signing significant new partnerships and expansions with a diverse group of customers including Kellogg's, LVMH, Nike, PepsiCo, and Unilever. I can't emphasize this point enough. GXO's ability to win a billion dollars of new business with blue chip customers speaks volumes about the demand for our superior solutions. At the time of the spin, we talked about a $450 billion total addressable market of which $300 billion is handled in-house presenting a huge growth opportunity. Only two short years later, about 40% of our wins in 2023 came from outsourcing, up from about 26% in 2022, as customers looked to GXO to make a strategic change in their business. We deployed a record amount of automation into our operations and set all-time volume records at two of our highly automated sites. And we're trialing some very exciting cutting-edge technologies, including AI-powered robots and humanoids, which I'll ask Adrian to update you on in a few moments. Our expertise in automation and robotics continues to set GXO apart, and our market share is higher in verticals where we've automated for our customers. Our automated solutions enable us to improve service and lower costs for our customers. We are creating the warehouses of the future, and our leadership in this area is a critical part of our long-term growth trajectory. Through our acquisition of PFS, we've gained an amazing portfolio of over 100 of the world's most iconic brands. PFS is a valued partner for brands looking to achieve a differentiated consumer experience in the luxury and beauty markets. This is a resilient and growing business that had excellent trading results in the fourth quarter. Now we're focused on supercharging PFS's growth. For example, our recent North American expansion with Glossier was the product of a strong PFS relationship in one country and the global scale of GXO. Turning to our outlook for this year, we've issued guidance of 2% to 5% organic growth with $760 million to $790 million of adjusted EBITDA for the full-year 2024. Baris will cover the detail behind our financial projections. But I'd like to just touch upon a few trends we're seeing that indicate a positive growth trajectory ahead. First, the pace of supply chain outsourcing is accelerating. I noted a moment ago that about 40% of the billion dollars of new sales wins in 2023 were activities that were being outsourced. Customers are increasingly turning to GXO to help them navigate the complexities of their supply chain operations. Second is the increasing need for return and reverse logistics. Our reverse logistics grew faster than the group as a whole in 2023, and represents a high-single-digit percentage of GXO's revenues, as both new and existing customers are increasingly asking us to help them manage this critical part of their supply chain. And the third, and perhaps the most pronounced, trend running through our commercial discussions is the demand for greater efficiency. In nearly every conversation, our customers are asking for our guidance on how to use automation to improve service and lower costs throughout their supply chains. As the leader in logistics automation, we're uniquely positioned to deliver on these objectives and capture even more of our total addressable market. We are continuing to sharpen our commercial strategy in order to meet the huge and accelerating demand for our services. On that note, we've appointed Richard Cawston, our Head of European Operations, to serve simultaneously in a newly created role of Chief Revenue Officer. Our customers are demanding more and more globally network services, and we're adapting our organization to support them and capitalize on this accelerating trend. We are also doubling down on our automation leadership to improve our site-level productivity, which Adrian will update you on in a moment. GXO is firing on all cylinders with a sound vision for what's ahead. We're winning incredible new business, growing share, and delivering best-in-class services to our customers. And with that, I'll hand you over to Baris to walk you through our financials and guidance. Baris, over to you.

Good morning, everyone. As Malcolm laid out, 2023 was a remarkable year for GXO. Revenues grew 9%; operating income grew 31%; and net income grew 16%. We maintained an operating return on invested capital above our target of 30%. Delivered strong margin performance in a lower growth environment and converted more than 40% of our adjusted EBITDA through free cash flow. Turning to details, for the full-year of 2023, we generated revenue of $9.8 billion, growing 9%. We delivered adjusted EBITDA of $741 million. Our adjusted EBITDA margins were also resilient, overcoming a headwind of approximately 70 basis points, due to the net effect of pensions and foreign exchange. Our operating income for the full-year 2023 was $318 million, up 31% year-over-year. We delivered net income of $229 million, up from $197 million in 2022. In the fourth quarter, we generated revenue of $2.6 billion, as well as adjusted EBITDA of $193 million. As Malcolm mentioned, we won a billion dollars of new business in 2023. And the average length of contracts signed in the fourth quarter set a new all-time record of well above six years. Our fourth quarter operating income was $87 million, growing 18% year-over-year, and net income was $73 million, up from $46 million in 2022. Our operating return on investment capital at 36% was once again well above our target. In 2023, we surpassed all expectations on free cash flow. We have sharpened our focus on capital effectiveness. From a CapEx perspective, we have allocated investments to technologies and services that drive greatest returns for our customers. On the working capital side, we achieved stellar cash collection, all of which drives high compound returns for GXO. As a result of these actions, we delivered an outstanding $151 million of free cash flow in the fourth quarter, taking the full-year to $302 million. We converted more than 40% of our adjusted EBITDA, which was significantly ahead of our target of 30%. I'm very pleased that in 2024, we also expect to be ahead of this target. We lowered our net leverage levels to 1.6 times, down from 1.8 times at the start of 2023, which includes the financing of our $150 million acquisition of PFS. Operationally, we are ahead of the net leverage targets that we set at the beginning of 2023. Our balance sheet remains rock solid and investment grade. We have no debt coming due in 2024, and we are pleased to have received credit rating outlook upgrades from S&P, Moody's, and Fitch in 2023. This illustrates both the significant need for innovation in the market and GXO's exceptional ability to meet that demand. Now turning to our guidance, for the full-year 2024, we expect to deliver organic growth of 2% to 5%. We anticipate a sequential acceleration of growth throughout the year. Our early trading results in January indicate that our first quarter organic growth shows an upward sequential trend. Based on the input from our customers, we believe the fourth quarter was the bottom. We are basing our full-year growth projections on the following factors. First, we have several significant new business starts ramping up throughout 2024, including notable wins in the aerospace and industrial verticals, as well as with brands such as LVMH, Mars, and Sainsbury's. Some of these are highly automated sites that take slightly longer to fully implement, hence the ramp-up throughout the year. Second, while many of our verticals are performing very strongly, several of the consumer customers that saw softer volumes in the second-half of 2023 are expecting sequentially higher growth throughout the year. Third, our year-on-year comparisons get significantly easier as we progress through the year. We also expect to deliver $760 million to $790 million of adjusted EBITDA. And to reiterate, we expect to convert 30% to 40% of our adjusted EBITDA into free cash flow, about our 30% long-term target. This cash conversion trajectory points to approximately 1 time net debt to EBITDA by the end of 2025. Roughly, half of our billion dollars of new business won in 2023 will go live in 2024. And we already booked nearly $230 million of additional incremental revenue for 2025. All taken, we expect to see revenue accelerate through the year. With incremental 2025 revenue already 29% higher than at this stage last year. We are very excited about our long-term growth trajectory. GXO continues to drive and compound great returns on capital. Our operating return on invested capital is significantly above 30%. We have generated an unprecedented amount of cash flow this year while taking our leverage to 1.6 times. This provides us with the balance sheet's flexibility to continue our disciplined M&A strategy. While our primary focus is on organic growth, we are delighted to be able to allocate capital into more and more automation contracts that are getting longer, proving the value we create to our customers, global brands across the world. And with that, I'll hand it over to Adrian to update you on our automation progress and outlook. Over to you, Adrian.

Thanks, Baris. Good morning, everyone. 2023 was a standout year for GXO in automation. We won multiple long-term, highly automated contracts with global blue chips and over half of our billion dollars of new business wins in 2023 are expected to generate revenue from automated operations. We are delivering on our long-term promise of increasing our revenue from automated operations, which has risen from 37% to 42% year-over-year as of the fourth quarter. A major contribution to this was increasing our total units of warehouse automation by about 50% year-over-year. We further entrenched our technology leadership position and trialed a broad range of new hardware and software solutions including humanoids, AI-powered robotics, and autonomous vehicles. As Malcolm noted, we are creating the warehouses of the future. We're talking with customers every day about supply chain efficiency and how to solve their complex problems. Every company with goods to move is looking for ways to make their fulfillment operations more productive today and more resilient tomorrow. Our competitive advantage is helping our customers bring efficiency to life in their site operations. Customers' needs for automation differ based on their experience and business model. Some want to invest in transformational large-scale automation. Others need a new partner to take over an existing operation, and many are outsourcing their operations for the first time. We pride ourselves on being able to meet any customer need with tailored solutions for best-in-class results. Of our billion dollars in new wins for 2023, approximately 45% will be automated through the contract. In addition, we typically see annual conversion rates of 5% to 7% from manual to modular adaptive tech through our own continuous improvement programs. This means we expect over half of that billion dollars of new wins will result in automated revenue for GXO. One of the biggest wins is a 15-year contract with the global sports brand, where we've selected and designed the appropriate technologies to enable a completely integrated end-to-end flow through the warehouse. This solution is key to the customer's European growth plan; it provides them with capacity for same-day fulfillment of up to 3 million units per week. Our deep experience and domain expertise with this level of complex automation was the primary driver for our success in winning this contract and continues to differentiate GXO in the market. Looking forward, the industry as a whole is nearing an inflection point with more and more global brands pursuing this type of transformation. We have nearly half a billion dollars of large-scale automated sales opportunities. On average these large-scale automations carry significantly longer contract duration. Our automation portfolio also delivers margins more than 200 basis points above group levels, making our business stickier and our growth more profitable. In addition to driving momentum in automated sales, our team is heavily involved in retrofitting both mature and new technologies to improve site-level productivity. We regularly pilot new innovations, and if the solution meets our performance thresholds, we then deploy it across our network. In 2023, we increased our total units of warehouse automation by 50%, that included doubling our vision tech, which optimizes auto validation and minimizes errors. It's a highly efficient technology that can be rolled out in operations across numerous verticals without requiring significant capital investment. The operations where we implemented this tech saw an average margin expansion of 300 basis points. We're also actively identifying practical applications for AI in our existing operations and have successfully trialed solutions for PIC productivity and workforce management. We're excited that the PIC solution delivered a productivity increase of approximately 15% and we're now rolling out the application to dozens of sites in 2024. Finally, given our rapidly expanding scale and leadership position, we're beginning to achieve meaningful procurement savings. We are already benefiting from significant reductions in prices in various categories. GXO has built a global technology ecosystem that is unrivaled in our industry, and the need for our solutions continues to grow every day. Our scale and reach have materially shaped the warehouse automation landscape and we're beyond excited as to what lies ahead and the major impact of GXO's role in building the supply chain of tomorrow. And with that, I'll pass back to you, Malcolm.

Thanks, Adrian. This was the year that we proved our business model. With resilient margins, strong cash flow, and adjusted EBITDA growth that surpassed our expectations, we won a billion dollars of great new business and expanded the gap with the competition through our investment in high return automation that meets our customers' increasing demand for outsourcing. Before we close, I want to thank our employees for their tremendous performance during peak and throughout 2023, their hard work and continued commitment to our values were the engines that delivered a truly great year for GXO. Looking forward to 2024 and beyond, we're building this momentum. Our automation leadership is driving stickiness and profitable growth with global customers looking to make their operations more efficient. We expect our growth to accelerate driven by new wins, with incremental revenue for 2025 tracking nearly 30% ahead of where we were a year ago. We are very excited about our growth trajectory as we focus on delivering the best possible solutions to our customers and generating strong returns for our shareholders. With that, we'll hand the mic back to Darryl and transition to Q&A.

Thank you. We will now be conducting the question-and-answer session. Our first questions come from the line of Stephanie Moore with Jeffries. Please proceed with your questions. Hey Stephanie, can you check if you're muted, please? Stephanie, are you able to hear us? Okay, we'll come back to you.

Sorry about that. Can you hear? Oh, I'm sorry. Can you hear me now? Sorry about that.

We can hear you, yes.

Great. Okay, Baris, thank you so much for all the color and outlook for 2024. But maybe if you could discuss what you're seeing across geographies and verticals and early 2024 results that could give you confidence that volumes and revenue growth can accelerate from Q4? Thank you.

Hi, Stephanie. Good morning, it’s Malcolm here. Let me cover some points on that. So if we look at the broad macro where GXO is operating, continental Europe business, that's actually continued to do well. It recovered through the middle part of last year. And we're seeing similar trends right now in that business. Pleasingly, I think we're starting to see some recovery in our North American business and U.K. business. Green shoots, it’s early days, but definitely, we're seeing, as we've moved into ‘24, we're seeing a different landscape than we left 2023. When we look at the different categories of products that we deal with, we can broadly say that our food and beverage related business, technology, consumer electronics, and industrial manufacturing are really the highlights. I would say slower is our omni-channel retail and consumer packaged goods. There’s no doubt the consumer is still under pressure. We look at the metrics and we can see consumers are spending money on services. But goods, it's still a sluggish environment. Staying with the macro, I think one of the pronounced trends we've seen during the latter part of last year, and a trend we're starting ‘24 with, is that across all of the different geographies, our customers have been managing carefully inventory levels. I think there's been an adjustment to take into account what was generally a sluggish 2023. People have managed inventory levels smartly. We've been proactive in working with our customers to do that also, and customers have valued our inputs on that. Generally, I think we've seen organizations prioritizing price more than volume. And that gives you a feel for our last quarter volumes. It's early days, but I would say our trading results for January are indicating a stronger trajectory for ‘24 than we were seeing in the last quarter. It's a bit early to judge what the first-half of the year will look like, but definitely encouraging signs. When we talk to customers, I would say directionally speaking, they all expect their activity to be increasing sequentially as we move through 2024. Probably a slower first-half with a faster second-half. That’s broadly in line with every kind of commentary that we're seeing at the moment. What's pleasing for us is we've just finished ’23; we had a really great season for new business, a billion dollars of new business against that slower macro, that should not be underestimated. So we're very pleased with that. As Adrian mentioned, a lot of big-ticket implementations going on this year. Our pipeline is strong, you know, it's held up incredibly strong and maybe one of the most pleasing aspects for us is our pre-pipeline. We don't talk about our pre-pipeline a lot, but our pre-pipeline right now is about 20% up year-over-year, and there are a lot of big transformative projects coming into that, projects that will require a lot of automation. So all of that gives us a good feeling about 2024. From a GXO perspective, as we move progressively through ‘24, our comps become considerably easier as we go through. So substantial growth on the pipeline is what we're seeing right now, and we're going into the year with a degree of confidence about ‘24 and how it's going to pan out.

Great. No, that was tremendously helpful. And then just as a follow-up to your guidance for 2024, it does look like your free cash flow expectations assumed a higher free cash flow conversion. Is there a structural change there that we could expect a similar level of conversion on a go-forward basis? Thanks.

Yes, let me hand you over to Baris, Stephanie, for that detail.

Hi, Stephanie. We had excellent collection and capital efficiency, and we had record free cash flow. Our free cash flow in Q4 was $151 million up year-over-year, and our strong Q4 helped us deliver over $300 million of free cash flow for the entire year, which was a conversion rate of 41%, comfortably ahead of our 30% to 40%. And with this pace, we forecast roughly debt levels to be around 1 time debt EBITDA by the end of 2025, creating roughly $2 billion of balance sheet capacity to be allocated either to accretive, disciplined M&A in all geographies or evaluate the potential of returning capital back to shareholders through a buyback. So we will create incremental cash flow beyond investing in our automation and technology, and that's driven by excellent collection and capital efficiency.

All right. Thank you guys so much. Appreciate it.

Hey, thanks. Good morning, guys. I guess maybe wanted to talk a little bit about the organic revenue guide for 2024. I was hoping maybe you could break that down into the parts, what you see in terms of new business wins, what attrition looks like. Also importantly, how volume plays out. The fourth quarter volume sort of implied seems fairly weak, so I want to get a sense of how you see that ramping up over the course of ’24?

Hi Chris, it's Baris here. Let me take that. We expect higher growth in 2024. We already signed nearly $600 million of new business impacting 2024, and we will continue to sign more business, which we expect to grow given the good outsourcing opportunities in our pipeline throughout this year. There has been a great outsourcing opportunity in all geographies we see right now. Our services are high in demand. We expect to see positive, but lower contribution from pricing and anticipate steady underlying customer turnover. There will continue to be some impact, at least at the start of the year, from the lower footprint of our customers, given their lower inventory levels, which gives us roughly 2% to 5% organic growth for 2024. Our growth will accelerate given the ramp-up of customer projects we have and easier year-over-year comps. If you look into our earlier trading results in January and talk to our customers, that view is confirmed.

Okay. And just so I'm clear, though, should we assume sort of still somewhat negative in the first part of the year turning positive as we move forward? So Q1 maybe still is a little on the negative side, or are you able to turn positive based on what you see through January?

In Q1, we definitely expect an improvement over Q4, and the earlier trading results are showing us that.

Okay, helpful. And then the follow-up would just be translating that to the EBITDA side. I guess as we think about the potential for incremental margins; is ‘24 a year where you'll be able to see maybe some degree of expansion there? I guess can maybe talk a little bit about the puts and takes that are going on there. I know you have some of the cost efficiencies flowing from ‘23 to ‘24. You have PFS, I'm just kind of curious about the moving parts there?

Sure. Our margins yet again prove how strong this business model is. Our EBITDA percentage margin will be steady in 2024. Nominally, we expect $760 million to $790 million, with a midpoint of around $775 million. Our organic growth, supported by the deployment of robotics, automation, and outsourcing will contribute to our margin expansion. PFS is trading well and will contribute. Our central efficiencies program, which we highlighted in detail, will provide an incremental $14 million benefit, and we've gone through the details in the earlier call. All of this is balanced with our investment in our capabilities and organization, including our sales and business development teams, where we see phenomenal opportunities. Our focus on automation is selling really, really well, and our investment in our cloud-based systems is turning our potential into performance and will fuel our growth in the future.

Thanks very much, good morning. A couple of questions, I guess the first one Baris for you following up on Chris's question. Could you speak to maybe a year-over-year bridge outlining kind of the primary drivers of adjusted EBITDA in 2024 versus ‘23? What are some of the big puts and takes that we're looking at year-over-year? Thanks.

Sure. The largest components are organic growth and we expect that to accelerate throughout the year. As we highlighted, we've been involved in a lot more outsourcing projects, and technology, our automation and robotics is a huge enabler on that one. PFS will continue to trade well and contribute to our results. Central efficiencies, which we have gone through in detail, both will contribute $14 million, and we will continue to invest in our capabilities in our organization. To give you a further highlight on what those investments are, we are investing in our sales and business development teams and automation and robotics implementation teams. We are moving to cloud both our data centers and software. This is in progress, both financial, HR, and IT systems across the board. We are actively working on outsourcing with a third-party on some non-core support functions. Activities, this was all part of the plan and we're moving forward in the early part of 2024 on those plans. All of those, as you would recall, were what we highlighted in our capital market day and will give you a full-year effect of over $100 million by 2026.

Great, thanks Baris. I guess, probably from Malcolm or Adrian primarily, you guys have highlighted today, I mean, GXO is a really large target addressable market. It gets significantly larger when customers who don't yet outsource their warehouse and supply chain operations to a third-party provider get involved. And clearly, your mix of contracts wouldn't increase substantially year-over-year. So I guess my multi-part question here is, it sounds like reverse logistics is a big driver of this outsourcing trend? What type of growth rate are you getting? It sounds like it's above the average, but what type of growth rate are you getting in reverse logistics? And do you anticipate that accelerating? Also, kind of this follow on, with outsourcing being a more meaningful mix, what type of growth new business win run rate do you anticipate over the coming few years?

Scott, It's Malcolm here. Let me take the first part of that, and then I'll ask Baris to comment on some of the numbers. You're absolutely right, reverse logistics; it's a huge growth area for our business. Right now, across our total company, it's starting to represent high-single-digits of our combined activities. When I look at the sales pipeline, it's very clear to see there's a huge number of projects coming through with a high degree element of reverse logistics. If you remember back right to the beginning of GXO, we always talked about those big tailwinds, more and more companies outsourcing their logistics. Well, absolutely in ‘23, we can see that in absolute action. You know, 40% of our business wins coming from that category. That's real growth, probably outstripping our own expectations even. We also talked about automation, and Adrian has already touched on that. Again, those outsourcing contracts are people outsourcing sometimes for the first time. Automation plays a huge part of it because people are catching up; they're recognizing that efficiency is everything, and automation is a simple way for us to drive that. Lastly, e-fulfillment, we don't talk so much about it, but it's still one of our fastest-growing activities. Again, automation plays a big part in it. So these are the trends we're seeing as we saw in ‘23. We think we're going to continue to see those growth engines across our business. We're in a super position to capitalize on that as GXO.

Yes, reverse revenue is growing faster, and we expect that to grow faster yet again in 2024. When you look at our investment strategy, what sells really, really well right now is outsourcing, automation, and robotics. That's where we are putting our human capital and monetary capital. We are giving up our team and talent in the business development and also implementation teams on automation. This is a huge cycle and GXO is winning through differentiation and automation.

Thanks. Good morning, everyone. Good job with the progress on the pipeline of new business. Can you elaborate on that a little bit more? I think, Malcolm, you said that there were some transformative projects in there. Can you expand on that a little bit? Also, are you seeing any changes in customer behavior? Are people looking to run with less inventory than before because of higher interest rates or something?

Yes, hi Ravi, Malcolm here. Good morning, let me cover those few topics, and I'll also ask Adrian to come in on the shape of the pipeline and what customers are saying. As I mentioned at the beginning of this call, one of the pronounced points we've seen in 2023, and no surprise, customers are eager to see how we can improve, how we can bring new efficiency, help them in the task of becoming more efficient in their own organizations. Clearly, automation plays a huge part of that. It's really leaning into our wheelhouse. We're seen in the marketplace as an innovator able to help organizations bring more efficiency. No surprise, a huge amount of our business wins are from companies who are looking to outsource or are looking to partner with GXO for the very first time. It's been a big source of growth, and I think that's a trend that we're going to continue to see. So higher interest rates and inflation are driving people to look for more efficiency. Adrian, may be useful just to share on some of that metric in the context of automation also?

Yes, thanks, Malcolm. So this is Adrian. Good morning, everyone. What's occurring in the industry is a very exciting flywheel combo effect between outsourcing and automation. The need for enterprise digital transformation is leading organizations to reexamine their entire supply chains because they understand that they need to go through this reexamination to stay competitive today and increase resilience for the long-term. We see this transformational trend in the numbers that both Malcolm and Baris have cited this morning, where 40% of our wins come from outsourcing and over half will lead to revenue from automated operations. We need to keep in mind that this trend, we're really just at the starting point of what's occurring. Our excitement is not only because of the potential benefits from automation, but because this industry is still predominantly very manual. Companies understand that in order to get the resilience they need for the future, they need to elevate how they're viewing supply chains and what they're doing today to be in that position for competitive resilience in the future.

And Ravi, just one last point. You asked about inventory levels; I guess one of the trends we saw in the latter part of last year was organizations really adjusting inventory levels to suit the sale of goods. People need less inventory if they're selling fewer products. No doubt we saw that trend. We think that will start to reverse as economies pick up. We missed customer volumes in last year, but we expect those will start to return as the general macro starts to strengthen across all of the geographies that we're seeing. That's something we’re looking for in ‘24.

Got it. It sounds cyclical more than structural. And maybe as a follow-up here are going to which is given the strong free cash flow and the guidance for ’24, how are you thinking about the balance sheets and the priorities there and kind of any specific targets you've identified on the M&A side?

Yes, Ravi we do have a very sizable pipeline for M&A targets in all geographies and verticals. We're actively working on a number of projects. But we are also very, very sensitive about shareholder value creation. We want to extract a lot of top line growth from incremental capabilities in additional verticals and capture a lot of cost savings, so that should pay for our shareholders. When we have excess cash, buying back our shares is another option. Investing in our company through buybacks is another option. We always weigh those and always put shareholder value creation top of mind.

Thanks, operator. Good morning, everybody. I want to start with, I guess, a bigger picture question for Malcolm. Malcolm, we're seeing high numbers of U.S. warehouse capacity that's basically available for sublease or sublet. Think the number this morning in the Wall Street Journal was almost 160 million square feet available for sublease? Wondering how that impacts the business? Because on one end, I think your customer is more strategic, and obviously, the duration of the contract is longer. So I don't know if this is more of a cyclical issue, but it would be helpful. I know you've been in this business for three, four decades. It would be helpful to get a little bit of historical perspective on the cyclicality in the amount of sublease capacity in the U.S. warehouse or the global warehouse market and how this maybe impacts the business in the near to mid-term?

Amit, hi, it's Malcolm here. Your question is really topical. I've also seen plenty of news reports about incremental capacity here in the North American market. From our perspective, a good way to explain is the core of our business is contracted long-term contracts. So customers tend to occupy a warehouse; they fund the warehouse. It's part of the cost makeup. It's part of the contract makeup. So in regard to our core EBITDA, it's actually quite a neutral aspect from our point of view. You see that in our '23, our actual EBITDA came in ahead of our original outlook. We were well ahead in terms of the full year. What you do see though, and this is one of the big benefits that GXO brings to our customers as inventory levels normally flex in any year up and down. What we saw through '23 was a more pronounced lowering down of inventory levels. Customers take time to change manufacturing plans and reflect new sales outlook, but gradually, they've lowered down inventory levels. For us, we see that in the environment where we work with them proactively to consolidate warehousing activity. For large customers, we might have several fully contracted warehouses, but we might also operate some transient warehousing where for GXO, we have relatively short-term commitments on it. Those kinds of warehouses, it's in our interest and our customers' interest to contract those volumes back into our main centers, and that's exactly what we've done. That's what being a proactive partner is all about. The end result is you're absolutely right. When you look at the real estate market, progressively, you end up with more empty capacity. For us, we see we don't see it so much in our profitability. We do see it in our top line growth because that volume, we're no longer invoicing. We expect to see that research back pretty much in alignment with how we expect the macro to start becoming stronger for consumer goods. Today, it's already strong for services, but we needed to really recover properly for consumer goods. So I hope that gives you an understanding of how we see it as a business. We are seeing exactly what is widely reported, but it's not really impacting us in terms of how we judge our profitability or how we judge our customer relationships. For those, it's more an opportunity for us to demonstrate our worth to our customers.

Got it. Okay. That's very helpful. And I just wanted to follow-up on the M&A question really quickly. Because if I look at the M&A strategy over the last couple of years, it's really been about buying companies that have markets that you already have a strong presence in. So I think about Clipper or the U.K. business or even PFS. Generally, you're taking out significant cost synergies on the SG&A side. But then you also have verticals and geographies that you're underrepresented in. So as we think about where your M&A focus is going to be going forward, if you can just talk about, are we talking about new verticals and geographies? Are we talking about the same playbook, which is, hey, we already have a great presence in this market, this vertical. Why don't we just buy this company and consolidate cost structures?

Yes. Amit, let me carry on the answer, Malcolm here. We review everything on it. Clearly, there are geographies where we want to be in new verticals. When we enter a new vertical, typically we're focused on growing that new vertical. Therefore, PFS is a great example. It's not a play about driving a lot of cost synergy. There is, of course, when you put 2 businesses together, you gain cost synergy, but it's a play about driving bigger growth, and we're off to a great start with PFS. It's already doing very, very well. We're very, very pleased with the PFS team and how that business is integrated into GXO. There are other aspects where we have to look opportunistically as well. If there's a business out there that we like, good quality, it's in good condition, and we can see big synergies. Of course, we'd be interested in those. I would say it's about what's out there in the market and what we're trying to accomplish at the time. Also, as Baris mentioned, overarching all of that, it's got to be delivering accretive benefits. It's going to be in the interest of the company and the interest of our shareholders. That's really how we look at the market.

Hey, thanks. Good morning. So maybe a question for you, Malcolm. Do you think this change we've seen more recently moving to more contracts that are outsourced for the first time? Is that durable or something we should expect will continue? Or do you think this is sort of like a lagged impact from several years of supply chain disruptions and now people are starting to move forward with a tranche, and there might be an air pocket next year or the year after? I wanted to see how you thought through that and if there's anything we should expect in the contracts in the structure? More tech, more efficiency, more automation, if those are going to change or if that more or less stays the same?

Hey, Brian, I think what we can see right now is a trend that's going to continue. Remember that we called out this trend all the way back in, I think, 2020, even pre-the spin of GXO that more and more companies were going to outsource their logistics. The reason we said that at the time and the reason it really still holds correct is that it's been reinforced through '23. We've had several years of disruption: the pandemic, supply chain disruptions, manufacturing disruption; then on top of that, we've had 1.5 years of really severe inflationary pressure, interest rate pressure. That's put a burden on so many organizations who don't want to pass those incremental burdens on to the consumer. They look at how can they do things differently, how can they do things more efficiently? The most organizations recognize that it’s daunting to bring technology into the warehouse but it's a logical step for them to look for an outsourced partner. As the largest pure-play contract logistics company in the market with our reputation for delivering these big projects on time and being a reliable partner, it's super for us. This is all playing into GXO's wheelhouse. We're very excited about it. That trend is set to stay. It's the very reason Baris just mentioned and Adrian; we've doubled down on our expenditure in terms of teams deploying automation on our sales organization. I think it's going to be a trend that's going to serve GXO very, very well in the future years.

Thanks, Malcolm. Just a quick follow-up on the inventory dynamics and how they've been a bit more volatile than usual. It sounds like you expect them to normalize over time for the consumer-facing side. But how does the GXO direct offering with the multi-tenant warehouses expand with Clipper? Is that something that's sort of picking up some of that slack? Or is that not big enough to really make a dent in sort of these single-tenant facilities that can move up and down?

Yes, Brian, for us, it's not a substantial enough amount of our capacity for it to make a real impact. But our GXO direct customers, just as our other customers, have not been immune to this last 12 months slower pace of consumer spending. Clearly, across all of our business, we've seen that. As I mentioned earlier, the vast majority of warehouses that we operate are fully back-to-back with our customers. The smaller proportion that sit in our GXO direct world is really not a material impact on our outlook.

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

Yes. Thanks, Darryl. And again, as always, thanks for hosting our call today. We really appreciate it. '23 has been a great year for GXO. We've delivered huge free cash flows, gained that $1 billion of new business, and towards the end, we are super excited about the acquisition of PFS, which is really performing incredibly well. We're driving great service and efficient benefits for both our new and existing customers through deploying game-changing technologies right across all of our footprint. Looking forward, we're excited about the future growth opportunities that we've been talking about on this call. We're increasingly the partner of choice for the huge in-house portion of our market that is looking to more and more outsourced. We're growing in a manner that's delivering fantastic returns for our shareholders. So with that, we'd like to wish everybody a great rest of the day. Thanks for joining us on this call and your attendance, and we look forward to speaking to you again in the future.

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.