Welcome to the GXO Third Quarter 2024 Earnings Conference Call and Webcast. My name is Rob, and I will 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, 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 on its website. Unless otherwise stated, all results 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 of the company's website. I'll now turn the call over to GXO's Chief Executive Officer, Malcolm Wilson. Mr. Wilson, you may begin.

Thanks, Rob, and good morning, everyone. I appreciate you joining us today for our third quarter 2024 earnings call. With me in Greenwich are Baris Oran, our Chief Financial Officer, and Kristine Kubacki, our Chief Strategy Officer. GXO has delivered a stellar third quarter. We posted record revenues and adjusted EBITDA. We have increasing momentum in our business, including continued acceleration in our sequential organic growth. During the quarter, we signed $226 million of new business wins. We continue to grow with top brands like GUESS, Gymshark, LG and L'Oréal. We've recently expanded our partnership with Zalando and together opened the largest outsourced ecommerce warehouse in France, which is highly automated. Our sales pipeline has grown 30% year-over-year and now stands at over $2.4 billion of high-quality opportunities, its highest level in more than two years. As of the end of third quarter, we've won about $750 million of new business year-to-date. We've got several major projects that we expect to sign in the fourth quarter. 2024 has the making of being a record-setting year for new business wins for GXO. Looking ahead to the fourth quarter, we're ready for the peak season. We've mentioned that we saw the bottom of the inventory cycle in the fourth quarter of last year. As we head into this year's peak, we're seeing inventory levels returning to normal and demand for ecommerce capacity is accelerating. Our customer service satisfaction scores are at an all-time high, and our dependability has recently been recognized by Newsweek, which ranked us the top logistics provider among America's Most Reliable Companies. As commercial activity picks up momentum, our technology differentiation through the deployment of automation and AI is creating a multiplier effect in the efficiencies we deliver for our customers. On the back of our real-world results, we are proud to have been recognized with a Supply Chain Excellence Award for our leadership in warehouse AI by Logistics Manager a few weeks ago. Our technology differentiation is also helping us win new business. Our ongoing strong sales performance, coupled with our targeted M&A in key geographies and hard-to-penetrate verticals, is driving our long-term growth. In Germany, we jumpstarted the growth of our business on the back of our acquisition of Clipper in 2022. Our state-of-the-art site in Dormagen is at full capacity. We've had successful startup of the 20-year $1 billion contract with Levi's that we announced in May, and we have a strong pipeline of other opportunities in Germany. More recently, on the back of our acquisition of PFS in 2023, we've grown our beauty and wellness business with several leading brands, including Beauty Pie, Glossier and L'Oréal. Similarly, we believe our acquisition of Wincanton will enable us to accelerate our growth in attractive verticals like aerospace, industrials and public sector. We're pleased to note that we've recently signed a cornerstone deal in Europe with a leading US aerospace provider. In light of this continued strong performance, we're reaffirming our full-year guidance for 2024. We have clear evidence we're through the trough and we intend to build from here. Looking further ahead in 2025, we expect an acceleration of growth across all three regions. Continental Europe is leading the pack with our growth in Germany and the ramping up of several large automated warehouses. Our strong sales performance and our long-term contractual business model give us confidence in our multiyear growth outlook and 2027 targets. Baris will now walk you through the quarter and our reaffirmed guidance. Baris, over to you.

Thanks, Malcolm. Good morning, everyone. In the third quarter, we generated record revenues of $3.2 billion. Our year-over-year revenue growth of 28% means we are on track to meet our 2027 top-line growth target of $15.5 billion to $16 billion. In the quarter, we saw organic revenue growth of 3%, which has accelerated sequentially throughout the year. The improving trajectory reflects the growing contribution of new facility startups each quarter, and we expect it to continue as we move into 2025. Our adjusted EBITDA this quarter was also record at $223 million, up 12% year-over-year. We have also seen sequential margin expansion throughout the year, and we expect this trend to continue as we see a margin uplift due to better space utilization in our multi-tenant network. Our adjusted diluted earnings per share was $0.79, up 14% year-over-year. Year-to-date, we have delivered $363 million of cash flow from operations, which is an increase of 6% year-over-year. Our free cash flow year-to-date is $124 million, and we are on track to deliver over 30% adjusted EBITDA to free cash flow conversion for the full year. Our operating return on invested capital remains well above our target at 38% as we continue to invest in high-return projects to fuel our organic revenue growth, in line with our capital allocation strategy. Our balance sheet is growing stronger. Our net leverage was 2.9 times as of the end of the third quarter, down from 3.1 times last quarter. We expect leverage levels of around 2.5 times to 2.6 times by the end of this year, as we prioritize paying down debt after the Wincanton acquisition and about 2 times by the end of 2025. Wincanton is performing above our pre-deal expectations, delivering double-digit revenue growth and reinforcing our excitement about this acquisition. Our focus in 2025 will be accelerating our organic growth and the integration of Wincanton. M&A is not on our short-term agenda. We are reaffirming our 2024 guidance. This year, we expect to deliver organic revenue growth of 2% to 5%, adjusted EBITDA of $805 million to $835 million, adjusted EBITDA to free cash flow conversion of 30% to 40%, and adjusted diluted earnings per share of $2.73 to $2.93. We also expect to continue to deliver an operating return on invested capital of above 30%. We are executing well on our value-creation framework. As a secular growth enterprise, we deliver predictable operating return on invested capital and resilient growth in revenue, adjusted EBITDA, adjusted diluted earnings per share, and cash flow throughout the cycle. We remain laser-focused on creating long-term shareholder value. With that, I'll pass the mic to Kristine. Kristine, over to you.

Thanks, Baris. Good morning, everyone. We're pleased with our results this quarter. Today, I'd like to update you on the macro trends we're seeing and how GXO's automation differentiation reinforces our confidence in our long-term growth algorithm. We operate in an attractive market with an outsized growth trajectory that's driven by secular supply chain trends, including complexity, ecommerce, outsourcing and automation. These tailwinds have driven our resilient growth across different parts of the cycle, and they're accelerating as customer needs for scaled automated solutions continue to increase. First, we're seeing an uptick in ecommerce commercial activity. This is a long-term structural tailwind that has been a key growth driver for us over the past five years. At an industry level, about a quarter of all retail sales today come from ecommerce. And this proportion is expected to grow by more than 10 percentage points over the next decade, as online shopping returns to its structural growth trajectory. We're seeing this effect translate into our own results. 60% of our new sales wins in the third quarter originated from ecommerce fulfillment. Second, as supply chains become increasingly complex, customers are relying more and more on scaled tech-forward logistics experts like GXO. This has been driving an acceleration of outsourcing for fulfillment activities. About a third of our new business wins this year to date have come from newly outsourced business and around 40% of our $2.4 billion pipeline is made up of customers looking to outsource for the first time. The acceleration of outsourcing is, in part, a result of the recovery of ecommerce and it drives customers to look for a partner with scale, automation and the ability to manage complexity. GXO is well positioned to capture growth from these trends because of our global scale and expertise in automation. We're the market leader in tech-enabled fulfillment and customers come to us to drive efficiency and unlock value in their supply chains. Over the past several months, GXO has been piloting our first proprietary AI application in select warehouses in the US. Our tool streamlines our customers' fulfillment processes by using machine learning to predict SKU demand in the near term. The sheer volume of data analyzed by our tool produces highly accurate forecasts of inventory flows down to the SKU level. These insights enable our operations teams to optimize the layout of the warehouse and match resources with demand. Our initial pilots have far exceeded our expectations, delivering predictive accuracy levels above 90% and productivity improvements of 3 to 4 times in stock replenishment, which drives increased capacity of 6% to 8% at no additional cost. We're thrilled with the early success of AI, and we're scaling it across our footprint. AI is going to change the way warehouses are run over the next few years. And our leadership in this space is a key driver of our long-term profitable growth. And with that, I'll hand it back over to Malcolm.

Thanks, Kristine. We've built on our momentum from the first half and delivered record revenue and adjusted EBITDA in the third quarter. Our pipeline stands at a two-year high, and we're on track to deliver a record year of new business wins, bolstering our confidence in our long-term growth targets. During the quarter, you may have seen media speculation about inbound interest in acquiring GXO. We don't comment on market speculation. We're focused on the great quarter we've just had and on delivering a strong finish to the year. With that, we'll hand the mic back to Rob for Q&A.

Thank you. We'll now be conducting a question-and-answer session. And our first question today comes from the line of Stephanie Moore with Jefferies. Please proceed with your questions.

Hi, good morning, everyone. This is Joe Hafling on for Stephanie Moore. Malcolm, I guess you've talked a lot about some of the trends you're seeing, but I was hoping maybe we could unpack kind of by geography, what you're seeing across Continental Europe, the UK and the US in terms of organic growth? And maybe if we could also kind of slice that into retail versus industrial, just kind of a high-level thought of what you're seeing on the trends across geographies? Thanks.

Good morning, Joe. It's been a strong quarter for us with record results on both the top- and bottom-line. We continue to see improvements in organic revenue growth and adjusted EBITDA margins each quarter. In Continental Europe, we're experiencing positive growth, particularly in Germany, but all countries in the region are performing well. Our UK operations are gaining momentum, likely benefiting from the recent elections and the certainty they’ve provided. In North America, growth trends are improving, though we need to analyze it by vertical. Overall, the team feels we are emerging from the challenges of the past year and returning to a more typical growth trajectory, setting us up for a stronger 2025. Our investments in reorganizing and bolstering our sales efforts at the beginning of the year are paying off. We had $226 million in closed-won business this quarter and $750 million year-to-date, with $463 million already anticipated to flow into 2025. We're also confident about additional projects set to be signed before year-end. Across various verticals, aerospace and defense, as well as technology and retail, have performed strongly this quarter, while food and beverage has lagged behind. Importantly, we've seen a resurgence in investment for e-fulfillment projects, showing a significant increase in related sales. E-fulfillment accounted for more than half of our new business signings this quarter, marking it as a very successful period for us. Additionally, the new organizational structure with Adrian Stoch leading our automation teams has started to provide benefits. We're observing gains from increased tactical automation and AI deployment that are enhancing productivity and contributing to margin expansion, a trend we expect to continue into 2025. Overall, we have a positive outlook with good performance across all regions, albeit with some regional variations.

That's a great answer, Malcolm. I have a follow-up question. I'm surprised by the strength in aerospace from my perspective. Could you discuss how new wins are offsetting any potential disruptions? I'd like to hear your thoughts on the strength in aerospace.

Yeah. Well, listen, it's a good callout, Joe. And one of the things, as I mentioned, we invested heavily at the start of the year. So, two things to talk about aerospace. One is the fact that we invested in sales, our sales organization, not just here in North America where we are a very strong player in aerospace and defense, but also taking those skill sets and putting them into Europe. And it's a long process to gain accreditation in a different geographical market, particularly for things like aerospace and defense. So, I think we're now starting to see the rewards of those investments. Plus, although Wincanton is still quite new for us, it has a very good reputation in the UK for aerospace. So, those two things combined have allowed us to secure our very first big blue-chip organization, new contract set in Europe with a big US aerospace manufacturer. We were incredibly pleased about that because it's a sure sign that the strategies that we're putting in place, they don't have an overnight impact. Some of these things you do have to see over a 12-month or even a two-year period, very similar to the German expansion that we're seeing now, which really comes on the back of that Clipper integration that took place two years ago, but we owe a lot of the expansion now in Germany to that. I'm sure aerospace, we're going to do incredibly well in Europe. It's a huge market. Very few competitors. We'll be the new kid on the block and I think we'll do really well.

Thank you very much. Good morning, everyone. I'd like to jump in here. Organic growth, it's been progressively better throughout the year as you all had guided. What's your confidence level heading into the fourth quarter? And given comparisons from '24 and trajectory that you're seeing, any commentary into '25 would be appreciated. Thanks.

Scott, hi. It's Malcolm here again. Let me take that at the really high level and then I'll hand it over to Baris because I think it's really important. So, first and foremost, in our earlier comments, we've reaffirmed our guidance for the year. Now, guidance is twofold. So, when we think about our top-line, clearly, it's still a relatively wide range, and that's coming as a consequence of the different possible outcomes that can come out of the busy holiday trading season. Last year was incredibly subdued. This year, inventory levels in our warehouses are better. We're seeing evidence of some of our customers doing sales promotion work, but in the end, the proof we'll only see really as we're getting into December. So, we have a sort of wide range on top-line. Importantly, on the bottom-line, I think we're running with a high level of confidence that we'll deliver our adjusted EBITDA pretty much in alignment with expectations. I think we'll be very close to the midpoint of our full-year 2024 guidance. And that confidence is really coming from a combination of fundamentals, fundamentals about our business. We have a high degree of visibility of bottom-line due to the nature of our contracting models. We have a reasonable proportion of our businesses, open-boot or cost-plus type contracts. And also, we have been driving, as I mentioned, a lot of value creation, including the deployment of all of the increasing amount of tactical automation and AI playing a more and more significant part. So, Q4 is a big step for us in EBITDA. And I do think it's really worthwhile, really value, Baris, just to go in another level of detail just to give you, because I think it's really important. Baris, would you comment on that?

Sure. Hi, Scott. Normally, we anticipate a sequential improvement in our nominal EBITDA from Q3 to Q4. Last year was an exception due to the sluggish retail sales environment, which resulted in low inventory and turnover. This year, we are looking at expectations that reflect the impact from Q4 of last year. While some customers are experiencing lower trading results than they would ideally prefer, we expect the seasonality to be more normal as we have moved past the lowest point. Additionally, we are effectively managing the open capacity in our underutilized multi-tenant warehouses, which has been a major focus for our organization. This is an area where we are seeing year-over-year margin improvement in Q4 as well. So, there are several factors at play, including the annual comparison to last year's Q4 and the margin improvement from better utilization of the multi-tenant network.

Thank you for that. Baris, the free cash flow conversion was impressive in the third quarter. Can you elaborate on that? Also, you've set a 30% to 40% conversion target for the entire year. What factors should we consider for the fourth quarter regarding free cash flow conversion? Thank you.

Thank you. We remain very confident in our ability to generate free cash flow for this year. As you said, $110 million in Q3, the spectacular results. We are on track to deliver 30% to 40%. Strong working capital management, and we are very diligent on our capital expenditures. Roughly two-thirds of our CapEx went to growth CapEx. We are investing for the future, but we are very selective on where we put our CapEx dollars. That drives our free cash flow.

Yeah. Hey, thanks. Good morning, guys. Baris, I want to touch on the fourth quarter margin comment that you made. So, it sounds like you got some improvement coming sequentially. I guess a couple of things. Can you outline some of the dynamics that are going to help with that? I guess maybe we can talk a little bit about Wincanton and the potential for Phase 1 or Phase 2? I guess, probably synergies could be part of that. Not sure exactly how you guys think about that. I know there's maybe some news coming up later this week. And then, when you think about the margins in the fourth quarter up sequentially, can we also get up year-over-year?

Hi Chris, it's Malcolm here. Let me address the Wincanton situation before passing it over to Baris for more details on the margin. We are currently reviewing the Phase 1 decisions made last Friday. As with other projects, we will engage constructively and collaboratively with the CMA. We feel confident about achieving a positive outcome, although there's a possibility of moving to Phase 2. We are prepared for any potential outcomes that might arise, and it's quite common for a deal this size to enter Phase 2. It's worth mentioning that Wincanton is performing well and exceeding our pre-deal expectations. Overall, we are very pleased with its progress. As we planned to start the integration of Wincanton soon, any positive margin impact will not be seen until January. At this point, there isn't any positive news on margins from Wincanton; instead, it is currently a negative impact as we prepare for integration. Baris, could you provide some additional details?

Sure. Excluding Wincanton, we have improved our margin every quarter this year. And when you look into the components of this margin expansion every quarter, there is a sizable improvement coming from our open-space utilization of our multi-tenant network every quarter and we expect that trend to continue from Q3 to Q4 as well. Additionally, as Malcolm mentioned, we have been working on a lot of adaptive tech, a lot of efficiency programs, that's also supporting our margin expansion from Q3 to Q4. And normally, we do expect a higher margin. Last year's Q4 was an anomaly and we expect to have normal trends. From a Wincanton perspective, when you look at Wincanton's margin, they are lower than ours at the moment, but that is the upside in 2025 and onwards when we start integrating the business and we capture the synergies.

Okay. That's very helpful. I appreciate that color on both fronts. Just quick follow-up on the pipeline. So, obviously, the pipeline has moved up nicely. We're at a pretty high level that we haven't been in a couple of years. I guess, we haven't seen volume necessarily inflect, but it does seem like interest is sort of picking up. So, I guess, Malcolm, how do you view this? And I guess, is there any way to kind of think about conversion as we move through the next couple of quarters? I know you're adding a lot of contracts here in 2024, but as we start to think about 2025 and beyond, does this sort of speak to an acceleration in that conversion rate? Just want to get a sense of how you guys are thinking about that pipeline and what it means for the business.

Yeah, Chris. It's Malcolm here. So, I think it's twofold. You're right, the pipeline is up. I think pipeline for us is a bit more diverse as well. So, you'll have heard us talk a lot during '24, during the previous quarters, about stepping into existing customer activities where customers have effectively come to us and sought to outsource their existing in-house business, and we've effectively stepped into an existing operation. That's still very prevalent. I think in the pipeline, as I mentioned, we've also seen a big uptick in more strategic projects for e-fulfillment. E-fulfillment has been a little bit quiet since the pandemic, I guess, but now what we're seeing is customers, I think, having a greater level of confidence to start investing again in big projects. And we've got a number of projects that are going live right now. I mentioned the Zalando. To be frank, that's one of four projects that we've got going live at the moment, large automated warehouses that we'll be fulfilling e-fulfillment, that were not in our stable of our sites prior to here and now. So, they're going live and they'll take reasonable amount of time, six months to fully ramp up into main volumes. But we will start to see the benefit of those as we progress into 2025. And I think the other thing, again, just building on what I mentioned earlier to, I think it was Scott or it may have been Joe, was that the investments that we made in the sales team, we're seeing now more and more population in our sales pipeline of projects for verticals that historically you probably wouldn't associate with GXO. So, we're very, very pleased with all of our omnichannel business and our e-fulfillment. It's been the bedrock of our business growth over many years, and we can see that's coming back, it's returning. I think it's a sign of more confidence in the economies in all the geographic regions that we're working in, but it's bolstered by new projects that we're starting to see for the first time. I think it will take us momentum to start winning those projects. That's why we were just so pleased about the aerospace deal in Europe. It's a first and I think it will be the first of many. So, it's given us the shape of the pipeline. I think we're in a healthy environment as we're heading into 2025.

Got it. That's very helpful. Appreciate the time this morning.

Great. Thanks. Good morning, everyone. Would love a little more color on your views on peak season. I know you addressed it a little bit, but I think one of the parcel companies mentioned that their customers are telling them that they are seeing more customers potentially going into store to buy this peak season given how compressed it might be. Are you hearing something similar from your customers? And also, are you agnostic given your position in the supply chain between shoppers shopping in store, collecting in-store versus buying online?

Hi Ravi, it's Malcolm. I believe we are quite flexible in this matter. When we discuss omnichannel in our business, we are referring to working with customers who often don’t have a fully dedicated e-fulfillment warehouse. While we do operate many of those sites, we’re increasingly focused on helping our customers optimize their balance sheets. Our IT systems are set up to pick from common stock, whether that involves loading pallets onto trailers for delivery to physical stores or packaging items for delivery through UPS, FedEx, or the Postal Service. Therefore, we are indifferent about which method is preferable. It’s positive that shoppers are returning to malls, but we are also observing a rebound similar to what we experienced during the transition before and after the pandemic. Many of our customers are making strategic choices regarding their future e-fulfillment capacities. Clearly, e-fulfillment is reasserting itself as a substantial channel for reaching consumers, and that's what we are witnessing.

Understood. That's really helpful. And maybe for a follow-up, just to go back to the topic of humanoids, which you guys addressed in the last call. You've been talking about it for like three to four months now and you've kind of piloted for a while. What are you hearing from customers? Are they interested in this technology? kind of do they view this as next-level automation and a real step up? Or are you having to make those outbounds and people are still, hey, call me in five years or something?

Hi, Ravi. It's Kristine here. We are seeing a lot of interest from customers in this emerging space. We believe there is significant potential to create more value for our customers. Humanoids fit well into this area. Our existing robotic solutions have matured recently and can perform dynamic tasks in a human-like manner, making human-like decisions. We expect the humanoid category to grow significantly over the next two to three years, so we are strategically investing through our operational incubator program. We are collaborating with innovative developers to turn these concepts into real-world applications. In fact, I recently visited one of our facilities in Atlanta and observed our Agility robots working in the warehouse. Just last quarter, we announced another partnership with a humanoid provider, Reflex Robotics, in addition to Agility and Apptronik. Similar to AI, this field is progressing rapidly, and GXO is leading the way in real-world operations within our fulfillment centers. This ongoing development enhances our technological differentiation and we will have more updates in the future, as there is considerable interest in this area.

Very good. Thanks, Kristine and Malcolm.

Hey, thanks. Good morning. Malcolm, maybe you can just provide a little more context, now it's been a few days since you've got the notification from the CMA. Can you provide any detail in terms of what they're actually looking at? I know you said you feel confident you'll get to a favorable resolution, but I just wanted to see if you had any further comments on that, in particular what they're looking at and asking for, now you've had a few days to actually see what the document is?

Yes, Brian, absolutely. As I mentioned, it's not unusual for a deal of this magnitude to enter what the CMA refers to as a Phase 2 process. This process involves much more detailed analysis, which is beneficial. We will collaborate with the CMA to clarify the various market segments present in the UK. The UK marketplace is undoubtedly highly competitive, and as someone from Britain, I'm probably well-positioned to address this. Our goal is to engage in thorough discussions with the CMA teams over the upcoming months. I believe this will significantly help clarify the situation. As I noted earlier, we're optimistic about achieving a satisfactory and positive outcome from this process. One aspect that may come into play is that, whereas we planned to start integrating the business in early January, it seems likely we could experience a delay, potentially extending into the early part of the second quarter. I don't anticipate it going beyond that, but that's our current expectation, as we must respect the CMA. They perform an excellent job, and it's important that we work with them to address the issues they have raised.

Okay. Thanks. That's helpful. Then, a follow-up for Baris. I guess, you mentioned the multi-tenant warehouse utilization efficiency several times. It seems like it's been a pretty big factor for margin improvement. So, can you give a more detail in terms of what's actually happening there? Are these leases that you're letting go back to the market? Are you putting more throughput through there with a bigger anchor tenant? And is this, I guess, like a strategic rethink here that's going to be done this year? Or do you have a little bit more to push on this potentially as you go into next year with potentially a bit better backdrop for volume? Thanks.

Yes. We have invested quite heavily on and refocused our organization, sales organization and business development organization, filling the available capacity in our multi-tenant network, and it is giving us good results so far. So, we have a number of available spaces with anchor tenants that have been hired throughout the last couple of quarters, and that's giving us our results. We also have looked into opportunities when the leases were coming to an end to not to renew those leases or consolidate those operations into our existing facilities and that reduced our cost base. So, both of these factors, but primarily coming from our sales focus and filling that space has driven the results.

Hi, good morning, and thanks for taking the question. I was wondering if you guys could speak to the competitive backdrop just around pricing of new deals. Is it getting less competitive or more, especially as you get into the more automated contract discussions?

Hi, it's Malcolm here. Let me address that. We haven't observed any significant changes in the market compared to the last couple of years. Typically, there are fewer organizations that can deliver automated solutions with the necessary credibility and experience. This is why we were pleased to be mentioned in the Newsweek article highlighting our reliability. We are recognized as a highly reliable company for establishing large-scale automated facilities. The number of competitors in these projects is quite limited, and customers are generally looking to commit for longer terms due to the substantial intellectual and financial investments involved in launching such projects. The facility we've recently opened in France is the largest automated facility in the country, which is a significant milestone for us and the customer. These projects require a lot of time and effort. The competitive landscape shows that there aren’t many players, allowing us to achieve slightly better margins compared to traditional manual activities. Moreover, our focus is not really on manual warehousing. Our sales pipeline indicates that automation is a fundamental aspect of the proposals we present to customers. In contrast, when we consider more manual, low-tech solutions, the competition increases, but that’s not where we see future growth for our business.

I appreciate that, Malcolm. And then, maybe closer in, you guys definitely had a volume fall off with some of your core customers last year. Has core volume growth improved throughout the year? I think that has been the case. And is that looking better into the fourth quarter?

Yeah. Let me ask Baris to comment on that.

Yes. Our volume environment has been gradually improving throughout the year every quarter. And as we look into Q4, we do expect a further improvement in the volume of our existing facilities and the impact on volume coming from network consolidation as well. It will still be a negative number, but it will be much better than Q3 and Q2.

Taking it all together, it feels like your cyclical commentary is as positive as it's been in, call it, 15 months. Can you walk us through how that plays out with some of the big buckets of organic growth into next year? And really just thinking of 2025, I mean, is this a bridge year to get back to the 10% organic growth implied in the long-term guidance that you reiterated? Or is there other scenarios if volumes continue to recover where you could actually be at that level in 2025? Thank you.

Hi, Bascome. It's Baris here. Every quarter we have seen an organic growth improvement, and that has been supported by our existing facility volumes, but also our investment in our sales and business development capabilities. We expect that trend to continue into 2025 and onwards. So, we do expect an acceleration of our growth in 2025 compared to 2024. And last year Q4 was clearly the bottom, and we have been going upwards since then. As far as our organic growth, we do see an acceleration. We are going to be providing further commentary on our Q4 earnings when we developed the guidance, but the direction is clearly up.

Thank you, operator Rob. Malcolm, Baris, Kristine, good morning. You reiterated some more confidence in your 2027 guide this morning. Has the walk to that changed any given that the organic growth is coming back and you're seeing some positive ecommerce trends? And then, I guess on a follow-up, you talked about in the near term your appetite for M&A is going to be at least shelved. Is this something when you say near term is maybe the next two quarters, or are we talking maybe back half of 2025% to resume that?

Hi, it's Baris here. Our primary focus in the shorter term, near term is paying down our debt and investing in our organic growth, which gives us phenomenal returns on invested capital. We expect that to continue in the earlier part of 2025 and onwards into the rest of 2025. It's early to talk about the remainder of 2025. Going back to our 2027 plan, clearly, we do see an acceleration in our growth. We are very excited about 2025 and the acceleration. And the components of our EBITDA bridge remain basically the same, coming from our core growth. Our automation, adaptive technology and productivity projects are in the second bucket. And the contribution we're expecting from Wincanton, new business development and synergies is the third bucket. That should take us to our 2027 plan, and we are on track.

Yeah, sure, Jason. It's Malcolm here. So I think to clarify that we are seeing returns being part of our e-fulfillment as an integral element. We tend to map out our returns business and it's very much aligned to e-fulfillment. So while I've talked about a return of volumes that have been low, I think we'll see that same lift in terms of our returns business. We have established, over the space of the year, a number of specific return centers for individual customers. We don't see any change in the trend of the volume of returns. I know you will have read some retailers making efforts to lower down the amount of returns, maybe imposing costs for return of goods, etc. We're not really seeing any evidence of that in our business. What we are seeing is our customers really being much more minded in terms of the speed of processing of those returns and making sure they maximize the worth of those returns, the detail of the actual return process. And that's right in our wheelhouse. Obviously, with the amount of technology that we utilize, that's really good for us. So I think generally, as we see e-fulfillment projects starting to reemerge, starting to be signed, as we mentioned with the Zalando project, what goes out from that warehouse, a proportion of it will come back, and we'll be ready to work with our customers to make the best processing of that.

Hi, good morning. So, Malcolm, it's very encouraging to hear you talk about the return of demand from e-fulfillment customers. I'm curious if you could dig into that a little bit more and just talk about what you think is driving that demand. Is some of that related to GXO's investment in its own sales force? Or do you think it's more organic and related to the market? And if it's the latter, maybe you could talk about why that is? And I'll give you some context on this. I'm surprised to hear that a little bit, given obviously the US election happening today. I would think maybe a lot of customers would be waiting to kind of see the outcome of that election. So, maybe you could talk about kind of election risk and then also what's driving that investment there? Thanks.

Sure, Ari. Yeah, good morning to you. So, I think what we see in driving it is a combination of factors. I think, one, you're absolutely right, I don't think we can say that the investments that we made earlier in the year in our sales organization, that's clearly having an impact. We're picking up projects that maybe in the past we might not have picked up. And I'm kind of hesitating saying that because I think we are seeing in the market as a leader when it comes to e-fulfillment, I'd like to feel that we see every project that's out there. I'm sure every CEO in our kind of position would want to say that, but the reality of it is, I'm sure we don't see every single one. So, having a broader and a more wider sort of sales net is a good thing for us. And don't forget, it's not just always about retail space, omnichannel, clothing, food that we think about e-fulfillment. It spreads into tech and even, to a certain extent, some other commodities. So, I think widening our sales organization is helping us, but I think the fundamental thing that we're seeing right now is people are starting to feel more confident about the economies in the different regions that we're working in. And you mentioned about what's happening today here in the US, it's a great day, but we can look at our business in Continental Europe and most recently in the UK. I don't think it's so much a matter of which party is winning an election. What it brings is certainty. And I think customers crave certainty. They crave to know what is the situation for the future. So, I think definitely when we look at Continental Europe, UK, we're seeing customers having a high degree of certainty. Interest rates, inflation levels, all trending in the right direction and allowing people to make more strategic decisions invariably that involve investments that are going to be multiple-year investments, and that's why typically people are happy to sign longer-term contracts.

Thank you for that color. That's very helpful and very encouraging. Just a quick one, if I could, for a follow-up. So, you mentioned about $750 million of new business has been on year-to-date. And if I think about that against about a $2 billion, $2.5 billion sales pipeline, it looks like a win rate kind of north of 30%. And I think historically we've talked about GXO kind of having a win rate closer to kind of 25%. I'm curious if you're seeing that step up, and if so, kind of what the factors there might be, whether it's competitive dynamics or whether it's GXO capabilities? Thanks.

Ari, I’ll let Baris address that, but at a high level, it's clear that when we analyze our sales pipeline, we must acknowledge that in the sectors where we are recognized as leaders, such as e-fulfillment, we are likely to secure projects because we are among the top organizations in that area. While we do have competitors, we stand out as a leader. Our success is more evident in these established markets, where we can present numerous reference sites to our customers, compared to new sectors where we are perceived as newcomers. For instance, the Wincanton deal reinforces our long-standing reputation in aerospace, which will significantly aid our growth in this sector, not just in the UK but throughout Europe. Without this established reputation, our win rates would likely be much lower. The win rates you see reflect our core competencies, and we are indeed improving and capturing market share. However, in new sectors, our win rates are much lower simply because we are still new to these markets. Baris, perhaps you can provide more detail on this.

Hi, Ari. As you know, we have been investing in our sales teams. When we talk about this investment, it also means improving our sales processes to achieve better results from our existing pipeline, enhancing the pipeline, and increasing our wins from it. You are seeing the outcomes of that investment, our focus, and the process improvements we have implemented throughout our entire commercial organization.

Thanks again, Rob, and thank you for hosting our call today. We really appreciate that. Thanks also to everybody who's participated. I think we got some great questions, some very insightful questions, and I think Kristine, Baris and myself, we really appreciated that. We've been very pleased overall with the progress that's come through our third quarter. As a business, I think we delivered strong new business wins, and we're looking forward to even more business growth as we're going into the future. Our sales pipeline is in good shape, and I think a number of very exciting projects that are expected to conclude before the end of the year. Whenever we're dealing with big projects, look, there's always that slight possibility they drift a few weeks, but I think we're in a good shape to have a very strong year of closed-won business, and that will set us up well for 2025. Baris just mentioned the return of a lot of e-fulfillment projects. I think that's very pleasing for us to see. It was always one of the big engines of this company's high-single-digit, double-digit organic growth, and it's great to see that starting to return now. And plus, it's also good for us to see real impact, tangible impact in our results in our business coming from all of the different innovative work that our teams have been doing with new technologies, as Kristine was just mentioning, and also AI, which is playing a greater part of our everyday running of the business. So, I think we're really feeling very excited about the next quarter, quarter four, and as we move into the next year. So with that, I'd like to wish everybody a great rest of the day, and thanks again for joining us on the call and thank you.

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