GXO Hosts Investor Day, Outlines 2027 Financial Targets
GXO’s 2027 Financial Targets
- 8-12% organic revenue CAGR1,2 (2021 to 2027) to approximately
$17 billionof revenue;
- Approximately 17% Adjusted EBITDA1,3 CAGR to approximately
$1.6 billion, nearly tripling Adjusted EBITDA1 from 2021;
- More than 30% free cash flow conversion rate on Adjusted EBITDA1;
- Cumulative free cash flow1 generation of approximately
$2 billionbetween 2021 and 2027; and
- More than 30% operating return on invested capital1.
Estimated Full Year 2022 Results
The company’s results of operations for the year ended
- Total revenue of
$9.0 billion, compared to total revenue of $7.9 billion for the year ended December 31, 2021;
- Net income attributable to GXO of $189 million to $199 million, compared to net income attributable to GXO of
$153 millionand pro forma net income attributable to GXO of $162 millionfor the year ended December 31, 2021; and
- Adjusted EBITDA1 of $720 million to $730 million, compared to Adjusted EBITDA1 of $611 million and pro forma Adjusted EBITDA1 of $633 million for the year ended
December 31, 2021.
Preliminary 2023 Guidance
The company’s full-year 2023 financial outlook is as follows:
- Organic revenue1 growth of 6% to 8%; and
- Adjusted EBITDA1 of
$700 millionto $730 million.
GXO Investor Day presentation materials are available on GXO’s Investor Relations website at investors.gxo.com. A replay of the presentation will be posted following the live event at https://gxo.com/investor-day-2023.
Non-GAAP Financial Measures
As required by the rules of the
GXO's non-GAAP financial measures in this press release include: organic revenue CAGR, Adjusted EBITDA, pro forma Adjusted EBITDA, Adjusted EBITDA CAGR, free cash flow and operating return on invested capital (“ROIC”).
We believe that the above adjusted financial measures facilitate analysis of our ongoing business operations because they exclude items that may not be reflective of, or are unrelated to, GXO’s core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses. Other companies may calculate the non-GAAP financial measures differently, and therefore our measures may not be comparable to similarly titled measures used by other companies. GXO’s non-GAAP financial measures should only be used as supplemental measures of our operating performance.
We believe that Adjusted EBITDA and pro forma Adjusted EBITDA improve comparability from period to period by removing the impact of our capital structure (interest and financing expenses), asset base (depreciation and amortization), tax impacts and other adjustments as set out in the attached tables, which management has determined are not reflective of core operating activities and thereby assist investors with assessing trends in our underlying businesses.
Adjusted EBITDA and pro forma Adjusted EBITDA include adjustments for transaction and integration costs, as well as restructuring costs and other adjustments as set forth in the financial table below. Transaction and integration adjustments are generally incremental costs that result from an actual or planned acquisition, divestiture or spin-off and may include transaction costs, consulting fees, retention awards, internal salaries and wages (to the extent the individuals are assigned full-time to integration and transformation activities) and certain costs related to integrating and separating IT systems. Restructuring costs are primarily related to severance costs associated with business optimization initiatives. Reconciliations of the midpoint of the company’s estimate of net income attributable to GXO to its estimate of Adjusted EBITDA for the full year 2022, net income attributable to GXO to Adjusted EBITDA and pro forma net income attributable to GXO to pro forma Adjusted EBITDA for the full year 2021, are provided below.
Pro forma Adjusted EBITDA includes adjustments for allocated corporate expenses and public company standalone costs. Allocated corporate expenses are those expenses that were allocated to the combined financial statements on a carve-out basis in accordance with
We believe that free cash flow is an important measure of our ability to repay maturing debt or fund other uses of capital that we believe will enhance stockholder value. We calculate free cash flow as net cash provided by operating activities less payment for purchases of property and equipment plus proceeds from sale of property and equipment. We believe ROIC provides investors with an important perspective on how effectively GXO deploys capital and use this metric internally as a high-level target to assess overall performance throughout the business cycle. We calculate ROIC as our trailing twelve-month Adjusted EBITA, net of income taxes paid divided by invested capital. We believe that organic revenue and organic revenue growth are important measures because they exclude the impact of foreign currency exchange rate fluctuations, revenue from acquired businesses and revenue from deconsolidated operations.
Management uses these non-GAAP financial measures in making financial, operating and planning decisions and evaluating GXO’s ongoing performance.
With respect to our financial preliminary 2023 guidance and 2027 financial targets, a reconciliation of these non-GAAP measures to the corresponding GAAP measures is not available without unreasonable effort due to the variability and complexity of the reconciling items described above that we exclude from these non-GAAP target measures. The variability of these items may have a significant impact on our future GAAP financial results and, as a result, we are unable to prepare the forward-looking statements of income and cash flows prepared in accordance with GAAP, that would be required to produce such a reconciliation.
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements, including our estimated full year 2022 results, preliminary 2023 guidance, and 2027 financial targets. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “trajectory” or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by the company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors the company believes are appropriate in the circumstances.
These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include, but are not limited to, the risks discussed in our filings with the
All forward-looking statements set forth in this report are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to or effects on us or our business or operations. Forward-looking statements set forth in this report speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law.
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Reconciliation of Net Income to Adjusted EBITDA
|(In millions)||Midpoint(1)||As Reported||Pro forma(2)|
|Net income attributable to GXO||$||194||$||153||$||162|
|Net income attributable to noncontrolling interest||3||8||8|
|Interest expense, net||29||21||25|
|Income tax expense (benefit)||64||(8||)||(5||)|
|Depreciation and amortization expense(3)||329||335||335|
|Transaction and integration costs||61||99||99|
|Restructuring costs and other||32||4||4|
|Unrealized (gain) loss on foreign currency options and other||13||(1||)||(1||)|
|Allocated corporate expense(5)||29|
|Public company standalone cost(6)||(23||)|
|Pro forma Adjusted EBITDA(2)(4)||$||633|
(1) Reflects the midpoint of the preliminary estimates for the year ended
(2) Pro forma as prepared under combined financial statements for all periods before
(3) Includes $68 million, $61 million and $61 million of intangible assets amortization, respectively.
(4) See the “Non-GAAP Financial Measures” section above.
(5) Excludes the impact of adjusted items and allocated interest expense, income tax, depreciation and amortization from XPO Corporate.
(6) Estimated costs of operating GXO as a standalone public company.
1 For definitions of non-GAAP measures see the “Non-GAAP Financial Measures” section in this press release.
2 Compound Annual Growth Rate (“CAGR”).
3 Earnings before interest, taxes, depreciation and amortization (“EBITDA”).
Source: GXO Logistics