Gxo Logistics, Inc. · NYSE:GXO
Gxo Logistics — Investor Day (July 2021)
78 slides from Gxo Logistics's investor day presentation, Jul 13, 2021
Slide 1: Game-Changing Opportunities - Investor Day
GAME-CHANGING OPPORTUNITIES Investor Day | July 13, 2021
Slide 2: Disclaimer
Disclaimer Additional Information References herein to “GXO” refer to GXO Logistics, Inc., a wholly owned subsidiary of XPO Logistics, Inc. (“XPO”). For additional information with respect to GXO and the proposed spin-off, please refer to the Form 10 Registration Statement, as it may be further amen
Slide 3: Agenda
Agenda INTRODUCTION INVESTMENT HIGHLIGHTS INDUSTRY OVERVIEW A WINNING CULTURE MARGIN-ENHANCING TECHNOLOGY FINANCIAL OVERVIEW 3
Slide 4: Introduction
Introduction
Slide 5: Today's presenters and contributors
Today’s presenters and contributors Brad Jacobs Malcolm Wilson Baris Oran Mark Manduca Chairman Chief Executive Chief Financial Chief Investment Officer Officer Officer Eduardo Richard Bill Fraine Neil Shelton Karlis Kirsis Pelleissone Cawston Chief Commercial Chief Strategy Officer Chief Legal Offi
Slide 6: Global leader in supply chain management and warehouse automation
Global leader in supply chain management and warehouse automation 10% 17% 2021E – 2022E 2021E – 2022E Revenue growth1 Adjusted EBITDA growth1 $1.5 billion 28% 2022E Adjusted EBITDAR1 Return on invested capital² INVESTMENT-GRADE CAPITAL STRUCTURE 1 Represents midpoint of 2022E guidance 2 See ROIC rec
Slide 7: Introducing GXO, logistics at full potential
Introducing GXO, logistics at full potential 7
Slide 8: Investment highlights
Investment highlights
Slide 9: Key investment highlights
Key investment highlights 1 Massive secular tailwinds 2 Long-term relationships with blue-chip customers 3 Critical scale in a growing market Largest global 4 Revenue- and margin-enhancing technology pure-play contract logistics provider 5 Attractive, resilient financial profile 6 World-class team 9
Slide 10: GXO's three major structural tailwinds
1 GXO’s three major structural tailwinds E-COMMERCE WAREHOUSE AUTOMATION OUTSOURCING E-commerce penetration1 Warehouse automation penetration2 % of logistics that is outsourced3 Currently insourced Outsourced E-commerce Global e-commerce Automation Automated warehouses 70% 30% opportunity 20% opport
Slide 11: Balanced mix of high-growth and durable verticals
1 Balanced mix of high-growth and durable verticals GXO’S VERTICAL MIX KEY HIGHLIGHTS % of 2020 revenue 11% Other E-commerce, 24% omnichannel and technology 50% 2021E – 2025E e-commerce industry CAGR1 Consumer packaged goods 13% 76% GXO revenue coming from non- cyclical consumer end markets Food and
Slide 12: Diversified blue-chip customer base with long tenure
2 Diversified blue-chip customer base with long tenure END MARKETS KEY CUSTOMERS MULTI-YEAR CONTRACTS WITH 93% AVERAGE HISTORICAL E-commerce, REVENUE RETENTION RATE omnichannel and technology AVERAGE TENURE OF TOP 20 CUSTOMERS IS 15 YEARS Food and NO ONE CUSTOMER beverage ACCOUNTS FOR MORE THAN Cons
Slide 13: GXO's footprint and scale are major competitive advantages
3 GXO’s footprint and scale are major competitive advantages 885 locations, primarily in North America and Europe 13
Slide 14: Largest global pure-play contract logistics provider
3 Largest global pure-play contract logistics provider KEY M ET RICS 1 2022E REVENUE VS. PURE- PL AY PEERS 4 $ in billions Countries of operation 27 Locations 885 Team members2 ~93,000 Total addressable opportunity3 ~$430 billion Total warehouse space ~210 million sq. ft. Total customers >1,000 GXO
Slide 15: Intelligent warehouse automation generates measurable improvements
4 Intelligent warehouse automation generates measurable improvements ROBOTICS GOODS-TO-PERSON ADVANCED VISION TECHNOLOGY SYSTEMS SORTATION SYSTEMS Driving improved productivity, revenue and margin growth Up to 6x labor productivity improvement with automation Faster, more consistent outcomes for cus
Slide 16: Sophisticated, technology-driven solutions
4 Sophisticated, technology-driven solutions 16
Slide 17: Typical contracting process
5 Typical contracting process O UR STRENG TH S PO SI TI O N US TO WI N KEY SELECTI O N CRI TERI A Higher-value-add 1 1 services (e.g., reverse logistics) Initial RFP 3-5 bidders Scale and ability to 2 2 service customers Initial Down Select globally 2-3 bidders 3 Finalists Robotics and 3 advanced au
Slide 18: Anatomy of a target GXO contract
5 Anatomy of a target GXO contract Customer typically covers most upfront costs Variable rate; based on output Leases are generally co-terminus with contracts Protections against labor cost inflation Long durations create durable partnerships 18
Slide 19: Balanced contract mix that passes through costs
5 GXO has a balanced contract mix that passes through costs Open Closed book book Spectrum of typical contracts Higher Higher ROIC margin HYBRID CONTRACTS INCLUDE ELEMENTS OF BOTH OPEN AND CLOSED BOOK STRUCTURES BASED ON: Region Vertical Services 19
Slide 20: Customer contract profile
5 Customer contract profile ~3 yrs. Day 1 28% Target payback period Target contract profitability 2021E GXO ROIC1 Long-duration contracts create visibility into future revenue 1 See ROIC reconciliation in appendix for calculation 20
Slide 21: GXO has shown resilience through all cycles
5 GXO has shown resilience through all cycles $ in billions Grew through M&A MILESTONES COVID 6.2 2008: Acquisition of 6.1 6.1 Salvesen Logistics 5.2 2011: Acquisition of TDG (Laxey Logistics) 4.8 2015: Full-year impact 4.0 of New Breed Logistics, Stable through Great Jacobson, and 3.6 Financi
Slide 22: Best-in-class growth profile on track for strong 2022E earnings
5 Best-in-class growth profile on track to deliver strong earnings in 2022E 2021E – 2022E ORGANI C REVENUE GROW TH¹ PRO FORMA ADJUSTE D EBI TDA 1 $ in millions +3 – 4% +8 – 12% 700 - 735 +5 – 8% 457 Business wins² Growth in existing 2022E organic growth 2020⁴ 2022E facilities Growth propelled by a c
Slide 23: Industry overview
Industry overview
Slide 24: Highly fragmented growth market
Highly fragmented growth market ~$430 billion ~$130 billion Total addressable opportunity1 Current addressable opportunity2 <25% ~2x Market share of top five players3 Growth advantage for top players Source: third-party industry research 1 Represents total addressable logistics market in North Ameri
Slide 25: Regionally diverse revenue base
Regionally diverse revenue base KEY REGIONS % OF 2020 REVENUE GXO’S COUNTRY POSITION 36% United States #2 United Kingdom #2 25% France #4 10% The Netherlands 8% #2 7% Spain #2 GXO is a top logistics provider in all of its key geographies 25
Slide 26: Decades of expertise in high-growth verticals
Decades of expertise in high-growth verticals % OF 2020 TOP VERTICALS STRONG VALUE PROPOSITION REVENUE Comprehensive B2C services, including sophisticated supply chain management facilitated by 50% advanced automation and data science E-commerce, High-value-add services include order personaliza
Slide 27: Mix, automation and scale expected to drive revenue outperformance
Mix, automation and scale expected to drive GXO revenue outperformance C O N T R AC T L O G I S T I C S I N D U S T R Y G R O W T H 1 P R I M AR Y G R O W T H D R I V E R S F O R T O P P L AYE R S $ in billions >10% 153 130 111 ~4.0% 2015 2019 2023E Market Growth in Demand for Regional Adjusted GXO
Slide 28: E-commerce exposure and growth rates by region
E-commerce exposure and growth rates by region NORTH AMERI C AN EUROPEAN GXO’ S GEOGRAPHI C MI X E-COMMERCE I NDUSTRY GROW TH E-COMMERCE I NDUSTRY GROW TH $ in billions 2020 revenue mix $ in billions Other 2% 1,290 809 North America 550 829 36% Europe 62% 2021E 2025E 2021E 2025E E-commerce industry
Slide 29: Product returns increase demand for e-commerce logistics
Product returns increase demand for e-commerce logistics E-COMMERCE DRI VES HI GHER GXO REVERSE LOGI STI CS REVENUE TREND W AREHOUSE DEMAN D $ in millions 3x – 10x 522 Revenue uplift when a customer switches to e-commerce 389 2x – 5x Revenue uplift from reverse logistics vs. outbound parcel 2018 202
Slide 30: Increasing complexity drives outsourcing trend
Increasing complexity drives outsourcing trend CUSTOMER NEEDS BECOMING MORE COMPLEX1 OUTSOURCED SHARE OF SUPPLY CHAIN ACTIVITY 43% 90% 90% Expected annual growth in same-day deliveries 60% 1 in 3 E-commerce products are returned 30% 60% Full truckload Courier, express Ocean and air Contract logistic
Slide 31: A winning culture
A winning culture
Slide 32: We solve complex supply chain problems
We solve complex supply chain problems 32
Slide 33: GXO's winning culture
GXO’s winning culture Global scale As much as 8x larger than other pure-play logistics providers1 Two decades of experience Deep expertise implementing high-value-added services to 1,000+ customers Trusted partner Top 20 customers have been with GXO for 15 years on average Customers choose GXO
Slide 34: Significant scale advantage over pure-play peers
GXO possesses significant scale advantage over pure-play peers Pure-play peers1 ~16,000 ~93,000 Number of team members Number of team members2 ~29 million ~210 million Warehouse space, sq. ft. Warehouse space, sq. ft.3 Source: Public filings 1 Figures represent median of selected peers (CLG, WIN, ID
Slide 35: Expertise to run the industry's most complex supply chains
GXO has the expertise to run the industry’s most complex supply chains CUSTOMER PROBLEM GXO SOLUTION “We need a comprehensive Full-service offerings for entire e-commerce supply chain solution” e-commerce supply chain “We need a single provider to manage Unified offering across global our multinatio
Slide 36: Customer case study – Walt Disney Parks and Resorts
Customer case study – Walt Disney Parks and Resorts The Disney MagicBand is an all-in-one, personalized wristband technology that gives a guest access to the Park, unlocks the Disney hotel room and is used to buy food and merchandise In 2013, Disney sought a partner to collaborate in creating a CU
Slide 37: Capabilities cover the full spectrum of warehousing needs
GXO’s capabilities cover the full spectrum of warehousing needs CUSTOMER PROBLEM GXO SOLUTION “1 in 3 pairs of shoes we sell are being returned and it’s causing significant Reverse logistics disruption” “We’re sending customers the Advanced automation wrong products at a high rate” and robotics “Lab
Slide 38: Customer case study – Nike
Customer case study – Nike Nike is one of the world’s most recognizable brands for athletic footwear, apparel, equipment and accessories CUSTOMER In 2017, Nike sought a logistics partner to manage product returns NEED An increase in returns was adversely impacting Nike’s bottom line GXO facili
Slide 39: Customer case study – Nike Rebound: Hyper-fast returns
Customer case study – Nike Rebound: Hyper-fast returns 39
Slide 40: GXO builds long-term partnerships with customers
GXO builds long-term partnerships with customers CUSTOMER PROBLEM GXO SOLUTION “We need a trusted 3PL partner Largest global pure-play contract without channel conflict” logistics provider “We’re selling a high-profile Long-tenured track record of new product and need to ensure a smooth rollout” sup
Slide 41: Continuous improvement positions GXO as a trusted partner
Continuous improvement positions GXO as a trusted partner Focus on continuous improvement (“CI”) drives best-in-class solutions and outcomes Identifies best CI tools available and shares universal best practices across footprint Identifies best vertical-specific practices, clearly differentiatin
Slide 42: GXO Direct: shared-space distribution solution
GXO Direct: an innovative, shared-space distribution solution for customers National distribution solution that gives customers fluid fulfillment with more flexibility than traditional distribution models, and at lower cost ADV ANT AGES FOR CUSTOMERS ADV ANT AGES FOR GXO Maintain independent brand
Slide 43: Committed to achieving bold environmental targets
Committed to achieving bold environmental targets 30% 100% 50% Greenhouse gas Carbon neutral Renewable global emission reduction by by 2040 electricity by 2030 2030 vs. 2019 80% 80% Global operations using Global landfill LED lighting by 2025 conversion rate by 2025 GXO is focused on attaining its o
Slide 44: Customer case study – Kering Group, carbon negative warehouse
Customer case study – Kering Group, the carbon negative warehouse Kering is a global luxury group with an ensemble of renowned labels in fashion, leather goods, jewelry and watches Kering sought an experienced contract logistics provider to help ship CUSTOMER its luxury goods under various brands
Slide 45: Culture of safety, diversity, inclusion and development
Dedicated to fostering a culture of safety, diversity, inclusion and development Favorable mix of employees and agency labor Best-in-class safety record Diversity, inclusion and belonging steering committee High level of employee engagement Ongoing employee education to raise awareness about inclusi
Slide 46: GXO's culture of safety and diversity
GXO’s culture of safety and diversity 46
Slide 47: $2 billion pipeline focused on e-commerce
$2 billion pipeline focused on e-commerce PIPELINE NEAR ALL-TIME HIGHS1 DRIVING SUBSTANTIAL NEW BUSINESS $ in billions Annualized revenue from new business won $ in billions 2.0 1.8 1.8 0.8 0.6 2019 2020 2021 YTD 2019 2020 OUTSIZED EXPOSURE TO FAST GROWING E-COMMERCE VERTICAL1 % of current pipeline
Slide 48: Margin-enhancing technology
Margin-enhancing technology
Slide 49: GXO is already building the warehouses of the future
GXO is already building the warehouses of the future Warehouse of the past Warehouse of the future Advanced Labor intensive automation Reduced Intelligent Improved Lack of speed productivity robotics efficiency Artificial Poor service Limited intelligence and Reduced and accuracy automation machine
Slide 50: Technology enables better outcomes for GXO and customers
Technology enables better outcomes for GXO and its customers Revenue Margin Scale and Growth Expansion Retention Automated customer Automation drives Automated customers solutions have higher improved productivity are bigger and stay with revenue growth than and higher margins GXO longer GXO’s avera
Slide 51: Hardware: automation implementations deliver operational benefits
Hardware: GXO’s automation implementations deliver operational benefits … Provides superior visibility and control Increases fulfillment speed and accuracy AUTOMATED GUIDED ROBOTICS Eliminates data silos VEHICLES Overcomes space and labor constraints Mitigates safety risks ADVANCED SORTATION VISION
Slide 52: Automation generates dramatic productivity gains
And generate dramatic productivity gains … Manual Automated Robotic arm 210 800 +4x Cases / hour picking rate Cases / hour picking rate Robotic destacker 17 100 Pallets / hour de-stacking rate +6x Pallets / hour de-stacking rate Automated gantry 210 3,400 Cases per hour rate +16x Cases per hour rate
Slide 53: Leading to higher growth and expanding margins
Leading to higher growth and expanding margins GREATER AUTOMATION EXPOSURE FASTER REVENUE GROWTH HIGHER AUTOMATED MARGINS Automation revenue as a % of total revenue % revenue growth from customers using automation EBITA margins for customers using automation ~30% ~5% Industry GXO Non-automated Autom
Slide 54: Software: proprietary digital ecosystem enhances visibility and control
Software: GXO’s proprietary digital ecosystem enhances visibility and control Enables sophisticated integration of advanced automation Facilitates collaboration with world-class manufacturers to engineer customized solutions Provides in-house control of intelligent solutions, including robotic
Slide 55: GXO Smart technology delivers productivity improvements of 5% to 7%
Software: GXO Smart™ technology delivers productivity improvements of 5% to 7% Proprietary suite of intelligent productivity tools that optimize labor cost Continuous + Improvement Machine learning drives productivity Cloud and operational effectiveness HR data Analytics applications Optimizes l
Slide 56: GXO Smart productivity management
GXO Smart™ productivity management 56
Slide 57: Customer case study – Nestlé
Customer case study – Nestlé Nestlé is the world’s largest food and beverage company “I'd like to offer a huge thank you to the many people at CUSTOMER Nestlé sought to build a state-of-the-art digital warehouse and Nestlé and [GXO] who have NEED innovation center in the UK for global product dist
Slide 58: Customer case study – Nestlé digital warehouse of the future
Customer case study – Nestlé digital warehouse of the future 58
Slide 59: Financial overview
Financial overview
Slide 60: Expected timeline of the spin-off
Expected timeline of the spin-off Key events Timing Public announcement of separation December 2, 2020 Public Form 10 filing June 9, 2021 Completed debt financing July 2, 2021 Investor day presentation July 13, 2021 Start of regular way trading August 2, 2021 Note: There can be no assurance that the
Slide 61: Financial performance highlights
Financial performance highlights Best-in-class top-line growth 8% to 12% 2022E YoY revenue growth, underpinned by $2 billion pipeline Attractive returns profile 28% 2021E ROIC1 Robust free cash flow generation Maintenance capex of ~1% of revenue Strong balance sheet Investment-grade capital structur
Slide 62: Capital allocation priorities
Capital allocation priorities Organic Prioritizing above-market growth growth Productivity and Ongoing investment in productivity and automation technology Balancing Disciplined approach to acquisitions acquisitions and capital return Return of capital to shareholders Near-term investment-
Slide 63: Key investment criteria
Key investment criteria 2021E ROIC BRIDGE 33% 5% 28% Maintain ROIC target: investment-grade 28%+ rating Target project Aligned to ESG payback period: goals ~3 years Project ROIC Central costs and GXO ROIC investment ~68% of GXO’s 2021E capex relates to growth projects 63
Slide 64: 2021E – 2022E organic revenue growth bridge
2021E – 2022E organic revenue growth bridge COMMENTARY +8 – 12% +3 – 4% Organic revenue growth of 8% – 12% for FY 2022E, above pro forma 2021E Growth of 5% – 8% from business wins – Record sales pipeline of ~$2 billion and growing +5 – 8% – High-quality opportunities converted to GXO wins Grow
Slide 65: More than a decade of above-market growth remains
More than a decade of above-market growth remains MEGATREN DS DRI VI NG TOPLI NE GROW TH GXO’ S TAI LW I NDS DRI VE ABOVE-M AR KET GROW TH 2019–2023 industry CAGR E-commerce adoption is accelerating coming out of COVID >10% – ~11% e-commerce CAGR over next 5 years Customers are demanding increas
Slide 66: 2021E – 2022E adjusted EBITDA bridge
2021E – 2022E adjusted EBITDA bridge $ in millions 30 – 35 700 – 735 26 – 32 40 – 45 600 – 630 2021E adjusted EBITDA Business wins¹ Growth in existing facilities Operating efficiencies 2022E adjusted EBITDA Revenue growth Margin improvement Note: 2021E adjusted EBITDA is shown on a pro forma basis 1
Slide 67: Drivers of long-term margin expansion
Drivers of long-term margin expansion MARGI N EXPANSI ON LEVERS E-COMMERCE DRI VES MARGI N EXPANSI ON Drive further implementation of GXO SmartTM and 2020 adjusted EBITDA margin % before overhead allocation other proprietary software tools – GXO SmartTM implemented in ~60% of sites +290 bps Grow
Slide 68: Attractive capital structure to fuel future growth
Attractive capital structure to fuel future growth EXPECTED CAPITAL STRUCTURE AT SPIN-OFF COMMENTARY Balance sheet right-sized for optimal Cash $100 million cost of capital No maturities due before 2026 Expect minimum total liquidity of $900 million Debt $800 million – Minimum cash balance of
Slide 69: Significant runway for free cash flow generation
Significant runway for free cash flow generation Track record of significant cash generation SIG NIFICANT LEVERS T O EXPAND EARNING S ACRO SS CY CLES whilst delivering best-in-class revenue Pro forma adjusted EBITDA less net capex1 growth $ in millions 370 247 Two-thirds of capex relates to grow
Slide 70: Summary
Summary
Slide 71: Reasons to invest in GXO
Reasons to invest in GXO MASSIVE SECULAR TAILWINDS CRITICAL SCALE IN A GROWING MARKET LONG-TERM, CONTRACTED AND DIVERSE BLUE-CHIP CUSTOMERS PROPRIETARY TECHNOLOGY IMPROVING CUSTOMER OUTCOMES FAST-GROWING AND HIGH-RETURN FINANCIAL PROFILE Largest global pure-play contract logistics provider, led by a
Slide 72: Appendix
Appendix
Slide 73: GXO Investor Day presenters
GXO Investor Day presenters Brad Jacobs Malcolm Wilson Chairman Chief Executive Officer Over 40-year career, has started five companies from Three decades of executive experience managing scratch and led each to become a billion dollar or multinational supply chain operations multi-billion dolla
Slide 74: Reconciliations of GXO pro forma adjusted EBITDA
Reconciliations of GXO pro forma adjusted EBITDA GXO ADJUSTED EBITDA RECONCILED TO OUTLOOK $ in millions 2020 GXO pro forma adjusted EBITDA (as presented in Form 10) 442 Adjusted for expected corporate cost run rate 10 – 20 2020 GXO pro forma adjusted EBITDA (comparable to 2021 outlook) 452 – 462 20
Slide 75: Reconciliations of GXO pro forma adjusted EBITDA (cont.)
Reconciliations of GXO pro forma adjusted EBITDA (cont.) NET LOSS ATTRIBUTABLE TO GXO RECONCILED TO ADJUSTED EBITDA FOR 2020 $ in millions Net loss attributable to GXO (14) Net income attributable to noncontrolling interest (9) Net loss (5) Interest expense 31 Income tax provision 15 Depreciation an
Slide 76: Estimated impact of a January 1 spin-off on full-year financial targets
Estimated impact of a January 1 spin-off on full-year financial targets SPIN-OFF IMPACT ON SELECT 2021 FINANCIAL TARGETS $ in millions GXO Post-Spin-Off Depreciation and amortization1 240 – 250 Interest expense2 20 – 25 Income tax rate 26% – 28% Net capital expenditures 240 – 250 Cash interest 20 –
Slide 77: ROIC reconciliation
ROIC reconciliation SELECT FINANCIALS AND GUIDANCE $ in millions Select income Select balance sheet items2 GXO pro forma 2021E Guidance statement items Adjusted EBITDA 600 – 630 Equity 2,451 (-) Depreciation and amortization1 240 – 250 (+) Debt 800 Adjusted EBITA 360 – 380 (+) Finance leases 161 (-)
Slide 78: Adjusted EBITDA less net capex reconciliation
Adjusted EBITDA less net capex reconciliation SELECT FINANCIALS AND GUIDANCE $ in millions 2020 2021E3 Adjusted EBITDA 4571 615 (-) Net capital expenditures 2102 245 Adjusted EBITDA less net capex 247 370 1 Midpoint of 2020 GXO pro forma adjusted EBITDA comparable to 2021 outlook (see reconciliation