GXO Logistics, Inc. (GXO) September 2026 Conference Transcript

Great. Next up, we have longtime friends of Laguna, GXO, and I'm very happy to welcome CFO Mark Suczynski and Chief Strategy Officer, Christine Kubacki. Thank you so much for being here. So it's been an interesting 12 months for everybody, especially for you guys. A lot's going on. Obviously, with macro, kind of idiosyncratically with you guys as well. Maybe you can start by just giving us an update on business trends and kind of how they have trended versus your expectations, kind of especially since last time you spoke with us in Duke, you call.

Yeah, thanks. You know, things really haven't, I think, materially changed since our last earnings call. You know, we started the year with the assumptions that volumes would be flat. But as we've progressed throughout the year, at least through the first half of the year, what we've seen is maybe B2B a bit stronger than we had anticipated, B2C maybe a little bit softer than we had anticipated. But, you know, overall, I would say, you know, when you think about the breadth of our customers, 30% of our customers are blue chip Fortune 100. we've got a very diversified customer base. And, you know, we have a lot of our customers in certain sectors that are growing very strongly, like aerospace and defense, like data centers. So there's a little bit of a natural hedge as it relates to how diversified our business is and how global we are. We're in 27 different countries. We're in, you know, the U.S., the U.K., and continental Europe. So overall, I think, you know, volumes and from a market backdrop, you know, we feel pretty good about where our plans are. I would say, you know, overall, when we think about our business, it's a longer cycle than nature. You know, typically our contracts are five years in length, as well as I think when you look at our business over the last five years, you don't see the type of cyclicality you see in some transport areas. We don't go as high as some. We don't go down as low. So it's a little bit more resilient. And, you know, I would say that, you know, as we move into the, you know, the peak season here, I would expect those trends to continue where B2B is a little bit stronger, a little bit softer. But obviously, with the macro going on and the conflicts in the Middle East and where fuel prices are, it's something we continue to keep an eye on.

That's super helpful. Well, maybe to unpack that a little bit, any particular color around the strength in B2B and the weakness in B2C, especially weakness in B2C, kind of it feels like e-commerce is doing reasonably well. Is that kind of, do you think it's idiot to you guys, or do you think it's marketplace, kind of any color there?

No, I think you're right. I think e-commerce continues to do quite well, right? You know, so that continues to be fairly resilient. I think that the consumer continues to be fairly resilient, right, even in light of where fuel prices are. So it isn't just our higher growth verticals like defense and data centers and some other industrials. We're seeing other parts of our business continue to be fairly resilient, and I think that's a great testament to the strength of the customers that we have and the book of business that we've built over the last five years. Understood.

So if e-commerce is doing reasonably well, does that feel like the, especially European, you know, food and bev kind of non-e-commerce retail is probably where the softness is?

A little bit there. I would say, you know.

You've heard that from others as well.

Continental Europe, I think not as much as the U.K. I think we're seeing a little bit more softening in the United Kingdom and Ireland. A little less so from a continental Europe standpoint, and then, you know, our North America business has been a little bit stronger along those lines.

You guys are one of the best peak season checks of any of the companies in our coverage. What are you seeing out there? Some of the early reads we're getting from the trucking guys is that this appears to be a very strong peak season, but maybe that's just supply driven on their side. So what are you hearing from your customers so far?

You know, at this point in time, you know, they've launched the summer campaigns. Inventories are filling, you know, from a seasonality standpoint. The third quarter is shaping up how we had expected. So, you know, at this point in time, you know, I think the peak, you know, the season has kicked off. The trends that we had expected when we laid out the plan at the beginning of the year, you know, We're seeing a reaffirmation by our customers at this point in time. There's still more to go between now and the end of the year before we get to Black Friday and the higher part of the season. But at this point in time, I would just say we're not seeing any pullback in light of where the global economy is.

Obviously, you guys have made great progress or continue to build on your progress on the pipeline of new business. Can you talk about some of the trends there, both geographically and segment-wise?

Well, you know, I think it's a testament to Patrick and the strategy that he's laid out. You know, before, you know, as he came on board as a CEO and we've pivoted from growing and scaling the business via M&A to a pivot of, you know, we've scaled off enough, we've got the capabilities, now let's go deploy those capabilities, right? And let's go grow the business. Let's focus on organic growth. Let's focus our attention on maybe where we've underperformed, like North America. Let's focus on these higher growth, higher margin-type verticals like aerospace and defense and data centers. And so as part of that overall strategy, you know, we established a corporate commercial officer that is focused on customer excellence, standing up that organization, really strengthening account management, focusing in our large customers as opposed to having three points of contact across our regions, having one point of contact, and then collaborating with the regions as we look at those customers that are in multiple regions. And we're starting to see the fruits of that labor. last time we spoke pipeline roughly 2.7 billion dollars continues to be near all-time highs in the second quarter contract wins up over 400 million dollars 30 percent higher than the prior year 40 percent of our contract wins in the second quarter came from the higher growth higher margin verticals aerospace and defense and data centers so the effort the commercial excellence team the leadership change in Amapac where we've inserted a new president of the region as well as put in a new sales leader. The momentum is there. We've got the capability. It's really, really focusing our efforts and targeting our sales, our go-to-market, our value proposition to the right markets, to the right customer base. And we've got great capability. And right now, We've got the bandwidth to focus our attention on focusing on customer, customer growth, and execution, whereas the last couple of years, there's been a lot of time consumed around M&A in the integration. So we're pivoting to the ongoing execution. And so at this point in time, when we really look at the second quarter, one quarter doesn't make a trend. For us, we stacked another quarter. We felt really good at the time of our earnings release on where the contract wins were being projected for the third quarter. We continue to feel good about that. And so our goal here is to deliver another strong contract win quarter as well as, you know, show a sequential improvement in organic growth in the third quarter, and we're very focused on that. And we look forward to continuing to, you know, provide some positive news as we move through the rest of the year.

Maybe even looking back, you know, before the spin, is there a reason why you guys have been so good and so successful in Europe and kind of maybe not quite replicated that success in North America? Is it just a genesis of NorBear and kind of it started out with European strength and that's what you were good at? Is it an end market thing? Is it a capabilities thing? What's the answer to that?

Well, I don't have the history. Of course, yeah, sure. You know, being around approximately six months. But, you know, I would say the Norbert acquisition led to a lot of capabilities in the U.K. Also, our former CEO was based in London. So when you have a significant acquisition made in that sector and your CEO who, from a cultural standpoint, was based in the UK, you tend to gravitate towards what you know best. And so as a result of that, I think we've accomplished a lot in the UK and continental Europe. From a market standpoint, we're number one in the UK. We did a couple of acquisitions to add to that. So that part of our business is solidly in good shape, mature, and so we need to continue to execute with our current customers and look for some opportunities to win. Our UK and I team had a great win last year with NHS, the National Health System in the UK, and it's a big win for us. Now as we think about maturing those sectors of our business, those regions of our business, now we can pivot to North America, which has been probably unsupported from a leadership standpoint. And we've got the right leader in there, and we've got the right focus. So, you know, we think UK and I and continental Europe are in a good place from a capability and a customer standpoint. Now our focus is pivoting to, you know, the largest economy in the world, which is North America, where the greatest potential of growth for us are and really trying to take advantage of the North American market. not only with the B2B and the higher-end verticals, but just in general. There is a lot of opportunities for us to grow in North America, and our team is excited. They have some momentum, and they're really ready to get after it.

Is North American success just about that renewed focus on the market? You said new local management team, regional management team as well. Do you need more skills and capabilities? Do you need more technology, or is it just a case of we have what we need, just go out for the business?

You know, leadership changes are important, and we've done that. Partnering them with our corporate chief commercial officer from a partnership in account management, she'll bring in capabilities like digital marketing to help expand. For us, we have 340 sites in North America. 40,000 employees. So it's a big-scale operation. We have a lot of capabilities in North America. And I think for us, it's being able to translate and communicate to new customers as it relates to the capabilities, the things that we're doing, like complex kitting and parts distribution from an aerospace and defense, like building for data centers, doing wiring. We have a value proposition. We have a lot of capabilities. And so it's our opportunity now as these RFP opportunities arise that we sell our story, right, and make sure that we have the proper bandwidth to go support the growth and make sure that we're prepared for the implementations because as we're growing faster, you know, operational excellence is going to be needed to support the customer growth.

Got it. Another kind of big characteristic of a business is the percentage of open book versus six variable contracts. Is that something else that you're looking to address? Obviously, one gives you defensiveness, the other gives you operating leverage, and so it's part of this pivot also kind of looking at that mix.

Customer mix, revenue mix, I think over time continues to shift. You know, 70% of our revenue is CPG. 30% is B2B. So over time, as we focus on the new higher growth verticals, the shift will change. That will help on the top line. It will help on the bottom line. As it relates to open book, it's not totally negative. It's low risk, very consistent cash flow. Okay. So open book will always be part of our overall portfolio. Today, open book is around 55% of our contracts. And as I see over time, as we pivot and focus more growth in North America, which is more fixed-type contracting, we grow faster there. It gives us an opportunity to leverage and grow margins. That pivot will continue to shift the mix of open book downward a bit. more to the fixed side of things. And even some of our open book contracts, we're having lots of conversations in the UK about continuous improvement, where we make investments, where we get returns, how do we support the customers. So I think there's some additional pricing strategies that can be deployed that would end up being a win-win for us and our customers. But what you just described from a mix standpoint, those mix shifts, no doubt, and pivots will help us grow the top line, but I think it will have a meaningful impact on our margins.

Got it. Let us take a little bit of a step back here and focus on maybe some broader industry or macro trends. The world's been a chaotic place for at least six years, if not longer than that. It doesn't look like that's changing anytime soon. What has that done to corporates thinking about their supply chains, thinking about whether to outsource or not? does that make them want to do it more or does that make them want to say hey this is a core function for us and so we need to do this in-house and have more control over it the trends that we're seeing is the the challenges that you just described are making supply chains more complex for companies uh they want to be less integrated they want to focus their management bandwidth with their attention, their investments on their core business.

So, you know, as part of that, you're seeing a lot of focus on onshoring, moving product closer to the home base, and I think that trend will continue very strongly. I do think that with the complexity of the world and the challenges that you just described, companies are looking to go to people like GXO who have the expertise to deal with the complexity of the supply chain of starting up operations, implementing automation, robotics, deploying AI, as well as having the scale of being in 27 countries and operating in dozens and dozens of free trade zones. So I think that's a real benefit that we can deploy for our customers. And, you know, through the first half of this year, around 17% of our wins have come from companies who have supply chain to the supply base. Historically speaking, about a third of our wins have typically been by big blue chip companies that are using vendors to step in and manage their supply chain. And so those trends will continue, and I think as the world continues to be more challenging, more complex, more and more companies are going to look for people like GXO to handle the complexity of that.

Got it. Also, going back to the chaos of the last six years, how has trade policy moving to a multipolar world, again, brought renewed scrutiny of global supply chains, where you store your inventory, near-shoring? What does all of this mean to you? In some ways, to your point, supply chains have become more complex. In some ways, it's actually become simplified. If you're near-shoring stuff, if you're storing more inventory, places closer to the end customer, what does it mean for you guys? Want to pick that one up?

No, I think the complexity that we've seen is increasing our value proposition. So, in fact, you think about maybe where supply chains were in farther off places, then those weren't regions that we were playing in. But certainly as we're moving those supply chains to North America and we're doing more of the warehousing, the fulfillment here in North America or in continental Europe, that helps us because it's right in our background. And I think you're seeing that in our pipeline as well. You know, as Mark mentioned, our pipeline is near a record. And in this last quarter, at the end of June, we ended at $2.3 billion, I'm sorry. And three weeks later, our pipeline was up to $2.7 billion. So I think our customers are certainly, the value proposition is resonating. They're looking for partners to help them with not only their complex challenges that they're facing today, but really with our chief commercial officer's strategy, it's about how are we partnering with them and looking out 10 years? How are their supply chains? What's the real strategic things that they're doing, and how can we help them not only over the next, like I said, the next month, but really over the next five years?

Got it. I wanted to spend some time talking about the competitive environment because I think one of the amazing things about your business is that it's basically two companies globally who can do what you do yourself and obviously your large peer. Is that still the case? Do you expect that to still be the case going forward? Or do you think some of the more regional competitors are getting more sophisticated? And as companies look to, like you said, kind of outsource their supply chains, is it basically a two-player game? Or do you think some of the others can kind of continue to be competitive?

Well, I would say this. We don't rest on our accomplishments, right? We're very focused on continuing to be the number one player in the market for us. We are the only sole warehouse logistics company in the marketplace, pure play warehouse logistics. And it's a very fragmented industry, so there's lots of opportunities for us to grow our competition as well as maybe the smaller companies. And so what I would say is I worry about all of them as it relates to their focus on growing. They're focused on their business. Everybody is going faster looking to deploy automation, robotics, and AI. And so we can't stand still. We need to continue to move the ball forward. We've been a market leader, I would say, in adopting automation, robotics, and AI. Our CEO is very, very focused on deploying the technology to support our customers. but also deploying that technology to drive operational efficiency and execution. You know, we've done pilots from a humanoid standpoint. Patrick's talked a lot about that. But as we think about, you know, how warehouse logistics looks in five years, it's obviously going to look a lot different than it is today. And so we can't just sit back and rest on the fact that we're number one in the UK. We need to continue to focus on getting better, gaining market share, winning new business. And that's all part of the four-pillared strategy. And really, when you think about our business, we're called or kind of placed in the transportation sector. I really view ourselves as we're morphing into a tech services company. Really, we provide services. We solve our customers' biggest challenges, which is the supply chain. And today, more and more of our ability to solve those problems are related to technology. It's the automation and it's the robotics. And then the ever-emerging internal work that we've done from AI, as well as using, complementing that with external AI, it's allowing us to be more efficient, to be more reactive, to support our customers' ever-changing needs. and today it's more dynamic than ever.

Dr. Ravi, I would just add, I mean, you talked about the competitive dynamics. I mean, our market is massive. I mean, we talked about an excess of a $500 billion TAM and us and our nearest competitors, we make up small percentages of that. So still our largest, you know, 70% of the market's still done in-house today. And we've acquired a tremendous amount of capabilities with the M&A that we've done over the last, you know, five years and 10 years. And so now we are continuing to unlock, even across our core markets, these new strategic growth verticals. We have a tremendous playing field and a tremendous runway of organic growth opportunities. We've seen it on the pipeline, the wind. So, again, I don't think we're resting on our laurels, but I think it's up for us to go grab. We have a tremendous opportunity on the organic growth runway.

Got it. Mark, you mentioned AI and robotics. I have a bunch of questions on that. Christine knows that. So it's coming your way. But before we get there, one more on competition. Obviously, there was a lot of headline focus on Amazon announcing the supply chain solutions business earlier this year. You guys came out and said, you know, hey, maybe that's a competitor to GX or Direct, but the rest of what we do is really complex. And can you just unpack that a little bit and maybe what investors are missing kind of still focused on that potential risk?

Yeah, let me jump into this and then I'll hand it off to Christine. But, yeah, lots of questions since April on this topic. And, hey, Amazon is a massive company with a lot of capability, and they do a great job of what they do. But when we look at what we do for our customers, in many ways, they are very specific customized services, site-specific, one site, one location, with very bespoke automation technology that's being deployed from a warehouse management system standpoint. I think the criticality of our or the ability of us to customize solutions for that individual customer is what makes us different than Amazon I'm not quite sure Amazon is huge they have a lot of space they have great technology and I think in many ways they're looking to utilize the assets that they have do they really want to start up and build a brand new warehouse for one customer and set up a solution for that I don't know right I would say this though we can't sit back and assume that they don't want to be a competitor we need to make sure that we're continuing to strengthen our company from a from a growth standpoint from an execution standpoint from an automation robotic standpoint so that we don't give our customers an excuse to go look at somebody else. But I think at the end of the day, in RFPs, we don't see them in our competitive bids. We don't compete against them. Our solutions are very bespoke and very tailored towards our customers. I think we do a great job of protecting our customers' data and their data integrity. So I think there's a lot of differences between a GXO and an Amazon and, you know, if you want to add to it.

I think you hit it well.

Sounds great. Again, maybe switch gears a little bit. Talking about the margin opportunity, obviously lots going on here, pipeline of new business, shifting mix towards better mixed product, and maybe looking at kind of that move towards more fixed variable contracts. There's the GXO way, which is kind of a bunch of productivity initiatives you have. So what do the building blocks of margins look like over the next few years?

Well, you made some mention. I think the commercial excellence strategy that we have will accelerate growth and allow us to expand margins, right? But holistically, when we look at the opportunity for us to expand our margins and achieve the type of margins that we believe our company should generate, is really going to be focused on further deployment of automation, robotics, and AI. AI via the GXO IQ technology, the middleware that connects the systems in the warehouses as well as the GXO way, which is with our new COO, driving standard operating KPIs measurements true robust continuous improvement projects the right types of KPIs Lean, Six Sigma running our warehouses like a small factory. Our warehouses are like a small factory. The only difference is we don't own the inventory. So from a flow standpoint, removing bottlenecks. So the GXO IQ has shown us to improve the day-to-day operations by connecting the data within the different automated solutions, whether it's warehouse management systems, the demand platform from our customers, the auto store. Connecting all those allows us throughout the day to pivot through the challenges of loads came in late, somebody called in sick today, the product is missing here. It is adaptive and gets smarter every single day that we run the operation. So we've been on that journey. We've rolled out 50 or 60 sites, and over the next couple of years, the goal is to roll out GXO IQ across the entire portfolio. But with the GXO way, you know, driving productivity, driving efficiencies in our locations. We have 150,000 employees. That is a lot of people across 27 countries. The team has done a great job of managing that and servicing our customers, and we've done that without what I'll call a real operating platform, right? A management operating system, and what Bart is bringing on board is the operating methodology. So we talk about automation and robotics. I talked about AI, but adaptive technology. How do we adapt technology that has a return on investment, that reduces our need from a labor standpoint? And we've continued to deploy that. You know, right now we have 17,000 pieces of automation throughout our portfolio. By the end of the year, we'll approach 20,000. So for us, continue to rely and adopt automation robotics, making those investments and rolling out GXO IQ. but a big productivity initiative that we have from a labor standpoint is implementing labor management systems, and I compare that to a manufacturing operation. Right now we're piloting six pilots in our regions. We've picked two providers, two vendors, and labor management systems, today we have a clocking system. We clock in when you come in the door, and then you have lunch, you clock out, you clock back in, and then you clock out, you go home. People get paid. Labor management systems enable us to have people clock on a job and clock off a job. That enables us to understand how long it takes somebody to do a job. Look at the variability of that job, and based on those jobs, you add up all your jobs in your factory to determine the amount of manpower that you need. You can drive accountability. You can understand where there's challenges. You know, today it took Johnny 12 minutes to do this job. Tomorrow it took 20 minutes. This day it took 15. So establishing what I like to call in my own manufacturing days champion times. Each job, what is the champion time? What is the best time possible? And then translating that into a standard, and then we create standards in the factory and hold people accountable to those standards. And so for us, I think this is a way to think about our business through a manufacturing mindset to drive productivity and efficiency. So we've got the tool set of automation and IQ to help us from a slotting and a picking standpoint, but now you have labor management tools that can be deployed to the management teams there to know what their people are doing and when they're doing it, when they're productive and when they're not productive. And so I think that's a huge breakthrough. So when we think about getting our margins to our target margins over the next couple of years, those are between the commercial excellence the automation robotics and IA labor management systems and the management operating system, these will deliver the results that we're talking about. For us, it's how do we make sure we have enough bandwidth to scale and deploy these timely to achieve the benefits in the timelines that we have laid out for ourselves. And so we're really excited about this. We have to remember that, you know, as a company, We didn't have a COO. We didn't have a CCO at the beginning of the year. Karen came in with no people as part of her team. So she's building a team. She's building account excellence. Bart is building his team. We didn't have global procurement. We're building that organization. He's hiring an implementation solutions leader for the business so that we can then take the business at this scale. We can drive it at the enterprise level. We can share best practices across the organization. We can put ourselves in a position where, as opposed to focusing regionally, hey, I have a great execution implementation team in the U.K. Let me pick them up and drop them into the Amapak where I've got a problem. That's what I'm used to seeing. And that's the path that we're on to go achieve those types of productivity efficiencies. Now, some of it will be shared with customers via open book, but I also think it will make us more competitive. There's an opportunity for us to increase our margins, but it makes us more cost competitive, and I also think it allows us to deliver a better service to our customers so that when we talk about retention, 95%, how do we improve that to 96% or 97%? That's the path. That's the journey that we're on.

So lots of blocking and tackling, but at the same time, you guys are also working on the Moonshot project. I want to make sure we talk about robotics here. You're going to hit on a lot of the basic details here, but again, you guys are already leaders in warehouse robotics, what people would know to be considered to be warehouse automation at the moment, but at the same time, we're also running 45 pilots on humanoid robots. So what have your learnings been so far? What still needs to be done here? What's the pathway for that to expand into something across all your operations?

Well, we think humanoids are the way of the future. Humanoids have been advanced greatly in the last couple years not only from a from an ability standpoint from a cost standpoint and so you know over time complementing automation robotics and AI with humanoids is going to be groundbreaking if you think about a humanoid they don't get injured they're higher levels of quality they can work multiple shifts and not get tired and so you know over the next couple years technology is advancing so quickly. A couple of years ago, a humanoid could maybe pick up a box. Today, humanoids actually have fingers and dexterity and actually can pick things up. The issue with humanoids today is they can't work at the speed of a human. And so there's the process of how do we improve the overall efficiency and it will be done. No different than robotics years ago where robotic arms picked slow and Over time, it got faster and went through learning. So, you know, today, 2026, when we think about the advancements of technology, every single day the advancements are, it's quicker and quicker, quicker. And so, you know, before you blink your eye, we'll be in the business of deploying humanoids who are working side by side with humans in our facilities.

We're super excited about that. Clearly super excited. But maybe really quickly, what does a humanoid do for you that is different than a dedicated warehouse, like a Locus or a gray-orange robot, like a dedicated warehouse robot? What additional can the humanoid form factor do for you?

Well, I think the biggest difference is, you know, a gray-orange or a low-pad are these AGVs that bring the product to a human. Okay. Bring it and take it away. But they can't pick the product off the shelf. So, you know, the low pads are a great tool from a planning standpoint. This is what we need. It goes out on the floor. It brings the carts to the employees. The employees have their order. They've got to go in the bins and pick them out. We can now complement the AGVs with a humanoid at a station where they'll actually be able to pick the parts or the products out of the bins and put them in boxes. And so the goal over time is to allow the humanoids and the rest of our technology to do the simple part of the work and use humans to do the more complex decision-making. And so that's how we see building out the technology and complementing automation, robotics, AI, and the human factor. And I say this jokingly sometimes, but at some time in the future, or maybe we're looking at a complete lights-out warehouse.

Very exciting times. Very much looking forward to your Investor Day in November as well. I think it's going to be a big catalyst for the stock. But Mark and Christine, thanks so much for being here.

Thank you for having us.