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GXO CEO on the company’s spinoff from XPO Logistics

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Malcolm Wilson, GXO CEO, speaks with Yahoo Finance on the company going public, expectations for future innovations, and expansion plans.

Video Transcript

- GXO Logistics became its own publicly traded company today after finalizing its spin-off from XPO. It is the largest pure play contract logistics provider in the world. And as you can see, the stock is up nearly 6% on its debut on the New York Stock Exchange. And XPO, by the way, also higher by nearly 3 and 1/2%. Joining us now is GXO's CEO Malcolm Wilson. Malcolm, welcome and congratulations on a very successful spin-off and IPO today.

You know, for folks who are not familiar with your company, you have some big time customers-- including Nike, Whirlpool, PepsiCo, Apple. And I know that you deal with the logistics, the warehouse and logistics operations, for these companies. What does going public now mean for your customers? What will GXO be able to do now, that maybe it couldn't do under the XPO umbrella?

MALCOLM WILSON: Well it's allowing us to focus all of our attention on our core business. That's overwhelmingly everything that happens in the warehouse for those blue chip customers that you mentioned and many, many others. That means all of our management focus is on developing future technologies. It's on developing the great services that we're providing to our customers. We can deploy all of our capital towards our business. Whether that's developing further robotics and automation, opportunistic M&A potential, really everything's focused towards what goes on with our customers. And, of course, our investors.

- Now, Malcolm, you are much larger than your peers are. I should say, GXO is. And size can be an advantage sometimes. It can also be a disadvantage. But what are some of the biggest advantages, as you see it, to the fact that GXO is four to eight times larger than some of your other competitors, and what are some of the biggest hurdles that you still see out ahead?

MALCOLM WILSON: The industry is really an industry where scale matters. So that being much bigger than our competitors really makes a difference. It makes a difference in terms of the customers we work with, the faith and the certainty that they can have in our reliable promises for when we're starting new operations, implementing new warehouses, and on average, we do about 50 or more big startups every year. But also we should think about our industry. You know, the industry is ripe for consolidation. So some consolidation is inevitable going forward, and that's where scale will really play to our advantage. Being able to look opportunistically at where we can enter new verticals that will really bring success for the business.

- Let's talk about some of those verticals, because this is still a largely untapped multibillion dollar industry that you are part of. After this pandemic, we see no stopping in terms of e-commerce and companies are going to start continuing to outsource their supply chain. So what are some of those verticals that you might want to get into?

MALCOLM WILSON: So there are several that will complement what we do already. Not just new verticals. Remember that our geography-- predominantly North America, Asia-Pacific, Europe. So we have some verticals where we're expert in one geography, and sometimes it's quite difficult to establish in a new area. So aerospace is a great example. We're very strong in the aerospace markets in North America. In Europe-- very little. So sometimes selective M&A can be a good thing to help us enter new verticals in new geography. But also, of course, we'll be cross-selling all of the expertise and experience that exists across the business.

We should also remember that we work in a highly fragmented market. You know, GXO is only 5% of the currently outsourced logistics market between North America and Europe. That's worth around 130 billion US. And then on top of that, there's a further 300 billion US of market that's presently done by large organizations who currently undertake their logistics themselves. But, of course, the trend is more and more outsourcing. So we're in a really great growth trajectory for our business going forward.

- And with that, of course, comes the use of more and more tech. We've had so many conversations, just in warehouses alone, for example, of how AI and technology is really going to be used and sometimes replace some of the jobs that we are currently seeing. For investors that are out there, how much is GXO going to be relying on tech? Going forward, what can you tell us, perhaps, about some new innovations that we might be able to expect?

MALCOLM WILSON: This is an incredible space. We should remember that if we think about the world's warehousing environment, only around 5% today is automated. In GXO, because we had that first-mover advantage many years ago, right now around 30% of our warehouses carry a high amount of automation. But, you know, automation-- it really complements the team members that are working in our business. It's really super important. And, you know, we have goods-to-person robots, deep-seated automation in the buildings, robotic arms, collaborative robots that work right alongside our team members. When you bring it all together, it's like a huge ecosystem of automation. And of course, at the heart of it, the GXO systems that are controlling everything.

- Because you sort of have a front row seat to the supply chain with GXO, can you tell us the state of the supply chain now as we continue to work our way through this pandemic? We keep hearing, you know, at the customer level how difficult it is to still get simple items, to get furniture delivered in a timely way. There seems to be so much still sitting out on freight unable to get unloaded. So what are you seeing, and are you seeing any sort of relief there yet?

MALCOLM WILSON: We're starting to see things easing a little bit, but you're absolutely right. There has been lots of disruptions. And of course, most recently, we've seen the chip shortage also creating some forms of disruptions with mechanical equipment that we would use in our warehouses even becoming on short supply. But again, that's where our scale really can count. But right now, what we're seeing is some easing of the supply chain difficulties that we've seen across different industries. And I think that's going to ease as we move forward in towards 2022.

- All right, we're going to leave it there. Again, congratulations Malcolm Wilson on becoming a publicly traded company. GXO trading there at the New York Stock Exchange today. All the best to you and your team.