GXO Logistics, Inc. 2026 Q2 Earnings Call

Good morning. Thank you for joining our second quarter 2026 results call. Joining me today are Mark Suchinski, our Chief Financial Officer, and Kristine Kubacki, our Chief Strategy Officer. Before we get into the quarter, I'd like to acknowledge a special milestone. This week marks five years since GXO became an independent public company. Milestones are an opportunity to celebrate progress. They're also a reminder that every milestone is the beginning of a new chapter, one this team is exceptionally well-positioned to lead. The foundation established over the past five years, combined with new leadership and a new strategic agenda, are now translating into results. We're seeing real momentum build behind our strategy. We're still in the early innings. Starting on slide four, our first half financial performance puts 2026 firmly on plan, even as we prioritize the investments that drive long-term profitable growth.

Looking to 2027, leading indicators, including pipeline and wins, are running ahead of our expectations, giving us confidence in accelerating growth and higher margins. In the second quarter, we generated revenue of $3.4 billion, and organic revenue growth of 3.4%, with broad-based contribution across all our regions. Adjusted EBITDA was $219 million, and adjusted EPS was $0.59. Approximately 40% of our new business wins came in our strategic growth verticals. Moving to slide five, this was a quarter of strong commercial momentum, our strongest commercial quarter in three years. In the second quarter, we added $410 million in new business wins, up more than 30% versus the prior year, with marquee wins across our largest customers and strategic verticals.

That commercial momentum has continued into the third quarter, where we expect wins again to increase significantly year-over-year, particularly driven by demand from data center and aerospace and defense customers. For the first half, wins reached nearly $640 million, up about 20% year-over-year. Even after a quarter with rapid pace of closings, our sales pipeline has already expanded post-quarter to $2.7 billion. Just as important as the pipeline size is the breadth and quality of what's in our pipeline, a deeper mix of opportunities across our strategic growth verticals and our largest global customers. We now have over $1 billion of expected incremental new business revenue secured for 2026, giving a strong line of sight into the balance of the year and underpinning our updated full year guidance. Mark and Kristine will discuss our financial results and commercial wins in more detail shortly.

Moving to slide six. Over the past year, we've been executing a deliberate evolution designed to position the business for its next phase of growth. The initial focus centered on strengthening the leadership team, bringing in experienced leaders across commercial, operations, Americas and Asia Pacific, and finance to establish the capabilities and perspectives needed to lead the business forward. With that foundation firmly in place, we've begun to evolve our structure and operating model to equip the business to scale efficiently and create the foundation for sustained execution. We are making significant progress on our three strategic priorities: sharpening commercial excellence, strengthening operational discipline through the GXO Way, and leading in AI and next-generation automation through GXO IQ. These are the levers that we believe will accelerate growth and expand margins. First, on commercial, we're winning more, and we're winning better.

Our wins this quarter were led by blue-chip global brands, expanding relationships with Nike, Marks & Spencer, and PepsiCo, and a significant new e-commerce win in continental Europe with Ahold, just to name a few. Nothing illustrates our progress better than North America, our single largest growth opportunity. A more disciplined commercial approach and a sharper focus on our strategic verticals have meaningfully expanded both our pipeline and our win rate here. Importantly, we're winning larger, more complex mandates than we were a year ago. We're also building on our leadership in aerospace and defense and in technology, particularly data center infrastructure, the fastest-growing verticals in our market. In aerospace and defense, we added new and expanding work with Raytheon, Boeing, and IAG, leveraging our market-leading capabilities.

In technology, we signed a major new hyperscaler relationship, our largest win in the quarter, and expanded with a global cloud and technology leader and a semiconductor equipment leader in Malaysia, and we continue to build our footprint in life sciences. Second, in operations, we are beginning to scale the GXO Way, evolving from local and regional excellence to one consistent set of global standards. Concretely, that means deploying a common labor management system across sites, moving our regions onto a single global operating dashboard so we manage the same metrics and KPIs around the world, and consolidating procurement scale that was previously managed regionally. We've identified a number of near-term opportunities to improve efficiency, including global procurement and labor management. We'll discuss our approach in greater detail at Investor Day.

This is how excellence becomes repeatable rather than site-specific, and it is a meaningful contributor to the margin expansion that we expect over time. Third, in technology, GXO IQ moved from platform launch to scale deployment this quarter, and we're on track to reach about 50 sites in 2026. We're packaging our proprietary AI into repeatable product waves, starting with forecasting, replenishment, and pick optimization that deploy across connected sites rather than being rebuilt one at a time. Alongside that, we will deploy 20,000 robots across our network this year. Our advantage isn't just having algorithms, it's deploying them inside live operations and turning that into a repeatable productivity engine. Across the commercial organization, enhancements to customer-facing processes, service models, and cross-functional coordination are helping create a more seamless end-to-end customer experience.

This quarter, we introduced a streamlined global approach to account management, evolving from a regional model to a globally integrated one, aligning GXO around the customer, not geography, with a trusted advisor mindset so our global customers experience one connected GXO across the regions. It is designed to be a true customer success model, and the results are starting to show. Technology, which is increasingly central to every aspect of our business, is a massive opportunity. We're ensuring we both optimize what we have today, make the right investments for the future, and connect innovation to execution through the GXO Way, standardizing where it makes sense to turn proven excellence into everyday performance. Today, our tech and operations teams are working in tandem to modernize service delivery, improve operational efficiency, and elevate the customer experience to create a more agile operating environment that balances innovation with operational excellence.

To bring it together, we've delivered a solid second quarter, our strongest commercial quarter in three years, with a pipeline that has continued to build and record incremental revenue more than $1 billion already secured for 2026. Our three priorities, accelerating organic growth, strengthening operational execution through the GXO Way, and translating our AI, automation, and tech leadership into measurable value creation are moving from strategy to execution, and we are already seeing them show up in our results. Five years into our journey as a public company, the momentum behind this strategy is real, and we are still in the early stages of what it can deliver. With that, I will hand the call to Mark.

Thank you, Patrick, and good morning, everyone. Having completed my first full quarter at GXO, my confidence in this business has only grown. A highly contractual model, a customer base of the world's leading brands, and commercial activity that gives us a clear runway into 2027. The opportunity ahead on margins and cash generation is just as clear, and that is where much of my focus will center for the remainder of the year and as we move into 2027. Turning to slide seven, GXO delivered second quarter revenue of $3.4 billion, up 4% year-over-year and 3.4% organically, with broad-based contributions across all of our regions. Second quarter revenue was impacted by the timing of new contract startups and exits. We delivered adjusted EBITDA of $219 million and adjusted EPS of $0.59.

Our adjusted EBITDA margin in the quarter was 6.4%, consistent with the second quarter of last year. We believe we have clear line of sight to expand margins, expecting margin improvement in the back half of the year as new business ramps and our cost and technology initiatives begin to take hold. Just as important, our margin improvement path is supported by investments we are making in systems and operating infrastructure, common dashboards, enhanced labor management tools, greater procurement visibility, and a stronger data foundation are giving us more consistent way to manage the business and scale efficiently. These capabilities are already improving execution across the network and will help translate growth into margin expansion over time. Moving to slide eight. In the quarter, we generated operating cash flow of $76 million and generated positive free cash flow of $12 million, a meaningful improvement year-over-year, reflecting tighter working capital discipline, and we remain on track against our full year free cash flow conversion target.