GXO Logistics posts strong Q1 2022 earnings results

First quarter 2022 earnings for Greenwich, Conn.-based global contract logistics services provider GXO Logistics saw strong results, the company reported earlier today. This was GXO's third standalone earnings release since it was spun off from XPO Logistics in August 2021.

GXO reported that first quarter revenue saw a 14% annual gain, to $2.1 billion. Net income came in at $38 million, for a 44.8% annual gain, and operating income—at $37 million—was up 19% annually. Adjusted EBITDA, for the quarter, was $155 million, for a 15% annual gain.

• Quarterly revenue was paced by growth across the key verticals GXO serves, with:
• E-commerce, omnichannel retail, and consumer technology up 8.4%, to $1.13 billion;
• Food and beverage up 11%, to $338 million;
• Industrial and manufacturing up 6%, to $263 million
• Consumer packaged goods up 13%, to $213 million; and
• Other verticals up 1%, to $139 million

The company saw record first quarter new business wins, representing more than $1 billion of incremental revenue contracted for 2022, which it said is equivalent to 13% of 2021 revenue, adding that it has roughly $217 in incremental revenue already contracted for 2023. And it cited GXO’s robust sales pipeline—at $2.5 billion—up 20% annually, with a revenue retention rate in the high-to-mid 90s, going back to the spin-off from XPO Logistics. What’s more, GXO said it recently issued its inaugural ESG report, which showed a 24% decrease in greenhouse gas intensity by revenue in 2021.

“Our stellar top- and bottom-line performance this quarter and record new business wins are a testament to the value of GXO’s game-changing solutions, the strength of our contractual business model and the accelerating demand for first-time outsourcing, especially from e-commerce and omnichannel customers,” said GXO Chief Executive Officer Malcolm Wilson in a statement. “In today’s environment, where supply chains are increasingly complex and require greater scale, GXO’s solutions are helping maximize our customers’ speed to market and profitability, while also reducing their environmental impact. Our ability to provide our customers with technologically advanced warehousing solutions and exceptional service to optimize their inventories effectively is more critical now than ever. Across our business in the first quarter, we saw solid volumes and growth in all of our verticals. Looking to the remainder of 2022 and beyond, we continue to benefit from multi-year revenue visibility, exceptional growth opportunities with new and existing customers, and a predictable, contractual business mode.”

In an interview GXO Chief Strategy Officer Neil Shelton told LM that the first quarter’s strong beat reflects a sales win-driven focus, which, in turn, drives the majority of the company’s growth.

“In 2021, we had an exceptional [number] of wins and that has continued through the first quarter of 2022, winning contracts with a lifetime value of $2 billion,” he said. “It is quite interesting when you look at that, the length of those wins is rising. It was around six years, for average contract duration, in the first quarter. We had incredibly strong wins in the quarter and now we find ourselves, at the end of that quarter, with $1 billion in incremental revenue from the wins for this year.”

What’s more, Shelton said that 44% of first quarter wins came from companies outsourcing for the first time. He added that level of what he called heavy growth is one of the key reasons GXO has raised its organic growth expectations this year to between 11%-to-15%.

Addressing GXO’s e-commerce business line, Shelton said that GXO was up well over 30% annually in the first quarter.

“What is really driving that trend growth more and more is brands and the second wave of outsourcing,” he said. “It is brick and mortar businesses wanting to have a best-in-class consumer experience. With all of this, consumers become more demanding, for things like receiving orders same-day and next-day. That is leading to more densification globally, not just in the U.S. In order to be able to fulfill the consumer demands, we are seeing more companies expand their e-commerce [operations] and plan for the future. That is really what is helping to drive our wins. Brands are planning for the next decade, which will see further online channel share and want to own the consumer relationship. To do that they need a best-in-class consumer proposition.”