Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related notes included elsewhere in this Annual Report. This Form 10-K contains certain forward-looking statements that are intended to be covered by the safe harbors created by The Private Securities Litigation Reform Act of 1995. Please see “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these statements.
Also, the following discussion and analysis of our financial condition and results of operations generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 financial condition and year-to-year comparisons between 2023 and 2022 are not included in this Annual Report and can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023.
Business Overview
GXO Logistics, Inc., together with its subsidiaries (“GXO,” the “Company,” “our” or “we”), is the largest pure-play contract logistics provider in the world and a foremost innovator in the industry. We provide our customers with high-value-added warehousing and distribution, order fulfillment, e-commerce, reverse logistics and other supply chain services differentiated by our ability to deliver technology-enabled, customized solutions at scale. Our customers rely on us to move their goods with high efficiency through their supply chains — from the moment goods arrive at our warehouses through fulfillment and distribution, and the management of returned products. Our customer base includes many blue-chip leaders in sectors that demonstrate high growth and/or durable demand, with significant growth potential through customer outsourcing of logistics services.
We strive to provide all customers with consistent quality service and cutting-edge automation. We also collaborate with our largest customers on planning and forecasting and assist with network optimization, working with these customers to design or redesign their supply chains to meet specific goals, such as environmental, social and governance. Our multidisciplinary, consultative approach has led to many of our key customer relationships extending for years and expanding in scope.
The most dramatic growth in demand in recent years has been in e-commerce and related sectors, including omnichannel retail and other direct-to-consumer channels. We expect to attract new customers and expand the services we provide to existing customers through new projects, thus earning more of their logistics spending. We use technology to manage advanced automation, labor productivity, sustainability, safety and the complex flow of goods within sophisticated warehouse environments.
Our business model is asset-light and historically resilient in cycles, with high returns, strong free cash flow and visibility into revenue and earnings. The vast majority of our contracts with customers are long-term in nature, and our warehouse lease arrangements generally align with contract length. The Company has both fixed-price contracts (closed book or hybrid contracts) and cost-plus contracts (open book contracts). Most of our customer contracts contain both fixed and variable components. The fixed component is typically designed to cover warehouse, technology and equipment costs, while the variable component is determined based on expected volumes and associated labor costs. Under fixed-price contracts, the Company agrees to perform the specified work for a pre-determined price. To the extent the Company’s actual costs vary from the estimates upon which the price was negotiated, the Company will generate more or less profit. Cost-plus contracts provide for the payment of allowable costs incurred during the performance of the contract plus a specified margin.
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On April 29, 2024, the Company completed the acquisition of Wincanton plc (“Wincanton”), a U.K. logistics provider specializing in both warehousing and transportation solutions (“the Wincanton Acquisition”). On October 23, 2023, the Company completed the acquisition of PFSweb, Inc. (“PFS”), an e-commerce order fulfillment company based in Irving, Texas (the “PFS Acquisition”). Due to the acquisitions of Wincanton in 2024 and PFS in 2023, comparisons in our results of operations between 2024 and 2023 are less meaningful. For additional information regarding our acquisitions, see Note 4. “Acquisitions” to the Consolidated Financial Statements.
Results of Operations
Year Ended December 31,
(In millions, except percentages) 2024 2023 $ Change % Change
Selling, general and administrative expense 1,061 998 63 6 %
Depreciation and amortization expense 415 361 54 15 %
Transaction and integration costs 76 34 42 n/m
Restructuring costs and other 27 32 (5) (16) %
Litigation expense 59 — 59 n/m
Other income, net 31 1 30 n/m
Income tax expense (8) (33) 25 (76) %
n/m - not meaningful
Revenue for 2024 increased by 20%, or $1.9 billion, to $11.7 billion compared with $9.8 billion for 2023. The increase primarily reflects $1.6 billion from the acquisitions of Wincanton and PFS. Also, revenue increased in our Continental Europe and U.K. and Ireland businesses, mainly driven by higher pricing. Foreign currency movements increased revenue by $109 million in 2024.
Direct operating expenses comprise both fixed and variable expenses and consist of operating costs related to our warehouse operations, including personnel costs, rent expenses, utility costs, equipment maintenance and repair costs, transportation costs, costs of materials and supplies and information technology expenses. Direct operating expense for 2024 increased by 23%, or $1.8 billion, to $9.9 billion compared with $8.0 billion for 2023. The increase primarily reflects $1.4 billion from the acquisitions of Wincanton and PFS, and higher personnel and temporary labor expenses in the U.K. and Ireland business from growth in the business. Direct operating expense also increased due to foreign currency movement in our U.K. and Ireland and Continental Europe businesses. As a percentage of revenue, direct operating expense was 84.1% and 82.2% in 2024 and 2023, respectively. The increase in Direct operating expense as a percentage of revenue was primarily related to the Wincanton Acquisition.
Selling, general and administrative expense (“SG&A”) primarily consists of salary and benefit costs for executive and certain administration functions, professional fees, bad debt expense and legal costs. SG&A for 2024 increased by 6%, or $63 million, to $1.1 billion, compared with $998 million in 2023. The increase was primarily driven by the acquisitions of Wincanton and PFS.
Depreciation and amortization expense for 2024 increased by $54 million to $415 million compared with $361 million for 2023. Depreciation and amortization expense increased primarily due to the acquisitions of Wincanton and PFS. Depreciation and amortization expense included amortization of intangible assets acquired of $108 million and $71 million in 2024 and 2023, respectively.
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Transaction and integration costs were $76 million in 2024, compared with $34 million for 2023. Transaction and integration costs in 2024 primarily included $61 million related to the Wincanton Acquisition and $8 million related to the integration of PFS. Transaction and integration costs in 2023 primarily included $20 million related to the integration of Clipper Logistics plc and $12 million related to the PFS Acquisition.
We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure. These costs are primarily related to severance, including projects to optimize human resources, finance and information technology activities, and are not associated with customer attrition. Restructuring costs and other were $27 million for 2024, compared with $32 million for 2023. Restructuring costs and other in 2024 related to a restructuring plan designed to centralize certain finance, human resource and IT functions. Restructuring costs and other for 2023 included $16 million related to severance, $11 million for impairment charges, and $5 million associated with the exit of a non-core businesses in Asia.
Litigation expense in 2024 related to a settlement agreement dated June 14, 2024. We recognized $59 million for the settlement, associated legal fees, and other related expenses. For additional information regarding our legal matters see Note 18. “Commitments and Contingencies” to the Consolidated Financial Statements.
Other income, net increased due to higher pension income and foreign currency movements. In 2024, pension income primarily increased due to a defined benefit plan assumed in connection with the Wincanton Acquisition.
In 2024, the Company recorded a gain of $8 million in connection with a real estate transaction.
Other income, net was as follows:
Year Ended December 31,
(In millions, except percentages) 2024 2023 $ Change % Change
Net periodic pension income $ 21 $ 8 $ 13 n/m
Foreign currency gain (loss):
Realized foreign currency option and forward contracts loss (5) (13) 8 (62) %
Unrealized foreign currency option and forward contracts gain 11 4 7 n/m
Foreign currency transaction and remeasurement loss (3) — (3) n/m
Total foreign currency gain (loss) 3 (9) 12 n/m
Other income, net $ 31 $ 1 $ 30 n/m
n/m - not meaningful
Interest expense, net increased due to the debt incurred for the Wincanton Acquisition. Interest expense, net was as follows:
Year Ended December 31,
(In millions, except percentages) 2024 2023 $ Change % Change
Cross-currency swaps (39) (33) (6) 18 %
Interest income (6) (10) 4 (40) %
Income before income taxes for 2024 decreased by $120 million, to $146 million, compared with $266 million for 2023. The decrease was mainly driven by higher transaction and integration costs, litigation expense, and interest expense, partially offset by higher other income, net. Income before income taxes for our domestic operations was a pre-tax loss of $88 million for 2024, compared with $97 million of pre-tax income in 2023. The decrease from income to a loss in 2024 was primarily driven by higher transaction and integration costs, litigation expense and
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interest expense for debt incurred for the Wincanton Acquisition. Income before income taxes for our foreign operations was $234 million for 2024 compared with $169 million in 2023. The increase in 2024 was primarily driven by growth in the business and other income, net.
Income tax expense was $8 million in 2024, compared with $33 million in 2023. Our effective tax rate was 5.6% in 2024 and 12.4% in 2023. The decrease in our effective income tax rate was driven by income tax benefits from the release of valuation allowances in 2024.
Liquidity and Capital Resources
Overview
Our ability to fund our operations and anticipated capital needs is reliant upon the generation of cash from operations, supplemented as necessary by periodic utilization of our revolving credit facility and factoring programs. Our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures, repayment of borrowings and strategic business development transactions. The timing and magnitude of our new contract start-ups can vary and may positively or negatively impact our cash flows. We continually evaluate our liquidity requirements and capital structure in light of our operating needs, growth initiatives and capital resources.
As of December 31, 2024, we held cash and cash equivalents of $413 million, restricted cash of $72 million recorded in Other long-term assets, and we had $999 million of borrowing capacity available, net of letters of credit under our revolving credit facilities. During 2024, we deposited €68 million ($70 million as of December 31, 2024) of restricted cash in relation to a contingency, and in January 2025, the Company deposited an additional amount of €16 million ($17 million).
We believe that our cash and cash equivalents on hand, our cash flows from operations, the borrowing capacity under our revolving credit facilities, and the use of our factoring programs will provide sufficient liquidity to operate our business and fund our current and assumed obligations for at least the next 12 months.
For additional information regarding our cash requirements from contractual obligations, indebtedness and lease obligations, and legal matters, see Note 18. “Commitments and Contingencies,” Note 10. “Debt and Financing Arrangements” and Note 9. “Leases” to the Consolidated Financial Statements.
Capital Expenditures
Our future capital spending includes fulfillment costs and investments in technology and automation to improve the speed and accuracy of order fulfillment and the resiliency of our supply chains. The level and the timing of the Company’s capital expenditures within these categories can vary as a result of a variety of factors outside our control, such as the timing of new contracts, availability of labor and materials and foreign currency fluctuations. We believe that we have significant discretion over the amount and timing of our capital expenditures as we are not subject to any agreement that would require significant capital expenditures on a designated schedule or upon the occurrence of designated events.
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Financial Condition
The following table summarizes our asset and liability balances as of December 31, 2024 and 2023:
December 31,
(In millions, except percentages) 2024 2023 $ Change % Change
Total assets and liabilities increased from December 31, 2023 to December 31, 2024 primarily due to the Wincanton Acquisition. Total liabilities also increased due to issuance of $1.1 billion of unsecured notes to fund the Wincanton Acquisition.
Cash Flow Activity
Our cash flows from operating, investing and financing activities, as reflected on our Consolidated Statements of Cash Flows, were summarized as follows:
Year Ended December 31,
(In millions, except percentages) 2024 2023 $ Change % Change
Net cash provided by operating activities $ 549 $ 558 $ (9) (2) %
Net cash used in investing activities (1,157) (410) (747) n/m
Net cash provided by (used in) financing activities 636 (186) 822 n/m
Effect of exchange rates on cash and cash equivalents (13) 13 (26) n/m
n/m - not meaningful
Operating Activities
Cash flows provided by operating activities for 2024 decreased by $9 million compared to 2023. This decline was driven by decreased net income after adjustments for non-cash items, offset by benefits from working capital activity compared to the prior year.
Investing Activities
Investing activities used $1.2 billion of cash in 2024 compared with $410 million in 2023. During 2024, we used $863 million, net of cash received, to fund the Wincanton Acquisition, used $359 million of cash to purchase property and equipment, partially offset by $61 million of proceeds from the sales of property and equipment and $4 million in net proceeds from the settlement of cross-currency swap agreements, excluding accrued interest. During 2023, we used $274 million of cash for capital expenditures, used $149 million in connection with the PFS Acquisition and $3 million in settlement of cross-currency swap agreements, excluding accrued interest, partially offset by $18 million of proceeds from the sales of property and equipment.
Financing Activities
Financing activities generated $636 million of cash in 2024 and used $186 million in 2023. The primary source of cash from financing activities in 2024 was the issuance of long-term debt of $1.1 billion, partially offset by cash used to repay $408 million of debt, $45 million to repay finance lease obligations and $8 million in payments for employee taxes on net settlement of equity awards. The primary use of cash from financing activities in 2023 was
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$140 million in repayment of debt, $29 million to repay finance lease obligations and $12 million in payments for employee taxes on net settlement of equity awards.
Off-Balance Sheet Arrangements
We do not engage in any off-balance sheet financial arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Contractual Obligations
As of December 31, 2024, our outstanding obligations under operating and finance leases were $2.5 billion and $276 million, respectively. For additional information see Note 9. “Leases” to the Consolidated Financial Statements.
As of December 31, 2024, we had a total of $1.9 billion of Unsecured Notes outstanding, consisting of $1.1 billion Unsecured Notes with interest payable semiannually on May 6 and November 6 of each year and $800 million Unsecured Notes with interest payable semiannually on January 15 and July 15 of each year. We also have $450 million of variable-rate term loans outstanding with interest payable in arrears at our option monthly, quarterly, or semiannually. For additional information see Note 10. “Debt and Financing Arrangements” to the Consolidated Financial Statements.
In addition, we have obligations for agreements to purchase goods or services entered into in the ordinary course of business that are enforceable and legally binding.
Critical Accounting Policies and Estimates
We prepare our Consolidated Financial Statements in accordance with GAAP. We make assumptions, estimates and judgments that affect our reported amounts of assets, liabilities, revenues, expenses, gains and losses. Material changes in these assumptions, estimates and/or judgments have the potential to materially alter our results of operations. We have identified the following accounting policies to be the most critical as they are important to our financial condition and results of operations and require significant judgment and estimates on the part of management in their application.
Business Combinations
We record tangible and intangible assets acquired and liabilities assumed in business combinations under the purchase method of accounting. We allocate the fair value of purchase consideration to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is allocated to goodwill.
Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date with respect to tangible and intangible assets acquired and liabilities assumed. We use our best estimates and assumptions to accurately assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets. Significant assumptions utilized in the allocation of the purchase price related to intangible assets include future expected cash flows from acquired intangibles and discount rates.
Our estimates of fair value are based upon reasonable assumptions but are inherently uncertain and unpredictable, and as a result, actual results may differ from these estimates. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. For additional information see Note 4. “Acquisitions” to the Consolidated Financial Statements.
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Evaluation of Goodwill
We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination. Goodwill is tested at the reporting unit level, which is an operating segment or one level below, on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We have three reporting units: i) Americas and Asia-Pacific, ii) United Kingdom and Ireland and iii) Continental Europe.
For each reporting unit, we first assess qualitative factors that are specific to the reporting unit as well as industry and macroeconomic factors to determine whether it is necessary to perform a quantitative goodwill impairment test. The qualitative factors could include a significant change in the business climate, legal factors, operating performance indicators, competition or the sale or disposition of a significant portion of a reporting unit. If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed.
A quantitative goodwill impairment test, when performed, includes estimating the fair value of a reporting unit using the income and/or market approach. The income approach of determining fair value is based on the present value of estimated future cash flows, which requires us to make various assumptions, including assumptions about the timing and amount of future cash flows, growth rates and discount rates. The discount rates reflect management’s judgment and are based on a risk-adjusted weighted-average cost of capital utilizing industry market data of businesses similar to the reporting units. Inherent in our preparation of cash flow projections are assumptions and estimates derived from a review of our operating results, business plans, expected growth rates, cost of capital and tax rates. Our forecasts also reflect expectations concerning future economic conditions, interest rates and other market data. The market approach of determining fair value is based on comparable market multiples for companies engaged in similar businesses, as well as recent transactions within our industry. We believe using these valuation techniques yields the most appropriate evidence of the reporting unit’s fair value.
Many of the factors used in assessing fair value are outside the control of management, and these assumptions and estimates may change in future periods. Changes in assumptions or estimates could materially affect the estimate of the fair value of a reporting unit and therefore could affect the likelihood and amount of any potential impairment.
Employee Benefit Plans
We sponsor various retirement plans, with the most significant plans held in the U.K. (the “U.K. Retirement Plans”). Assumptions used in the accounting for these employee benefit plans include the discount rate and expected return on plan assets. Assumptions are determined based on company data and appropriate market indicators and are evaluated each year at December 31. A change in any of these assumptions would have an effect on the net periodic pension cost reported in the Consolidated Financial Statements.
The discount rate is determined based on the yield on a portfolio of high-quality bonds, constructed to provide cash flows necessary to meet our pension plans’ expected future benefit payments, as determined for the accumulated benefit obligation. A 50-basis-point decrease in the discount rate of the U.K. Retirement Plans would result in an estimated increase in the accumulated benefit obligation of approximately $91 million. The expected return on plan assets assumption is derived using the current and expected asset allocation of the pension plan assets and considering historical as well as expected returns on various classes of plan assets. An increase or decrease of 50 basis points in the expected return on plan assets for the U.K. Retirement Plans would have decreased or increased our net periodic pension cost by approximately $9 million in 2025. For additional information see Note 15. “Employee Benefit Plans” to the Consolidated Financial Statements.
New Accounting Standards
Information related to new accounting standards is included in Note 2. “Basis of Presentation and Significant Accounting Policies” to the Consolidated Financial Statements.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Our market risk disclosures involve forward-looking statements. Actual results could differ materially from those projected in such forward-looking statements. We are exposed to market risk related to changes in interest rates and foreign currency exchange rates.
Interest Rate Risk
Our long-term debt portfolio, excluding finance leases and other debt, consists of $1.9 billion fixed-rate notes and $450 million variable-rate term loans based on the Secured Overnight Financing Rate (“SOFR”). For our variable-rate debt, we entered into interest rate swap agreements to convert $125 million of variable-rate U.S. dollar (“USD”) denominated debt into USD-denominated fixed-rate debt. Additionally, we entered into cross-currency swap agreements to convert $250 million of variable-rate debt from SOFR to the Euro Interbank Offered Rate (“Euribor”). As of December 31, 2024, a hypothetical 1% increase in SOFR and Euribor would have increased our interest expense by approximately $3 million.
Foreign Currency Exchange Rate Risk
A significant proportion of our net assets and income are in non-USD currencies, primarily the British pound sterling (“GBP”) and the Euro (“EUR”). We are exposed to currency risk from potential changes in functional currency values of our foreign currency denominated assets, liabilities and cash flows. Consequently, the depreciation of the EUR or the GBP relative to the USD could adversely impact on our financial results.
We entered into cross-currency swap and forward agreements to manage our foreign currency exchange risk by effectively converting a portion of the fixed-rate USD-denominated debt, including the interest payments, to fixed-rate EUR-denominated debt and a portion of the floating-rate USD-denominated loans, including the interest payments, to floating-rate EUR-denominated debt. We use foreign currency options and forward contracts to mitigate the risk of a reduction in the value of earnings from our operations that use the EUR or GBP as their functional currency.
As of December 31, 2024, a uniform 10% strengthening in the value of the USD relative to the EUR and GBP would have decreased our net assets by $70 million and $92 million, respectively, net of foreign currency hedging. These theoretical calculations assume that an instantaneous, parallel shift in exchange GBP and EUR rates occurs.
See Note 11. “Fair Value Measurements and Financial Instruments” to the Consolidated Financial Statements for additional information.
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Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
Page
Report of Independent Registered Public Accounting Firm 29
Consolidated Balance Sheets as of December 31, 2024 and 2023 34
Notes to Consolidated Financial Statements 38
Note 1 - Organization 38
Note 2 - Basis of Presentation and Significant Accounting Policies 38
Note 3 - Revenue Recognition 44
Note 4 - Acquisitions 45
Note 5 - Segment Information 47
Note 6 - Goodwill 49
Note 7 - Intangible Assets 49
Note 8 - Property and Equipment 50
Note 9 - Leases 50
Note 10 - Debt and Financing Arrangements 52
Note 11 - Fair Value Measurements and Financial Instruments 54
Note 12 - Accrued Expenses 57
Note 13 - Stockholders’ Equity 58
Note 14 - Stock-Based Compensation 58
Note 15 - Employee Benefit Plans 60
Note 16 - Restructuring Charges and Other 63
Note 17 - Income Taxes 63
Note 18 - Commitments and Contingencies 67
Note 19 - Subsequent Events 68
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors
GXO Logistics, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of GXO Logistics, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
The Company acquired Wincanton plc. during 2024, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, Wincanton plc.’s internal control over financial reporting associated with approximately 9.9% of total assets, excluding associated goodwill and intangible assets and approximately 11.8% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2024. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Wincanton plc.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
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testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Acquisition-date fair value of a customer relationship intangible asset
As discussed in Note 4 to the consolidated financial statements, on April 29, 2024, the Company acquired Wincanton plc in a business combination for consideration of approximately $958 million. As a result of the transaction, the Company acquired a customer relationship intangible asset associated with the generation of future income from the acquiree’s existing customers. The acquisition-date fair value of intangible assets recorded by the Company was $539 million, which included a customer relationship intangible asset.
We identified the evaluation of the acquisition-date fair value of the customer relationship intangible asset as a critical audit matter. Subjective auditor judgment was required to evaluate certain assumptions used to estimate the acquisition-date fair value of the customer relationship intangible asset. Specifically, there was limited observable market information for the forecasted revenue and customer attrition assumptions, and evaluation of the discount rate assumption required specialized skills and knowledge. Changes in these assumptions could have had a significant impact on the acquisition-date fair value of the customer relationship intangible asset.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process to estimate the acquisition-date fair value of the customer relationship intangible asset. This included controls related to the determination of the forecasted revenue, customer attrition, and discount rate assumptions used in the Company’s model. We evaluated the Company’s forecasted revenue of the acquired company by comparing it to past performance of the acquired company, and actual and forecasted revenue trends of the acquiree’s peers. We evaluated the Company’s customer attrition assumption by comparing it to historical attrition
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experienced by the acquired company. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company’s discount rate used by comparing it against a discount rate that was developed using publicly available market data for comparable entities.
Sufficiency of audit evidence over revenue from contracts with customers
As discussed in Notes 2 and 3 to the consolidated financial statements, revenue is recognized over the period in which services are provided under the terms of the Company’s contractual relationship with its customers. For the year ended December 31, 2024, the Company reported $11.7 billion of revenue.
We identified the evaluation of the sufficiency of audit evidence over revenue from contracts with customers (revenue) as a critical audit matter. Subjective auditor judgment and IT professionals with specialized skills and knowledge were required to evaluate the sufficiency of audit evidence obtained over revenue due to the number and dispersion of warehouse management and other IT systems used in the processing and recording of revenue.
The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over the processing and recording of revenue. We evaluated the design and tested the operating effectiveness of certain internal controls related to the processing and recording of revenue, including manual controls related to the examination of revenue contracts and detection of revenues recorded outside of expectations. We involved IT professionals with specialized skills and knowledge to test certain manual and automated controls, including general IT controls, over multiple relevant IT systems and information used in internal control. We compared certain revenue activity recorded during the year to cash received, adjusted for reconciling items. We evaluated the relevance and reliability of certain reconciling items to underlying documentation, including the changes in accounts receivable and deferred revenue. We examined a selection of revenue contracts and transactions to assess that revenue was recorded in accordance with the Company’s accounting policy. Additionally, for a sample of accrued revenue at year-end, we confirmed with the Company’s customers the amount of revenue billed subsequent to year-end and compared the result to the Company’s accounting records. We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence.
/s/ KPMG LLP
We have served as the Company’s auditor since 2021.
New York, New York
February 18, 2025
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GXO Logistics, Inc.
Consolidated Statements of Operations
Year Ended December 31,
Selling, general and administrative expense 1,061 998 886
Depreciation and amortization expense 415 361 329
Transaction and integration costs 76 34 61
Restructuring costs and other 27 32 32
Litigation expense 59 — —
Interest expense, net (103) (53) (29)
Income tax expense (8) (33) (64)
Net income attributable to Noncontrolling Interests (“NCI”) (4) (4) (3)
Net income attributable to GXO $ 134 $ 229 $ 197
Earnings per share
Weighted-average common shares outstanding
See accompanying Notes to the Consolidated Financial Statements.
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GXO Logistics, Inc.
Consolidated Statements of Comprehensive Income
Year Ended December 31,
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments (34) 19 (98)
Cash flow hedges (1) (2) 7
Pension plans (42) (1) (36)
Other comprehensive income (loss), net of tax (77) 16 (127)
Comprehensive income, net of tax 61 249 73
Less: Comprehensive income attributable to NCI 1 5 2
Comprehensive income attributable to GXO $ 60 $ 244 $ 71
See accompanying Notes to the Consolidated Financial Statements.
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GXO Logistics, Inc.
Consolidated Balance Sheets
December 31,
(Dollars in millions, shares in thousands, except per share amounts) 2024 2023
ASSETS
Current assets
Cash and cash equivalents $ 413 $ 468
Accounts receivable, net of allowance of $15 and $11 1,799 1,753
Long-term assets
Intangible assets, net of accumulated amortization of $618 and $528 986 567
LIABILITIES AND EQUITY
Current liabilities
Current operating lease liabilities 647 597
Other current liabilities 385 327
Long-term liabilities
Long-term operating lease liabilities 1,898 1,842
Other long-term liabilities 623 473
Commitments and Contingencies (Note 18)
Stockholders’ Equity
Additional Paid-In Capital (“APIC”) 2,629 2,598
Accumulated Other Comprehensive Income (Loss) (“AOCIL”) (313) (239)
Total stockholders’ equity before NCI 3,003 2,912
See accompanying Notes to the Consolidated Financial Statements.
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GXO Logistics, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31,
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization expense 415 361 329
Stock-based compensation expense 39 35 33
Deferred tax benefit (38) (41) (7)
Changes in operating assets and liabilities
Accounts payable 23 (3) 45
Accrued expenses and other liabilities (93) (61) 6
Net cash provided by operating activities 549 558 542
Cash flows from investing activities:
Proceeds from sale of property and equipment 61 18 40
Acquisition of business, net of cash acquired (863) (149) (876)
Cross-currency swap agreements settlement 4 (3) 21
Other — (2) 8
Net cash used in investing activities (1,157) (410) (1,149)
Cash flows from financing activities:
Repayments of finance lease obligations (45) (29) (33)
Taxes paid related to net share settlement of equity awards (8) (12) (16)
Net cash provided by (used in) financing activities 636 (186) 787
Effect of exchange rates on cash and cash equivalents (13) 13 (18)
Cash, restricted cash and cash equivalents, beginning of year 470 495 333
Cash, restricted cash and cash equivalents, end of year $ 485 $ 470 $ 495
Reconciliation of cash, restricted cash and cash equivalents
Restricted cash (included in Other long-term assets) 72 2 —
Total cash, restricted cash and cash equivalents $ 485 $ 470 $ 495
See accompanying Notes to the Consolidated Financial Statements.
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GXO Logistics, Inc.
Consolidated Statements of Cash Flows
Year Ended December 31,
Supplemental cash flow information:
Cash paid for interest, net $ 97 $ 57 $ 34
Cash paid for income taxes, net 43 84 111
Noncash investing and financing activities:
Common stock issued for acquisition $ — $ — $ 204
See accompanying Notes to the Consolidated Financial Statements.
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GXO Logistics, Inc.
Consolidated Statements of Changes in Equity
Common Stock APIC RetainedEarnings AOCIL EquityBefore NCI NCI TotalEquity
(Shares in thousands, dollars in millions) Shares Amount
Other comprehensive loss — — — — (126) (126) (1) (127)
Stock-based compensation — — 33 — — 33 — 33
Vesting of stock compensation awards 557 — — — — — — —
Other — — — — 2 2 (8) (6)
Other comprehensive income — — — — 15 15 1 16
Stock-based compensation — — 35 — — 35 — 35
Vesting of stock compensation awards 555 — — — — — — —
Other — — — — — — (4) (4)
Other comprehensive loss — — — — (74) (74) (3) (77)
Stock-based compensation — — 39 — — 39 — 39
Vesting of stock compensation awards 607 — — — — — — —
Other — — — — — — (3) (3)
See accompanying Notes to the Consolidated Financial Statements.
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GXO Logistics, Inc.
Notes to Consolidated Financial Statements
1. Organization
Nature of Operations
GXO Logistics, Inc., together with its subsidiaries (“GXO” or the “Company”), is the largest pure-play contract logistics provider in the world. The Company provides its customers with high-value-added warehousing and distribution, order fulfillment, e-commerce, reverse logistics and other supply chain services differentiated by its ability to deliver technology-enabled, customized solutions at scale. The Company serves a broad range of customers across various industries, such as e-commerce, omnichannel retail, technology and consumer electronics, food and beverage, industrial and manufacturing, and consumer packaged goods, among others. The Company presents its operations in the Consolidated Financial Statements as one reportable segment.
The Company became a standalone publicly traded company on August 2, 2021, when XPO, Inc. (“XPO”) spun off the Company to GXO’s stockholders and GXO’s common stock, par value of $0.01 per share, began trading independently on the New York Stock Exchange under the ticker symbol “GXO”. GXO was incorporated as a Delaware corporation in February 2021.
2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The Company’s Consolidated Financial Statements include the accounts of GXO Logistics, Inc. and its majority-owned subsidiaries and variable interest entities where the Company is the primary beneficiary. The Company has eliminated intercompany accounts and transactions.Certain amounts reported for prior years have been reclassified to conform to the current year’s presentation.
Use of Estimates
The preparation of Consolidated Financial Statements in conformity with GAAP requires the use of estimates, judgments and assumptions that affect the reported amounts in the Consolidated Financial Statements and accompanying notes. The Company bases its estimates and judgments on historical information and on various other assumptions that it believes are reasonable under the circumstances. GAAP requires the Company to make estimates and judgments in several areas, including, but not limited to, those related to revenue recognition, income taxes, loss contingencies, defined benefit plans, valuation of long-lived assets including goodwill and intangible assets and their associated estimated useful lives, collectability of accounts receivable and the fair value of financial instruments. Actual results may vary from those estimates.
Significant Accounting Policies
Cash, Restricted Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less on the date of purchase to be cash equivalents. Restricted cash primarily consists of cash deposited in relation to a contingency, and cash collateralizing operating obligations. Restricted cash is recorded in Other long-term assets on the
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Consolidated Balance Sheets. See Note 18. “Commitments and Contingencies” for additional information regarding the contingency.
Accounts Receivable and Allowance for Credit Losses
Accounts receivable represents the Company’s unconditional right to receive consideration from its customers. The Company records accounts receivable at the contractual amount and records an allowance for doubtful accounts for the amount it estimates it may not collect. In determining the allowance for doubtful accounts, the Company considers historical collection experience, the age of the accounts receivable balances, the credit quality and risk of its customers, any specific customer collection issues, current economic conditions and other factors that may impact its customers’ ability to pay. The Company writes off accounts receivable balances once the receivables are no longer deemed collectible.
The roll forward of the allowance for doubtful accounts was as follows:
Year Ended December 31,
Beginning balance $ 11 $ 12 $ 13
Provisions charged to expense 16 10 5
Write-offs, less recoveries, and foreign exchange translation (12) (11) (6)
Property and Equipment
Property and equipment, which includes assets recorded under finance leases, are stated at cost less accumulated depreciation or, in the case of property and equipment acquired in a business combination, at fair value at the date of acquisition. Maintenance and repair expenditures are charged to expenses as incurred.
For internally developed computer software, all costs incurred during the planning and evaluation stages are expensed as incurred. Software development costs are capitalized once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended.
Depreciation is computed using the straight-line method over the estimated useful lives of the assets or the remaining lease term, whichever is shorter. Land and assets held within construction in progress are not depreciated.
The estimated useful lives of property and equipment are described below:
Estimated Useful Life
Buildings 40 years
Leasehold improvements Shorter of useful life or term of lease
Warehouse equipment, fleet and other 3 to 15 years
Technology and automated systems 3 to 15 years
Computer equipment 1 to 5 years
Internal-use software 1 to 5 years
Lease Obligations
The Company has operating leases primarily for real estate, warehouse equipment, material handling equipment, trucks, trailers and containers and finance leases for equipment. The Company determines if an arrangement is a lease at inception. For leases with terms greater than 12 months, the Company recognizes lease assets and liabilities at the lease commencement date based on the present value of the lease payments over the lease term.
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For most of the Company’s leases, the implicit rate cannot be readily determined and, as a result, the Company uses the incremental borrowing rates at the commencement date to determine the present value of future lease payments. For leases that include fixed rental payments for both the use of the asset (“lease costs”) as well as for other occupancy or service costs relating to the asset (“non-lease costs”), the Company generally includes both the lease costs and non-lease costs as a single lease component in the measurement of the lease asset and liability. Certain lease agreements include rental payments based on changes in the consumer price index (“CPI”). Lease liabilities are not remeasured as a result of changes in the CPI; instead, changes in the CPI are treated as variable lease payments and are excluded from the measurement of the right-of-use asset and lease liability. These payments are recognized in the period in which the related obligation is incurred.
Lease agreements may contain rent escalation clauses, renewal or termination options, rent holidays or certain landlord incentives, including tenant improvement allowances. Lease expense is recognized on a straight-line basis over the non-cancelable lease term and renewal periods that are considered reasonably certain. Amounts received from a landlord are included as a reduction to the lease asset and are included within operating activities on the Consolidated Statement of Cash Flows.
Goodwill and Intangible Assets
The Company records goodwill as the excess of the consideration transferred over the fair value of net assets acquired in business combinations. Goodwill is tested for impairment at the reporting unit level, which is an operating segment, or one level below. The Company has three reporting units: i) Americas and Asia-Pacific, ii) United Kingdom and Ireland and iii) Continental Europe. The Company measures goodwill impairment, if any, as the amount by which the carrying amount of the reporting unit exceeds its fair value, not to exceed the carrying amount of goodwill.
The Company performed its annual goodwill impairment test on November 1. The review of goodwill impairment consists of either using a qualitative approach to determine whether it is more likely than not that the fair value of the assets is less than their respective carrying values or a one-step quantitative impairment test. In performing the qualitative assessment, the Company considers many factors in evaluating whether the carrying value of goodwill may not be recoverable, including declines in the Company’s stock price, market capitalization of the Company and macroeconomic conditions. If, based on the results of the qualitative assessment, it is concluded that it is not more likely than not that the fair value of a reporting unit exceeds its carrying value, additional quantitative impairment testing is performed. The quantitative test requires that the carrying value of each reporting unit be compared with its estimated fair value. If the carrying value of a reporting unit is greater than its fair value, a goodwill impairment charge will be recorded for the difference (up to the carrying value of goodwill). The Company uses the income approach and/or a market-based approach to determine the reporting units’ fair values. The determination of discounted cash flows used in the income approach requires significant estimates and assumptions. Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates.
The Company’s intangible assets consist of customer relationships, trade names, trademarks, and developed technology which are amortized on a straight-line basis or over the period the economic benefits are expected to be realized. The Company reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
Impairment of Long-lived Assets
The Company reviews long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If an impairment indicator is present, the Company evaluates recoverability by comparing the carrying amount of the asset group to the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset group. If the assets are impaired, an impairment loss is measured as the amount by which the carrying amount of the asset group
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exceeds the fair value of the asset. The Company estimates fair value using the expected future cash flows discounted at a rate consistent with the risks associated with the recovery of the asset.
Revenue Recognition
The Company generates revenue by providing logistics services for its customers, including warehousing and distribution, order fulfillment, reverse logistics, packaging and labeling, factory and aftermarket support and inventory management ranging from a few months to a few years. Generally, the Company’s contracts provide the customer an integrated service that includes two or more services, including but not limited to facility and equipment costs, construction, repair and maintenance services and labor. For these contracts, the Company does not consider the services to be distinct within the context of the contract when the separate scopes of work combine into a single commercial objective or capability for the customer. Accordingly, the Company generally identifies one performance obligation in its contracts, which is a series of distinct services that remain substantially the same over time and possess the same pattern of transfer.
Revenue is recognized using the series guidance over the period in which services are provided under the terms of the Company’s contractual relationships with its customers. The transaction price is based on the amount specified in the contract with the customer and contains fixed and variable consideration. In general, the fixed consideration in a contract represents reimbursement for warehouse, technology and equipment costs incurred to satisfy the performance obligation and is recognized on a straight-line basis over the term of the contract. The variable consideration is comprised of cost reimbursement based on the costs incurred, per-unit pricing is determined based on units provided and time and materials pricing is based on the hours of services provided. The variable consideration component is recognized over time based on the level of activity. Generally, pricing can be adjusted based on contractual provisions related to achieving agreed-upon performance metrics, changes in volumes, services and market conditions. Revenue relating to these pricing adjustments is estimated and included in the consideration if it is probable that a significant revenue reversal will not occur in the future. The estimate of variable consideration is determined by the expected value or most likely amount method and factors in current, past and forecasted experience with the customer. Customers are billed based on terms specified in the revenue contract and they pay us according to approved payment terms.
Contract Assets and Liabilities
Contract assets consist of two components: customer acquisition costs and costs to fulfill a contract. The Company capitalizes direct and incremental costs incurred to obtain and to fulfill a contract in advance of revenue recognition, such as certain labor, third-party service and related product costs. These costs are recognized as an asset if the Company expects to recover them. Contract assets are recognized consistent with the transfer of the underlying performance obligations to the customer based on the specific contracts to which they relate. Contract assets are amortized to Direct operating expense in the Consolidated Statements of Operations over the contract term.
Contract liabilities represent the Company’s obligation to transfer services to a customer for which the Company has received consideration or the amount that is due from the customer.
Derivative Instruments
The Company records all its derivative financial instruments on the Consolidated Balance Sheets as assets or liabilities measured at fair value. For derivatives designated as a hedge, and effective as part of a hedge transaction, the effective portion of the gain or loss on the hedging derivative instrument is reported as a component of other comprehensive income or as a basis adjustment to the underlying hedged item and reclassified to earnings in the year in which the hedged item affects earnings. The effective portion of the gain or loss on hedges of foreign net investments is generally not reclassified to earnings unless the net investment is disposed. To the extent derivatives do not qualify or are not designated as hedges, or are ineffective, their changes in fair value are recorded in earnings immediately, which may subject us to increased earnings volatility.
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Stock-Based Compensation
The Company accounts for stock-based compensation based on the equity instrument’s grant date fair value. Stock compensation expense is recognized using the straight-line method, based on the grant date fair value, over the requisite service period of the award, which is generally the vesting term. For grants of stock options, the Company determines the fair value based on the Black-Scholes option-pricing model. For grants of restricted stock units (“RSU”) subject to service-based or performance-based vesting conditions only, the Company establishes the fair value based on the market price on the date of the grant. For grants of restricted stock awards (“RSA”) the fair value is equal to the fair market value of the Company’s common stock on the date of grant. These shares vest and are issued upon grant. For grants of awards subject to market-based vesting conditions (“PSU”), the Company determines the fair value based on a Monte Carlo simulation model. The Company accounts for forfeitures as they occur.
Earnings per Share
Basic earnings per share (“EPS”) is based upon net earnings available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by giving effect to all potentially dilutive stock awards that were outstanding. The computation of diluted earnings per share excludes the effect of the potential exercise of stock-based awards when the effect of the potential exercise would be anti-dilutive. For the years ended December 31, 2024, 2023 and 2022, the number of common shares excluded from diluted shares outstanding was 1.1 million, 1.5 million and 2.0 million, respectively, because the effect of including those common shares in the calculation would have been anti-dilutive.
Defined Benefit Plans
The Company calculates its employer-sponsored retirement plan obligations using various actuarial assumptions and methodologies. Assumptions include discount rates, expected long-term rate of return on plan assets, mortality rates and other factors. The assumptions used in recording the projected benefit obligation and fair value of plan assets represent the Company’s best estimates based on available information regarding historical experience and factors that may cause future expectations to differ. The Company’s obligation and future expense amounts could be materially impacted by differences in experience or changes in assumptions.
The Company determines the net periodic benefit cost of the plans using assumptions regarding the projected benefit obligation and the fair value of the plan assets as of the beginning of the year. Net periodic benefit cost is recorded within Other income, net in the Consolidated Statement of Operations. The Company calculates the funded status of the defined benefit plan as the difference between the projected benefit obligation and the fair value of the plan assets.
The impact of plan amendments, actuarial gains and losses and prior-service costs are recorded in AOCIL and are generally amortized as a component of net periodic benefit cost over the remaining service period of the active employees covered by the defined benefit pension plans. Cumulative gains and losses over 10% of the greater of the beginning of year benefit obligation or fair value of the plan assets are amortized over the expected average life expectancy.
Income Taxes
The Company accounts for income taxes using the asset and liability method on a legal entity and jurisdictional basis, under which the Company recognizes the amount of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in the Consolidated Financial Statements or tax returns. The calculation of the annual effective tax rate relies on several factors including pre-tax earnings, various jurisdiction statutory tax rates, tax credits, uncertain tax positions, valuation allowances and differences between tax laws and accounting laws. The effective tax rate in any financial
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statement period may be materially impacted by changes in the blend and/or level of earnings by individual taxing jurisdictions.
If the Company considers that a tax position is more likely than not to be sustained upon audit, based solely on the technical merits of the position, presuming an examination by a taxing authority with full knowledge of all relevant information, the Company recognizes all or a portion of the benefit. Valuation allowances are established when it is more likely than not that the Company’s deferred tax assets will not be realized based on all available evidence.
The Company uses judgments and estimates in evaluating its tax positions. The Company’s tax returns are subject to examination by U.S. Federal, state and local and foreign taxing jurisdictions. The Company regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years. The Company recognizes tax benefits from uncertain tax positions only if based on the technical merits of the position it is more likely than not that the tax positions will be sustained upon audit. The Company adjusts these tax liabilities, including related interest and penalties, based on the current facts and circumstances. The Company reports tax-related interest and penalties as a component of income tax expense.
Foreign Currency Translation and Transactions
The assets and liabilities of the Company’s foreign subsidiaries that use their local currency as their functional currency are translated to U.S. dollars (“USD”) using the exchange rate prevailing at each balance sheet date, with balance sheet currency translation adjustments recorded in AOCIL in the Consolidated Balance Sheets. The Company converts foreign currency transactions recognized in the Consolidated Statements of Operations to USD by applying the exchange rate prevailing on the date of the transaction. Gains and losses arising from foreign currency transactions and the effects of remeasuring monetary assets and liabilities are recorded in Other income, net in the Consolidated Statements of Operations.
Adoption of New Accounting Standards
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. The Company adopted the guidance for the fiscal year ended December 31, 2024. Adopting this new standard resulted in additional disclosure within the Company’s Consolidated Financial Statements, see Note 5. “Segment Information.”
Accounting Pronouncements Issued But Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides for expanded disclosures primarily related to income taxes paid and the rate reconciliation. The amendments are effective prospectively for annual periods beginning after December 15, 2024, and early adoption and retrospective application are permitted. The Company is currently evaluating the impact of this ASU on its Consolidated Financial Statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This standard requires all public companies to disclose more detailed information about certain costs and expenses in the notes to the financial statements at interim and annual reporting periods. This standard is effective for annual reporting periods beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of the disclosure requirements about specific expense categories in its Consolidated Financial Statements.
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3. Revenue Recognition
Revenue disaggregated by geographical area was as follows:
Year Ended December 31,
The Company’s revenue can also be disaggregated by various verticals, reflecting the customers’ principal industry. Revenue disaggregated by industry was as follows:
Year Ended December 31,
Contract Balances
December 31,
Contract assets and contract costs included in:
Other current assets $ 37 $ 21
Total contract assets $ 233 $ 181
Contract liabilities included in:
Other current liabilities $ 272 $ 210
Other long-term liabilities 128 115
Total contract liabilities $ 400 $ 325
Revenue recognized included the following:
Year Ended December 31,
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4. Acquisitions
Wincanton Acquisition
On February 29, 2024, the Company and the board of directors of Wincanton plc, a logistics company based in Chippenham, United Kingdom (“Wincanton”), reached an agreement on the terms of a cash offer by the Company for the acquisition of the entire issued ordinary share capital of Wincanton (the “Wincanton Acquisition”). Under the terms of the agreement, Wincanton shareholders received 605 pence ($7.64 as of the acquisition date) in cash for each Wincanton share held. On April 29, 2024, the Company completed the Wincanton Acquisition for a total consideration of approximately £762 million ($958 million as of the acquisition date). The Wincanton Acquisition is subject to a review by the Competition and Markets Authority (the “CMA”) in the U.K. On November 14, 2024, the CMA referred the completed acquisition by GXO Logistics, Inc. of Wincanton plc for an in-depth investigation (“Phase 2”) with a statutory deadline of April 30, 2025.
Wincanton is a logistics provider specializing in warehousing and transportation solutions in the U.K. and Ireland. Wincanton services industries in grocery, retail and manufacturing, consumer goods, e-commerce, healthcare, defense, industrial, and energy.
In connection with the Wincanton Acquisition, the Company incurred transaction costs of $61 million for the year ended December 31, 2024, which were included in Transaction and integration costs in the Consolidated Statements of Operations.
Also, in connection with the Wincanton Acquisition, (i) the Company entered into a bridge term loan credit agreement (the “Bridge Term Loan”), (ii) the Company entered into a three-year term loan credit agreement (“Three-Year Term Loan due 2027”), and (iii) in April 2024, the Company issued $1.1 billion aggregate principal amount of senior notes (the “Unsecured Notes”). For additional information regarding the financing agreements entered in connection with the Wincanton Acquisition, see Note 10. “Debt and Financing Arrangements.”
Wincanton’s results of operations are included in the Consolidated Statements of Operations from the date of acquisition. The Company recorded $1.4 billion and $7 million of revenue and loss before income taxes for the year ended December 31, 2024, respectively.
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The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date:
(In millions)
ASSETS
Current assets
Cash and cash equivalents $ 90
Accounts receivable 241
Other current assets 70
Total current assets 401
Long-term assets
Property and equipment 137
Operating lease assets 166
Intangible assets (1) 539
Other long-term assets 151
Total long-term assets 993
LIABILITIES
Current liabilities
Accounts payable $ 70
Accrued expenses 313
Current debt 10
Current operating lease liabilities 22
Other current liabilities 123
Total current liabilities 538
Long-term liabilities
Long-term debt 211
Long-term operating lease liabilities 144
Other long-term liabilities 269
Total long-term liabilities 624
Total liabilities $ 1,162
Net assets purchased $ 232
Purchase price (2) $ 958
Goodwill recorded (3) $ 726
(1) The Company acquired $539 million of intangible assets, comprised of customer relationships, trade names, and intellectual property with weighted-average useful lives of 12.5 years.
(2) The Company recorded a realized foreign currency gain of $5 million which represents the change in foreign currency rates from the acquisition date through the settlement date. The gain is included as a component of “Transaction and Integration expense” on the Consolidated Statements of Operations.
(3) Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed at the acquisition date. Goodwill acquired was recorded in the U.K. and Ireland reporting unit and was primarily attributed to anticipated synergies. The Company does not expect the goodwill recognized in connection with the Wincanton Acquisition to be deductible for income tax purposes.
The fair values of the assets acquired and liabilities assumed are considered preliminary and subject to adjustment as additional information is obtained and reviewed. The final allocation of the purchase price may differ from the preliminary allocation based on completion of the valuation. The primary areas of the purchase price allocation that are not yet finalized relate to intangible assets, goodwill, other long-term assets, lease assets and liabilities, accrued expenses, other current and long-term liabilities, and income taxes. The Company expects to finalize the purchase price allocation within the measurement period, which will not exceed one year from the acquisition date.
The following unaudited pro forma information presents the Company’s results of operations as if the acquisition of Wincanton occurred on January 1, 2023. The pro forma results reflect the impact of incremental interest expense to finance the acquisition and amortization expense on acquired intangible assets. Adjustments have also been made to
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remove transaction related costs. The unaudited pro forma information is not necessarily indicative of what the results of operations of the combined company would have been had the acquisition been completed as of January 1, 2023.
Year Ended December 31
Income before income taxes (1) 105 200
(1) Included in the Income before income taxes on a pro forma basis for the year ended December 31, 2024, were long-lived asset impairment charges of $90 million recorded by Wincanton before its acquisition by the Company.
PFSweb Acquisition
On September 13, 2023, the Company entered into an Agreement and Plan of Merger to acquire PFSweb, Inc., a Delaware corporation headquartered in Irving, Texas (“PFS”). On October 23, 2023, the Company completed the acquisition of PFS (the “PFS Acquisition”). The Company acquired the shares of PFS at a price per share of $7.50 in cash, totaling approximately $149 million, net of cash acquired. PFS is a global provider of omnichannel commerce solutions, including a broad range of technology, infrastructure and professional services, in the United States, Canada and Europe. PFS’s service offerings include order fulfillment, fulfillment-as-a-service, order management and customer care.
The Company recorded the fair value of assets acquired and liabilities assumed on the date of acquisition, including intangible assets comprised of customer relationships, trademarks, trade names and developed technology of $55 million with a weighted-average amortization period of 13 years. Goodwill acquired in connection with the acquisition was $80 million, recorded in the Americas and Asia-Pacific reporting unit, and was attributed to anticipated synergies. The Company does not expect the goodwill recognized in connection with the PFS Acquisition to be deductible for U.S. income tax purposes.
5. Segment Information
The Company is organized geographically into three operating segments: i) Americas and Asia-Pacific, ii) United Kingdom and Ireland, and iii) Continental Europe. The Company’s reporting unit results are regularly provided to the chief operating decision maker (“CODM”). The CODM is our Chief Executive Officer, who assesses the Company’s performance and allocates resources.
The CODM evaluates the Company’s performance and allocates resources primarily based on adjusted earnings before interest, taxes, depreciation and amortization, adjusted for transaction and integration costs, restructuring costs, litigation expense, and unrealized gain/loss on foreign currency contracts and other adjustments (“Adjusted EBITDA”).
For disclosure purposes, we aggregate these three operating segments into one reportable segment due to the similar nature of their operations and economic characteristics.
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The Company’s segment results were as follows:
Year Ended December 31,
Selling, general and administrative expense (1) 996 931 822
Other income (expense), net (2) (20) 4 (64)
Less:
Transaction and integration costs 76 34 61
Restructuring costs and other 27 32 32
Litigation expense 59 — —
Unrealized (gain) loss on foreign currency contracts and other (4) (11) (5) 13
Income tax expense (8) (33) (64)
(1) Excludes unallocated corporate expenses.
(2) Other income, net excluding unrealized (gain) loss on foreign currency contracts and other.
(3) Corporate expenses include unallocated costs related to corporate functions such as salaries and benefits, rent, and professional fees which are recorded in Selling, general and administrative expenses in the Consolidated Statements of Operations.
(4) Included in Other income, net in the Consolidated Statements of Operations.
Long-lived assets geographic information
The Company’s long-lived assets for this disclosure is defined as Property and equipment, net of accumulated depreciation, and operating lease assets. The Company’s long-lived assets by geographic region were as follows:
December 31,
(1) Includes Asia, Latin America and Canada.
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6. Goodwill
The following tables present the changes in goodwill for the years ended December 31, 2024 and 2023.
(In millions)
Foreign exchange translation (1) 43
Foreign exchange translation (1) (72)
(1) Changes to goodwill amounts resulting from foreign currency translation after the acquisition date are presented as the impact of foreign exchange translation.
(2) Includes $726 million and $4 million for the preliminary purchase price allocation for the Wincanton Acquisition and adjustments to the purchase price allocation for the PFS Acquisition, respectively.
As of December 31, 2024 and 2023, there were no accumulated goodwill impairment losses.
7. Intangible Assets
The following table summarizes identifiable intangible assets:
Developed technology 17 (3) 14 7 — 7
Intangible asset amortization expense was $108 million, $71 million and $68 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Estimated amortization expense for each of the five succeeding fiscal years and thereafter is as follows:
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8. Property and Equipment
The following table summarizes property and equipment:
December 31,
Land, buildings and leasehold improvements $ 515 $ 440
Warehouse equipment, fleet and other 1,113 1,025
Technology and automated systems 531 373
Total property and equipment, gross 2,892 2,498
Less: accumulated depreciation and amortization 1,732 1,545
Total property and equipment, net $ 1,160 $ 953
Depreciation of property and equipment was $307 million, $290 million and $261 million for the years ended December 31, 2024, 2023 and 2022, respectively.
9. Leases
The following amounts were recorded in the Consolidated Balance Sheets related to leases:
December 31,
Operating leases:
Current operating lease liabilities $ 647 $ 597
Long-term operating lease liabilities 1,898 1,842
Total operating lease liabilities $ 2,545 $ 2,439
Finance leases:
Property and equipment, net $ 239 $ 107
Current debt $ 39 $ 26
Total finance lease liabilities $ 276 $ 116
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The components of lease expense were as follows:
Year Ended December 31,
Operating leases:
Finance leases:
Amortization of leased assets $ 30 $ 30 $ 30
Interest expense on lease liabilities 10 5 5
Total finance lease cost $ 40 $ 35 $ 35
Total operating and finance lease cost $ 1,225 $ 1,140 $ 956
(1) Operating lease cost is primarily included in Direct operating expense in the Consolidated Statements of Operations.
Supplemental cash flow information related to leases was as follows:
Year Ended December 31,
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases $ 791 $ 696 $ 576
Operating cash flows for finance leases 10 5 5
Financing cash flows for finance leases 45 29 33
Leased assets obtained in exchange for new lease obligations:
Supplemental weighted-average information for leases was as follows:
December 31,
Weighted-average remaining lease term
Operating leases 5.6 years 5.6 years
Finance leases 24.1 years 11.7 years
Weighted-average discount rate
Operating leases 4.9 % 4.6 %
Finance leases 5.4 % 4.4 %
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Maturities of lease liabilities as of December 31, 2024 were as follows:
(In millions) Finance Leases Operating Leases
Present value of lease liabilities $ 276 $ 2,545
As of December 31, 2024, the Company had additional operating leases that have not yet commenced with future undiscounted lease payments of approximately $98 million. These operating leases will begin in 2025, with initial lease terms ranging from 4 to 16 years.
10. Debt and Financing Arrangements
The following table summarizes the carrying value of the Company’s debt:
December 31,
(In millions, except percentages) Rate (1) 2024 2023
Finance leases and other debt Various 303 118
(1) Interest rates as of December 31, 2024.
(2) Net of unamortized discount and debt issuance costs of $1 million and $2 million, as of December 31, 2024 and 2023, respectively.
(3) Net of unamortized discount and debt issuance costs of $7 million as of December 31, 2024.
(4) Net of unamortized discount and debt issuance costs of $3 million as of December 31, 2024 and 2023.
(5) Net of unamortized discount and debt issuance costs of $10 million as of December 31, 2024.
(6) In 2024, the Company repaid $185 million of the Three-Year Term Loan due 2025.
(7) Net of unamortized debt issuance costs of $1 million as of December 31, 2024 and 2023.
(8) In 2024, the Company repaid $100 million of the Five-Year Term Loan due 2027.
Unsecured Notes
On April 25, 2024, the Company entered into an underwriting agreement to issue and sell $1.1 billion of Unsecured Notes, consisting of $600 million of notes due 2029 (the “2029 Notes”) and $500 million of notes due 2034 (the “2034 Notes”) in a registered public offering to fund the Wincanton Acquisition. The closing of the sale of the Unsecured Notes occurred on May 6, 2024. The 2029 Notes bear interest at a rate of 6.25% per annum payable semiannually on May 6 and November 6 of each year, beginning on November 6, 2024, and maturing on May 6, 2029. The 2034 Notes bear interest at a rate of 6.50% per annum payable semiannually on May 6 and November 6 of each year, beginning on November 6, 2024 and maturing on May 6, 2034.
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In 2021, the Company completed an offering of $800 million aggregate principal amount of notes, consisting of $400 million of notes due 2026 (the “2026 Notes”) and $400 million of notes due 2031 (the “2031 Notes”). The 2026 Notes bear interest at a rate of 1.65% per annum payable semiannually in arrears on January 15 and July 15 of each year, and maturing on July 15, 2026. The 2031 Notes bear interest at a rate of 2.65% per annum payable semiannually in arrears on January 15 and July 15 of each year and maturing on July 15, 2031.
Five-Year Term Loan due 2027
In 2022, the Company entered into a $500 million five-year unsecured term loan (the “Five-Year Term Loan”) that will mature on May 26, 2027. The loan bears interest at a fluctuating rate per annum equal to, at the Company’s option, the alternate base rate or the adjusted Secured Overnight Financing Rate (SOFR), plus an applicable margin based on the Company’s credit ratings. In 2024, the Company repaid $100 million of the Five-Year Term Loan.
Three-Year Term Loan due 2025
In 2022, the Company borrowed a $235 million three-year term loan tranche (the “Three-Year Term Loan”) that will mature on May 26, 2025. The Delayed Draw Term Loan bears interest at a fluctuating rate per annum equal to, at the Company’s option, the alternate base rate or the adjusted SOFR, plus an applicable margin based on the Company’s credit ratings. In 2024, the Company repaid $185 million of the Three-Year Term Loan.
Three-Year Term Loan due 2027
On March 29, 2024, the Company entered into a three-year term loan credit agreement with the lenders and other parties from time to time party thereto and Bank of America N.A., as an administrative agent, that provided a three-year multicurrency £250 million unsecured term facility (the “Three-Year Term Loan due 2027”) to fund the Wincanton Acquisition. Concurrently with the closing of the Unsecured Notes in 2024, the Company terminated the commitments under the Three-Year Term Loan due 2027. No amounts were drawn under the Three-Year Term Loan due 2027.
Bridge Term Loan
On February 29, 2024, the Company entered into a 364-day bridge term loan credit agreement that provided a £763 million unsecured Bridge Term Loan facility (the “Bridge Term Loan”) to fund the Wincanton Acquisition. Concurrently with the closing of the Unsecured Notes in 2024, the Company terminated the commitments under the Bridge Term Loan. No amounts were drawn under the Bridge Term Loan.
Revolving Credit Facilities
On March 29, 2024, the Company terminated its previous revolving credit agreement expiring in 2026 and entered into a new revolving credit agreement with Bank of America N.A., as administrative agent and an issuing lender (the “Revolving Credit Agreement”). The Revolving Credit Agreement is a five-year unsecured, multicurrency revolving facility expiring in 2029. The aggregate commitment of all lenders under the Revolving Credit Agreement will be equal to $800 million, of which $100 million is available for the issuance of letters of credit.
Loans under the Revolving Credit Agreement will bear interest at a fluctuating rate per annum equal to (a) with respect to borrowings in U.S. dollars, at the Company’s option the alternate base rate or term Secured Overnight Financing Rate (“SOFR”), (b) with respect to borrowings in Canadian Dollars, term Canadian Overnight Repo Rate Average (“CORRA”), (c) with respect to borrowings in Pounds Sterling, daily simple Sterling Overnight Index Average Rate (“SONIA”) and (d) with respect to borrowings in Euros, Euro Interbank Offered Rate (“EURIBOR”), in each case, plus an applicable margin calculated based on the Company’s credit ratings. In addition, the Company is paying a commitment fee of 0.15% per annum on the unused portion of the commitments under the Revolving Credit Facility. No amounts were outstanding under the previous or new revolving credit agreements as of December 31, 2024 or December 31, 2023.
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In connection with the Wincanton Acquisition, the Company assumed a revolving credit facility agreement (the “Wincanton Revolving Credit Agreement”) under which it may borrow up to £175 million ($219 million as of December 31, 2024) in aggregate at any time, expiring in March 2027. Loans under the Wincanton Revolving Credit Agreement will bear interest at daily simple SONIA plus a margin. As of December 31, 2024, the Company had £15 million ($19 million) of borrowings outstanding under this agreement.
Amounts drawn and repaid in 90 days or less under the revolving credit facilities are presented net in the Consolidated Statement of Cash Flows.
Long-Term Debt Maturities
Set forth below is the aggregate principal amount of the Company’s long-term debt (excluding finance lease obligations, unamortized discount and debt issuance costs) as of December 31, 2024, maturing during the following years.
Factoring Programs
The Company sells certain of its trade receivables on a non-recourse basis to third-party financial institutions under various factoring programs. The Company accounts for these transactions as sales of receivables and presents cash proceeds as cash provided by operating activities in the Consolidated Statements of Cash Flows.
The Company accounts for these transactions as sales because the Company sells full title and ownership in the underlying receivables and control of the receivables is considered transferred. For these transfers, the receivables are removed from the Consolidated Balance Sheets at the date of transfer.
Information related to trade receivables sold was as follows:
Year Ended December 31,
Net cash provided by operating cash flows 200 21 35
Covenants and Compliance
The covenants in the Five-Year Term Loan, the Delayed Draw Term Loan, the Unsecured Notes and the Revolving Credit Facilities, which are customary for financings of this type, limit the Company’s ability to incur indebtedness and grant liens, among other restrictions. In addition, the facilities require the Company to maintain a consolidated leverage ratio below a specified maximum.
As of December 31, 2024, the Company complied with the covenants contained in its debt and financing arrangements.
11. Fair Value Measurements and Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The levels of inputs used to measure fair value are:
•Level 1—Quoted prices for identical instruments in active markets;
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•Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and
•Level 3—Valuations based on inputs that are unobservable, utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.
Assets and liabilities
The Company bases its fair value estimates on market assumptions and available information. The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and current maturities of long-term debt approximated their fair values as of December 31, 2024 and 2023, due to their short-term nature.
Debt
The fair value of debt was as follows:
(In millions) Level Fair Value Carrying Value Fair Value Carrying Value
Financial Instruments
The Company directly manages its exposure to risks arising from business operations and economic factors, including fluctuations in interest rates and foreign currencies. The Company uses derivative instruments to manage the volatility related to these exposures. The objective of these derivative instruments is to reduce fluctuations in earnings and cash flows associated with changes in foreign currency exchange rates and interest rates. These financial instruments are not used for trading or other speculative purposes. The Company does not expect to incur any losses as a result of counterparty default.
Net Investment Hedges
The Company uses fixed-to-fixed or variable-to-variable cross-currency swap agreements to hedge its net investments in foreign operations against future volatility in the exchange rates between the U.S. dollar and the associated foreign currencies. The Company designated these cross-currency swap agreements as qualifying hedging instruments and accounts for them as net investment hedges. During 2024, the Company amended four cross-currency swaps with an aggregate notional amount of $315 million maturing in 2027 and 2028 and cross-currency swaps with an aggregate notional amount of $165 million matured. The Company entered into five new cross-currency swaps with an aggregate notional amount of $500 million, maturing in 2025 and 2029.
Interest Rate Swap Agreements
The Company uses interest rate swap agreements to hedge the variability of cash flows resulting from floating interest rate borrowings. The Company designated these interest rate swap agreements as qualifying hedging instruments and accounts for them as cash flow hedges. When an interest rate swap agreement qualifies for hedge accounting as a cash flow hedge, the changes in the fair value are recorded in equity as a component of AOCIL and are reclassified into Interest expense, net over the life of the underlying debt, as interest on the Company’s floating rate debt is accrued. During 2024, an interest rate swaps agreement with a notional amount of $125 million matured.
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Foreign Currency Exchange Rate Risk
The Company is exposed to certain risks relating to its ongoing business operations, including foreign currency exchange rate risk. The Company uses foreign currency options and forward contracts to mitigate the risk of a reduction in the value of earnings from its operations that use the Euro or British pound sterling as their functional currency. Additionally, the Company uses foreign currency forward contracts to mitigate exposure from variability of cash flows related to the forecasted interest and principal payments on intercompany loans. The foreign currency forward contracts generally expire within 12 months. While these derivatives are hedging the fluctuations in foreign currencies, they do not meet the requirements to be accounted for as hedging instruments.
Derivatives
The notional amount and fair value of derivative instruments were as follows:
December 31,
Derivatives designated as net investment hedges:
Cross-currency swap agreements $ 270 $ 12 $ — $ — Other current assets
Cross-currency swap agreements 1,177 48 487 3 Other long-term assets
Cross-currency swap agreements 98 7 165 7 Other current liabilities
Cross-currency swap agreements 325 2 883 49 Other long-term liabilities
Derivatives designated as cash flow hedge:
Interest rate swaps $ — $ — $ 125 $ 2 Other current assets
Interest rate swaps 125 3 125 3 Other long-term assets
Derivatives not designated as hedges
Foreign currency option contracts $ 300 $ 13 $ 397 $ 8 Other current assets
Foreign currency option contracts 26 — — — Other current liabilities
Foreign currency forward contracts — — 1 — Other current assets