XPO Says GXO Spinoff Should Be Completed by Q3
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XPO Logistics has moved up the potential timeline to complete a spinoff of its logistics operations into a separate company, and also has provided updated financial guidance that forecasts strong growth for the planned independent company.
XPO in a June 9 filing with the Securities and Exchange Commission said it expects the new company — to be called GXO Logistics — will have an 8% to 12% increase in organic revenue growth in 2022 compared with comparable figures from 2021, along with a 14% to 20% increase in EBITDA.
Given the current state of progress on the spinoff, XPO said it now expects it can complete the deal in the third quarter of this year, up from earlier guidance of the second half of 2021.
XPO has filed its public #Form10 for @GXOLogistics, a big step ahead of the company's expected #spinoff in Q3. Read the release at https://t.co/mIL8zBLc1F, and check out our fully revamped website at https://t.co/FHf6h36V4b. — XPO Logistics, Inc. (@XPOLogistics) June 9, 2021
Meantime, the EBITDA estimate for XPO in Q2 2021 has been increased to at least $490 million. The company has increased its outlook for full-year 2021 adjusted EBITDA to $1.845 billion to $1.895 billion, compared with prior guidance of $1.825 billion to $1.875 billion.
XPO said the separation will create two independent public companies with different investment identities and service offerings in “vast addressable markets.” Initially, it said GXO will be the second largest contract logistics company in the world. XPO, meantime, will continue as a provider of transportation services, primarily less-than-truckload transportation and truck brokerage.
“The separation will create two pure-play powerhouses in the supply chain industry, XPO in transportation and GXO in logistics, each with enhanced prospects for growth,” XPO Chairman and CEO Brad Jacobs said in a statement.
“GXO will have accelerated momentum out of the gate as an independent company, as reflected in the strong 2022 guidance we issued today,” said Malcolm Wilson, CEO of XPO Logistics Europe and announced CEO of GXO. “Our growth is being driven by customer demand for outsourcing and for two areas of logistics where we hold leading positions — warehouse automation and e-commerce.”
Wilson
XPO said the GXO customer base will include over 30% of the Fortune 100 companies and 24% of the Fortune Global 100 including well-known consumer brand names such as Apple, Nike, Nestle, Zara, H&M, Boeing, Whirlpool, Pepsi and L’Oreal.
Long-term contracts are expected to make up a large part of GXO’s future business.
For 2020, XPO said 49% of its logistics business came from contracts with companies that were five or more years in duration.
The company said its business model is centered on customer retention and low customer concentration, and noted its current retention rate is 93%. The company said it reduces risk by not relying on just a few customers for a large chunk of its revenue. For 2020, XPO noted that its top five customers accounted for only 16% of its $6.2 billion in revenue, and its top customer represented only 4% of total revenue.
As e-commerce continues to take a larger share of the U.S. economy and economists say that trend will only continue, XPO said in 2020 50% of its revenue came from e-commerce, omnichannel retail and consumer technology.
GXO on June 8 also made two personnel announcements. Eduardo Pelleissone has been named president of GXO’s operations in the Americas and Asia Pacific, and Neil Shelton has been named chief strategy officer.
Pelleissone has more than 20 years of experience leading multinational operations in the food, logistics and transportation industries. He joined XPO in 2020 as chief transformation officer, after previously serving as executive vice president of global operations and chief operating officer for Kraft Heinz Co.
Shelton comes from the financial industry where he has worked for 25 years and he has been tasked with engaging with investment firms about GXO’s strategy and growth opportunities.
His 25-year career includes head of technology, media and telecom specialist sales at JP Morgan Chase in London, and earlier roles at Credit Suisse, Citigroup and Arthur Andersen.
XPO ranks No. 2 on the Transport Topics Top 50 list of the largest logistics companies in North America.
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