GXO Logistics(US:GXO)2022-11-09 21:07Financial Performance - Revenue for the three months ended September 30, 2022 increased by 16%, or $313 million, to $2.3 billion, compared to $2.0 billion for the same period in 2021[100] - Net income for the three months ended September 30, 2022 was $64 million, a decrease of 12% compared to $73 million for the same period in 2021[99] - Revenue for the nine months ended September 30, 2022 increased by 15%, or $848 million, to $6.5 billion, compared to $5.7 billion for the same period in 2021[111] - Operating income for the three months ended September 30, 2022 was $72 million, a 100% increase compared to $36 million for the same period in 2021[99] - Income before income taxes for the three months ended September 30, 2022 increased by $41 million to $83 million, compared to $42 million for the same period in 2021[108] - Income before income taxes increased by $122 million to $205 million for the nine months ended September 30, 2022, compared to $83 million for the same period in 2021, driven by business growth and lower transaction costs[120] Expenses - Direct operating expenses for the three months ended September 30, 2022 were $1.9 billion, or 82% of revenue, compared to $1.7 billion, or 84% of revenue for the same period in 2021[101] - Selling, general and administrative expenses increased by $56 million to $227 million for the three months ended September 30, 2022, compared to $171 million for the same period in 2021[102] - SG&A expenses increased by $118 million to $637 million for the nine months ended September 30, 2022, compared to $519 million for the same period in 2021, primarily due to higher personnel costs[114] - Direct operating expenses for the nine months ended September 30, 2022, were $5.4 billion, representing 83% of revenue, compared to $4.7 billion, also 83% of revenue, for the same period in 2021[112][113] Cash Flow and Assets - Net cash provided by operating activities increased by $65 million to $316 million for the nine months ended September 30, 2022, compared to $251 million for the same period in 2021[133] - Total current assets increased by 7% to $2.242 billion as of September 30, 2022, from $2.099 billion as of December 31, 2021[132] - Total long-term liabilities increased by 54% to $3.932 billion as of September 30, 2022, from $2.552 billion as of December 31, 2021[132] - Cash flows used in investing activities were $1.056 billion for the nine months ended September 30, 2022, compared to $140 million for the same period in 2021, primarily due to the Clipper Acquisition[135] Acquisitions and Integration - The Clipper Acquisition contributed 16% to European revenue and 10% to total revenue for the three months ended September 30, 2022[100] - Transaction and integration costs for the three months ended September 30, 2022 were $14 million, down from $29 million for the same period in 2021[104] - The company entered into a five-year unsecured Term Loan of $500 million on May 25, 2022, to fund the Clipper Acquisition, maturing on May 26, 2027[124] Foreign Currency Risk - A significant portion of the company's net assets and income are in non-USD currencies, primarily the Euro (EUR) and British pound sterling (GBP) [143] - The company entered into cross-currency swap agreements to manage foreign currency exchange risk, converting a portion of USD-denominated debt to EUR-denominated debt [144] - As of September 30, 2022, a 10% strengthening of the USD relative to the EUR would have increased net assets by approximately $20 million [145] - Conversely, a 10% strengthening of the USD relative to the GBP would have decreased net assets by approximately $30 million as of September 30, 2022 [145] - The sensitivity analysis does not factor in potential changes in sales levels or local currency prices due to fluctuations in exchange rates [145] - The company uses foreign currency option contracts to mitigate the risk of reduced earnings value from operations using EUR or GBP as functional currencies [144] - Fluctuations in exchange rates can affect sales volume and foreign currency sales prices, impacting competitiveness [145] - The company is exposed to currency risk from potential changes in the functional currency values of foreign currency-denominated assets, liabilities, and cash flows [143] - The management of foreign currency exchange risk is critical for maintaining financial stability and performance [144]