As contract logistics provider GXO approaches the five-year mark since spinning off from parent company XPO, it is planning to shift its focus from gobbling up smaller firms in a series of mergers and acquisitions toward more “organic growth” in lucrative sectors like aerospace & defense, life science & medical devices, and technology & data centers.
All three of those target markets can require a third party logistics provider (3PL) to offer specialized skills and equipment to ensure that high-value goods stay within strict levels of security, traceability, or temperature limits. But GXO says it already has those capabilities, thanks to previous acquisitions of logistics specialists such as Wincanton. Leveraging those specialties will allow GXO to shift from its current revenue source of 70% retail, e-commerce, and consumer package goods (CPG) to a larger portion of business to business (B2B) revenue, GXO CEO Patrick Kelleher said today in an interview.
The company discussed its new approach after releasing its second quarter earnings report on Tuesday. According to market analysts such as TD Cowen, those results met Wall Street expectations, thanks to numbers such as adjusted earnings per share of $0.59, adjusted EBITDA of $219 million, and organic growth of 3.4%. In TD Cowen’s view, investors are now looking to GXO to improve its performance further by accelerating its growth and bridging a “notable” profit margin gap with other 3PLs.
GXO says its plans to achieve that greater growth include a growing focus on artificial intelligence (AI) and robotics, including humanoids. Amid a persistent labor shortage for warehouse workers, such robotic devices can attract a different type of associate who enjoys working with new technology, Kelleher said. Already, the company has seen benefits such as a 50% increase in productivity from an AI agent for pick path optimization, he said. Additional gains come from features like the tablet computers mounted on many robots that help workers view visual pictures of correct products to pick, or guide them through workflow instructions.
One stumbling block for many industry 3PLs adopting such tools may be a new White House trade policy announced last week that would block U.S. companies from purchasing foreign-made robotics such a humanoids, quadrupeds, and rolling vehicles. Analysts warn that the new rules could block the AMRs and AGVs that have become popular in recent years for warehouse tasks like goods-to-person, sortation, and picking applications.
Kelleher allowed that the trade change raised important questions, saying “We’ll watch with great interest to see how the regulators sort that out.” But he insisted that GXO is well- positioned to continue its strategy in any case, since it already has in-house skills in systems integration and it sources its technology purchases from a variety of vendors, including both U.S. and overseas robot-makers.
“This quarter marks five years since GXO became an independent public company, and we delivered results that reflect the momentum building across our business, including our strongest new business wins in three years,” Kelleher said in published remarks. “Revenue grew to $3.4 billion, with all three regions growing organically, underscoring the resiliency and predictability of our business model. We signed approximately $410 million of new business, up 34% year over year, led by marquee wins with some of the world’s leading brands and deeper penetration of our strategic growth verticals — aerospace & defense, technology, industrial and life sciences.”
