GXO Logistics posts strong Q4 and calendar year 2021 earnings
GXO Logistics Inc. reported fourth quarter revenue came in at $2.3 billion, marking a 28% annual increase, when it was still part of XPO Logistics, for a new company high. Net income came in at $56 million and was up 10.8% annually, and operating income, at $63 million, was up 20.6%. Adjusted EBITDA also saw a new high, at $167 million, rising 12.6% annually. For calendar year 2021, revenue, at $7.9 billion, rose 21.5%, with operating income at $151 million.
Logistics in the NewsDiffering opinions prevail in lead up to STB’s reciprocal switching hearing U.S. rail carload and intermodal volumes are mixed for week ending February 12 7 Trends that will Change Parcel Shipping in 2022 Intermodal volumes begin 2022 with annual declines, reports IANA GXO Logistics posts strong Q4 and calendar year 2021 earnings More Logistics News
Logistics Resource7 Trends that will Change Parcel Shipping in 2022Read the eBook to see how you can leverage these trends and deploy creative strategies to build agility into your order fulfillment workflows.
Fourth quarter and calendar year 2021 earnings for Greenwich, Conn.-based global contract logistics services provider GXO were very strong, the company reported earlier today. This was GXO's second standalone earnings release since it was spun off from XPO Logistics in August 2021.
GXO reported fourth quarter revenue came in at $2.3 billion, marking a 28% annual increase, when it was still part of XPO Logistics, for a new company high. Net income came in at $56 million and was up 10.8% annually, and operating income, at $63 million, was up 20.6%. Adjusted EBITDA also saw a new high, at $167 million, rising 12.6% annually. For calendar year 2021, revenue, at $7.9 billion, rose 21.5%, with operating income at $151 million.
GXO saw significant traction over the course of the fourth quarter, for e-commerce and reverse logistics revenues, which were up 45% and 28%, respectively, and the company saw double-digit revenue growth for each quarter of 2021, including a 19% fourth quarter increase. What’s more, it noted that its new customer wins in 2021 are expected to contribute incremental revenue of around $830 million in 2022, which it said represents around 10% of 2021 revenue. It also noted that the company’s sales pipeline reached an all-time high of $2.5 billion, with its revenue retention rate at the mid-to-high 90s since the spin-off was made official.
“More than ever, customers are demanding innovation, and our combination of industry-leading technology, global scale and world-class talent continues to set GXO apart,” said GXO CEO Malcolm Wilson in a statement. “We’re pioneering automated and ESG-focused solutions that improve safety and lower the carbon footprint of global supply chains, and we look forward to publishing our first sustainability report later this year. We see significant growth opportunities heading into 2022, as the tailwinds of e-commerce, automation and outsourcing continue unabated. Our new contract wins and sales pipeline are the highest they’ve ever been, which, along with our improved revenue retention rate, position us extremely well to deliver our 8% to 12% organic revenue growth target in 2022. Moreover, we continue to realize benefits from our 2021 acquisition in the U.K. which, in addition to two recent technology customer wins, has already achieved synergies of over $30 million, equivalent to approximately 5% of its sales.”
GXO Chief Investment Officer Mark Manduca toldLMthat the 2021 Peak Season highlighted how the company was able to successfully deliver for its customers, with it being a big question mark for lots of people heading into it, with an optimistic outlook going forward.
“The growth trajectory here is secular, Santa has handed his baton over to the Easter Bunny, and we are just pushing through,” he quipped. “That was clear in our e-commerce and reverse logistics gains. We produced free cash flow and have a great balance sheet and returns on invested capital above 30%, and we raised our guidance.”
Manduca解释说,GXO的业务是发射on all cylinders in the fourth quarter, with GXO serving a solutions provider for its customers across several verticals. And he observed that GXO’s reverse logistics operations accelerated on a tougher annual comparison in the fourth quarter compared to the third quarter, up 28% in the fourth quarter compared to the third quarter’s 21% annual gain.
“This means that when we look at our customer projects, we are clearly focused on returns as a business, but also customers are coming to us for our e-commerce and fulfillment solutions, and they know that they can rely on us in times of stress within the broader supply chain,” he said.
As an example, he observed how in November, the Black Friday volume returns for one of its customers surged on the e-commerce side, where as a technology shipper customer saw a 46% annual increase in returns, and a top apparel brand customer saw volumes increase 36%.
“This is not sporadic, it is across the board,” said Manduca. “It is systemic of what is going on in our business, with e-commerce market share being gained and is a secular growth driver in itself. And automation is also growing, and we are a market leader, and outsourcing, too. People come to us, because they want to be with the blue chip, well-capitalized player in this space.”
Inflation:When asked about how inflation is impacting operations, Manduca said nobody wants higher inflation, with the caveat that GXO is a real asset producing real consumer goods, and that very much plays as being an inflation hedge and a beneficiary of higher inflation. The reason for this, he said, is that is effectively drives customers to want to change how they do things.
“And it moves them towards the large-scale, technologically-advanced player in the space, which basically means more outsourcing towards us, and that is good for GXO,” he said. “We are seeing the U.S. market with modest high single-digit to low double-digit inflation on the labor side, to be clear. In the European market, we are seeing slightly more modest mid-single-digit growth in inflation year-over-year. For our open book markets, costs are a pass through, and for our closed book contracts, which combined with our hybrids, that is basically 60% of our business. We have inflation escalators on the top line, and we pass through our costs on the costs base and that means we are a modest inflation beneficiary when inflation rises.”
2022 outlook:For 2022, GXO is estimating organic revenue growth at 8%-to-12%, with adjusted EBITDA of $707 million-to-$742 million, and free cash flow of approximately 30% of adjusted EBITDA.
“This is a real high growth business that focuses on writing very vigorous contracts, and one of the key considerations in fueling our growth is always making sure that we really focus on those long-term, durable, blue-chip customers,” said Manduca. “That is the backbone of everything we do, and we are landing and expanding with our existing customers and also taking on first-time outsourcers and taking share from the competition with our scale and technology.”
M&A prospects:Manduca said that 2022 M&A moves are a possibility in order to fill certain service niches or needs maybe expand into certain geographies.
“Things are on the table as we view those types of moves,” he said. “This business deserves acquisitions, and this business is sitting in a highly fragmented market, where the top five customers control less than 25% of the market share. We've got the balance sheet and the heritage to do deals and that's definitely part of our wheelhouse. I would say it is somewhere in the region of a low single-digit number of bolt on deals per year, maybe a mid-sized deal. We are going to be very return on invested capital-focused and what shareholders want in terms of a deal.”
About the AuthorJeff Berman, Group News EditorJeff Berman is Group News Editor for万博2.0app下载,Modern Materials Handling, andSupply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis.Contact Jeff Berman
Subscribe to Logistics Management Magazine!Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!
2022 Global Issue: Is this the new normal? Ocean Cargo Trends: Pandemic continues to wreak havoc View More From this Issue