GXO Logistics, Inc. 10-K

Item 8. Financial Statements and Supplementary Data. Index to Financial Statements Page Report of Independent Registered Public Accounting Firm 29 Consolidated Statements of Operations for the Years Ended December 31, 2024, 2023 and 2022 32 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 202 4 , 202 3 and 202 2 33 Consolidated Balance Sheets as of December 31, 202 4 and 202 3 34 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 4 , 202 3 and 202 2 35 Consolidated Statements of Changes in Equity for the Years Ended December 31, 202 4 , 202 3 and 202 2 37 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 1 1 - Fair Value Measurements and Financial Instruments 54 Note 1 2 - Accrued Expenses 57 Note 1 3 - Stockholders ’ Equity 58 Note 1 4 - Stock-Based Compensation 58 Note 1 5 - Employee Benefit Plans 60 Note 1 6 - Restructuring Charges and Other 63 Note 1 7 - Income Taxes 63 Note 1 8 - Commitments and Contingencies 67 Note 19 - Subsequent Events 68 28 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 29 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 30 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 31 GXO Logistics, Inc. Consolidated Statements of Operations Year Ended December 31, (Dollars in millions, shares in thousands, except per share amounts) 2024 2023 2022 Revenue $ 11,709 $ 9,778 $ 8,993 Direct operating expense 9,853 8,035 7,443 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 — — Operating income 218 318 242 Other income, net 31 1 51 Interest expense, net ( 103 ) ( 53 ) ( 29 ) Income before income taxes 146 266 264 Income tax expense ( 8 ) ( 33 ) ( 64 ) Net income 138 233 200 Net income attributable to Noncontrolling Interests (“NCI”) ( 4 ) ( 4 ) ( 3 ) Net income attributable to GXO $ 134 $ 229 $ 197 Earnings per share Basic $ 1.12 $ 1.93 $ 1.68 Diluted $ 1.12 $ 1.92 $ 1.67 Weighted-average common shares outstanding Basic 119,413 118,908 117,050 Diluted 119,798 119,490 117,616 See accompanying Notes to the Consolidated Financial Statements. 32 GXO Logistics, Inc. Consolidated Statements of Comprehensive Income Year Ended December 31, (In millions) 2024 2023 2022 Net income $ 138 $ 233 $ 200 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. 33 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 Other current assets 429 347 Total current assets 2,641 2,568 Long-term assets Property and equipment, net of accumulated depreciation of $ 1,732 and $ 1,545 1,160 953 Operating lease assets 2,329 2,201 Goodwill 3,549 2,891 Intangible assets, net of accumulated amortization of $ 618 and $ 528 986 567 Other long-term assets 601 327 Total long-term assets 8,625 6,939 Total assets $ 11,266 $ 9,507 LIABILITIES AND EQUITY Current liabilities Accounts payable $ 776 $ 709 Accrued expenses 1,271 966 Current debt 110 27 Current operating lease liabilities 647 597 Other current liabilities 385 327 Total current liabilities 3,189 2,626 Long-term liabilities Long-term debt 2,521 1,620 Long-term operating lease liabilities 1,898 1,842 Other long-term liabilities 623 473 Total long-term liabilities 5,042 3,935 Commitments and Contingencies (Note 18) Stockholders’ Equity Common Stock, $ 0.01 par value per share; 300,000 shares authorized, 119,496 and 119,057 shares issued and outstanding 1 1 Preferred Stock, $ 0.01 par value per share; 10,000 shares authorized, none issued and outstanding — — Additional Paid-In Capital (“APIC”) 2,629 2,598 Retained earnings 686 552 Accumulated Other Comprehensive Income (Loss) (“AOCIL”) ( 313 ) ( 239 ) Total stockholders’ equity before NCI 3,003 2,912 NCI 32 34 Total equity 3,035 2,946 Total liabilities and equity $ 11,266 $ 9,507 See accompanying Notes to the Consolidated Financial Statements. 34 GXO Logistics, Inc. Consolidated Statements of Cash Flows Year Ended December 31, (In millions) 2024 2023 2022 Cash flows from operating activities: Net income $ 138 $ 233 $ 200 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 ) Other 1 23 ( 17 ) Changes in operating assets and liabilities Accounts receivable 118 ( 17 ) ( 71 ) Other assets ( 54 ) 28 24 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: Capital expenditures ( 359 ) ( 274 ) ( 342 ) 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: Proceeds from debt, net 1,090 — 917 Repayments of debt, net ( 408 ) ( 140 ) ( 82 ) Repayments of finance lease obligations ( 45 ) ( 29 ) ( 33 ) Taxes paid related to net share settlement of equity awards ( 8 ) ( 12 ) ( 16 ) Other 7 ( 5 ) 1 Net cash provided by (used in) financing activities 636 ( 186 ) 787 Effect of exchange rates on cash and cash equivalents ( 13 ) 13 ( 18 ) Net increase (decrease) in cash, restricted cash and cash equivalents 15 ( 25 ) 162 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 Cash and cash equivalents $ 413 $ 468 $ 495 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. 35 GXO Logistics, Inc. Consolidated Statements of Cash Flows Year Ended December 31, (In millions) 2024 2023 2022 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. 36 GXO Logistics, Inc. Consolidated Statements of Changes in Equity Common Stock APIC Retained Earnings AOCIL Equity Before NCI NCI Total Equity (Shares in thousands, dollars in millions) Shares Amount December 31, 2021 114,659 $ 1 $ 2,354 $ 126 $ ( 130 ) $ 2,351 $ 39 $ 2,390 Net income — — — 197 — 197 3 200 Other comprehensive loss — — — — ( 126 ) ( 126 ) ( 1 ) ( 127 ) Stock-based compensation — — 33 — — 33 — 33 Vesting of stock compensation awards 557 — — — — — — — Tax withholding on vesting of stock compensation awards ( 246 ) — ( 16 ) — — ( 16 ) — ( 16 ) Common stock issued for acquisition 3,758 — 204 — — 204 — 204 Other — — — — 2 2 ( 8 ) ( 6 ) December 31, 2022 118,728 $ 1 $ 2,575 $ 323 $ ( 254 ) $ 2,645 $ 33 $ 2,678 Net income — — — 229 — 229 4 233 Other comprehensive income — — — — 15 15 1 16 Stock-based compensation — — 35 — — 35 — 35 Vesting of stock compensation awards 555 — — — — — — — Tax withholding on vesting of stock compensation awards ( 226 ) — ( 12 ) — — ( 12 ) — ( 12 ) Other — — — — — — ( 4 ) ( 4 ) December 31, 2023 119,057 $ 1 $ 2,598 $ 552 $ ( 239 ) $ 2,912 $ 34 $ 2,946 Net income — — — 134 — 134 4 138 Other comprehensive loss — — — — ( 74 ) ( 74 ) ( 3 ) ( 77 ) Stock-based compensation — — 39 — — 39 — 39 Vesting of stock compensation awards 607 — — — — — — — Tax withholding on vesting of stock-based compensation awards ( 168 ) — ( 8 ) — — ( 8 ) — ( 8 ) Other — — — — — — ( 3 ) ( 3 ) December 31, 2024 119,496 $ 1 $ 2,629 $ 686 $ ( 313 ) $ 3,003 $ 32 $ 3,035 See accompanying Notes to the Consolidated Financial Statements. 37 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 38 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, (In millions) 2024 2023 2022 Beginning balance $ 11 $ 12 $ 13 Provisions charged to expense 16 10 5 Write-offs, less recoveries, and foreign exchange translation ( 12 ) ( 11 ) ( 6 ) Ending balance $ 15 $ 11 $ 12 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. 39 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 40 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. 41 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 42 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. 43 3. Revenue Recognition Revenue disaggregated by geographical area was as follows: Year Ended December 31, (In millions) 2024 2023 2022 United Kingdom $ 5,248 $ 3,664 $ 3,293 United States 3,087 2,909 2,861 Netherlands 922 831 699 France 809 830 729 Spain 571 529 488 Italy 391 382 331 Other 681 633 592 Total $ 11,709 $ 9,778 $ 8,993 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, (In millions) 2024 2023 2022 Omnichannel retail $ 5,360 $ 4,100 $ 3,649 Technology and consumer electronics 1,541 1,467 1,337 Industrial and manufacturing 1,339 1,078 1,076 Food and beverage 1,331 1,331 1,327 Consumer packaged goods 1,259 1,027 915 Other 879 775 689 Total $ 11,709 $ 9,778 $ 8,993 Contract Balances December 31, (In millions) 2024 2023 Contract assets and contract costs included in: Other current assets $ 37 $ 21 Other long-term assets 196 160 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, (In millions) 2024 2023 2022 Amounts included in the beginning of year contract liability balance $ 208 $ 122 $ 93 44 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. 45 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 Total assets $ 1,394 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 46 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 (In millions) 2024 2023 Revenue $ 12,283 $ 11,529 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. 47 The Company’s segment results were as follows: Year Ended December 31, (In millions) 2024 2023 2022 Revenue $ 11,709 $ 9,778 $ 8,993 Direct operating expense 9,853 8,035 7,443 Selling, general and administrative expense (1) 996 931 822 Other income (expense), net (2) ( 20 ) 4 ( 64 ) Segment Adjusted EBITDA $ 880 $ 808 $ 792 Less: Corporate expenses (3) 65 67 64 Depreciation expense 307 290 261 Amortization expense 108 71 68 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 Interest expense, net 103 53 29 Income before income taxes 146 266 264 Income tax expense ( 8 ) ( 33 ) ( 64 ) Net income $ 138 $ 233 $ 200 (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, (In millions) 2024 2023 United States $ 1,498 $ 1,545 United Kingdom 1,006 772 Europe 939 783 Other (1) 46 54 Total $ 3,489 $ 3,154 (1) Includes Asia, Latin America and Canada. 48 6. Goodwill The following tables present the changes in goodwill for the years ended December 31, 2024 and 2023. (In millions) Balance as of December 31, 2022 $ 2,728 Acquisition 120 Foreign exchange translation (1) 43 Balance as of December 31, 2023 2,891 Acquisitions (2) 730 Foreign exchange translation (1) ( 72 ) Balance as of December 31, 2024 $ 3,549 (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: December 31, 2024 December 31, 2023 (In millions) Gross Carrying Amount Accumulated Amortization Net Value Gross Carrying Amount Accumulated Amortization Net Value Customer relationships $ 1,527 $ ( 600 ) $ 927 $ 1,046 $ ( 524 ) $ 522 Trade names and trademarks 60 ( 15 ) 45 42 ( 4 ) 38 Developed technology 17 ( 3 ) 14 7 — 7 Total $ 1,604 $ ( 618 ) $ 986 $ 1,095 $ ( 528 ) $ 567 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: (In millions) 2025 2026 2027 2028 2029 Thereafter Estimated amortization expense $ 118 $ 109 $ 103 $ 84 $ 69 $ 503 49 8. Property and Equipment The following table summarizes property and equipment: December 31, (In millions) 2024 2023 Land, buildings and leasehold improvements $ 515 $ 440 Warehouse equipment, fleet and other 1,113 1,025 Technology and automated systems 531 373 Computer equipment 335 304 Internal-use software 398 356 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, (In millions) 2024 2023 Operating leases: Operating lease assets $ 2,329 $ 2,201 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 Long-term debt 237 90 Total finance lease liabilities $ 276 $ 116 50 The components of lease expense were as follows: Year Ended December 31, (In millions) 2024 2023 2022 Operating leases: Operating lease cost $ 830 $ 751 $ 697 Short-term lease cost 202 225 118 Variable lease cost 153 129 106 Total operating lease cost (1) $ 1,185 $ 1,105 $ 921 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, (In millions) 2024 2023 2022 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: Operating leases, including $ 166 , $ 52 , and $ 233 from an acquisition in 2024, 2023 and 2022 respectively $ 815 $ 568 $ 1,154 Finance leases, including $ 83 , $ 1 , and $ 16 from an acquisition in 2024, 2023 and 2022 respectively 211 10 20 Supplemental weighted-average information for leases was as follows: December 31, 2024 2023 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 % 51 Maturities of lease liabilities as of December 31, 2024 were as follows: (In millions) Finance Leases Operating Leases 2025 $ 46 $ 763 2026 39 637 2027 33 483 2028 28 308 2029 24 209 Thereafter 290 517 Total lease payments 460 2,917 Less: Interest ( 184 ) ( 372 ) 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 Unsecured notes due 2026 (2) 1.65 % $ 399 $ 398 Unsecured notes due 2029 (3) 6.25 % 593 — Unsecured notes due 2031 (4) 2.65 % 397 397 Unsecured notes due 2034 (5) 6.50 % 490 — Three-Year Term Loan due 2025 (6) 5.58 % 50 235 Five-Year Term Loan due 2027 (7)(8) 5.71 % 399 499 Finance leases and other debt Various 303 118 Total debt $ 2,631 $ 1,647 Less: Current debt 110 27 Long-term debt $ 2,521 $ 1,620 (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. 52 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. 53 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. (In millions) 2025 2026 2027 2028 2029 Thereafter Long-term debt $ 71 $ 403 $ 402 $ 1 $ 600 $ 900 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, (In millions) 2024 2023 2022 Receivables sold in period $ 1,856 $ 1,110 $ 992 Cash consideration 1,843 1,103 988 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; 54 • 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: December 31, 2024 December 31, 2023 (In millions) Level Fair Value Carrying Value Fair Value Carrying Value Unsecured notes due 2026 2 $ 380 $ 399 $ 362 $ 398 Unsecured notes due 2029 2 617 593 — — Unsecured notes due 2031 2 336 397 326 397 Unsecured notes due 2034 2 514 490 — — Three-Year Term Loan due 2025 2 49 50 231 235 Five-Year Term Loan due 2027 2 394 399 493 499 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. 55 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, 2024 2023 (In millions) Notional Amount Fair Value Notional Amount Fair Value Balance Sheet Location 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 Foreign currency forward contracts 125 1 — — Other current liabilities As of December 31, 2024 and 2023, the derivatives were classified as Level 2 within the fair value hierarchy. The derivatives are valued using inputs other than quoted prices such as foreign exchange rates and yield curves. 56 The effect of hedges on AOCIL and in the Consolidated Statements of Operations was as follows: Year Ended December 31, 2024 Year Ended December 31, 2023 (In millions) Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives Gain (Loss) Reclassified from AOCIL into Net Income (1) Gain (Loss) Recognized in Net Income on Derivatives (Excluded from effectiveness testing) (1) Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives Gain (Loss) Reclassified from AOCIL into Net Income (1) Gain (Loss) Recognized in Net Income on Derivatives (Excluded from effectiveness testing) (1) Derivatives designated as net investment hedges Cross-currency swap agreements $ 108 $ 4 $ 3 $ ( 66 ) $ — $ 3 Derivatives designated as cash flow hedges Interest rate swaps $ ( 1 ) $ — $ — $ ( 3 ) $ — $ — (1) Amounts reclassified to Net income are reported within Interest expense, net in the Consolidated Statements of Operations. Derivatives not designated as hedges Gains and losses recognized in Other income, net in the Consolidated Statements of Operations for foreign currency options and forward contracts were as follows: Year Ended December 31, (In millions) 2024 2023 2022 Foreign currency gain (loss) on foreign currency contracts $ 4 $ ( 9 ) $ 17 12. Accrued Expenses The components of accrued expenses were as follows: December 31, (In millions) 2024 2023 Salaries, benefits and withholding $ 460 $ 362 Facility and transportation charges 422 346 Value-added tax and other taxes 213 136 Interest 20 9 Other 156 113 Total accrued expenses $ 1,271 $ 966 57 13. Stockholders’ Equity The following table summarizes the changes in AOCIL by component: Foreign Currency Adjustment (In millions) Foreign Currency Translation Adjustments Net Investment Hedges Cash Flow Hedges Defined Benefit Plans Less: AOCIL attributable to NCI AOCIL attributable to GXO As of December 31, 2021 $ ( 38 ) $ ( 15 ) $ — $ ( 76 ) $ ( 1 ) $ ( 130 ) Other comprehensive income (loss) before reclassifications ( 119 ) 36 9 ( 49 ) 1 ( 122 ) Amounts reclassified to net income — ( 7 ) — — — ( 7 ) Tax amounts ( 1 ) ( 7 ) ( 2 ) 13 — 3 Other comprehensive income (loss), net of tax ( 120 ) 22 7 ( 36 ) 1 ( 126 ) Other 2 — — — — 2 As of December 31, 2022 $ ( 156 ) $ 7 $ 7 $ ( 112 ) $ — $ ( 254 ) Other comprehensive income (loss) before reclassifications 72 ( 66 ) ( 3 ) ( 3 ) ( 1 ) ( 1 ) Amounts reclassified to net income — ( 3 ) — 2 — ( 1 ) Tax amounts 1 15 1 — — 17 Other comprehensive income (loss), net of tax 73 ( 54 ) ( 2 ) ( 1 ) ( 1 ) 15 As of December 31, 2023 $ ( 83 ) $ ( 47 ) $ 5 $ ( 113 ) $ ( 1 ) $ ( 239 ) Other comprehensive income (loss) before reclassifications ( 113 ) 108 ( 1 ) ( 60 ) 3 ( 63 ) Amounts reclassified to net income — ( 7 ) — 3 — ( 4 ) Tax amounts 1 ( 23 ) — 15 — ( 7 ) Other comprehensive income (loss), net of tax ( 112 ) 78 ( 1 ) ( 42 ) 3 ( 74 ) As of December 31, 2024 $ ( 195 ) $ 31 $ 4 $ ( 155 ) $ 2 $ ( 313 ) 14. Stock-Based Compensation In 2021, the Company established the 2021 Omnibus Incentive Plan (the “2021 Incentive Plan”). The 2021 Incentive Plan authorizes the issuance of up to 11.6 million shares of common stock as awards. Under the 2021 Incentive Plan, directors, officers and employees may be granted various types of stock-based compensation awards. These awards include stock options, RSUs, RSAs, PSUs and cash incentive awards. As of December 31, 2024, approximately 6.9 million shares of common stock were available for the grant under the 2021 Incentive Plan. The following table summarizes stock-based compensation expense recorded in Selling, general and administrative expense in the Consolidated Statements of Income: Year Ended December 31, (In millions) 2024 2023 2022 RSUs $ 28 $ 22 $ 21 PSUs 7 8 7 Stock options 3 5 5 RSAs 1 — — Total stock-based compensation expense $ 39 $ 35 $ 33 Tax expense (benefit) on stock-based compensation $ ( 7 ) $ 1 $ ( 1 ) 58 Stock Options The Company’s stock options vest over five years after the grant date and have a ten-year contractual term with an exercise price equal to the stock price on the grant date. The Black-Scholes option-pricing model was used to estimate the fair value of these awards. The Black-Scholes option-pricing model incorporates various subjective assumptions, including expected terms and expected volatility. A summary of stock option award activity for the year ended December 31, 2024, is presented in the following table: Stock Options (In thousands, except per share) Number of Stock Options Weighted-Average Exercise Price Weighted-Average Remaining Term Outstanding as of December 31, 2023 1,071 $ 64.71 7 years Forfeited or expired ( 176 ) 64.91 Outstanding as of December 31, 2024 895 $ 64.67 6 years Exercisable as of December 31, 2024 406 $ 64.22 6 years There was no intrinsic value for options outstanding and exercisable at December 31, 2024. As of December 31, 2024, unrecognized compensation cost related to options of $ 6 million is anticipated to be recognized over a weighted-average period of approximately 1.4 years. Restricted Stock Units and Performance-Based Units The Company grants RSUs and PSUs to its key employees, officers and directors with various vesting requirements. The holders of the RSUs and PSUs do not have the rights of a stockholder and do not have voting rights until the shares are issued and delivered in settlement of the awards. RSUs generally vest over the service period, typically three years , and PSUs generally vest based on achieving certain predefined performance objectives along with a service period. For PSUs the number of shares may be increased to the maximum or reduced to the minimum threshold based on the results of these performance metrics in accordance with the terms established at the time of the award. The Company granted a portion of PSUs subject to market-based vesting conditions. The Company determines the fair value of PSUs subject to market-based vesting conditions using a Monte Carlo simulation model that incorporates the probability of the performance conditions being met as of the grant date. Assumptions used in the Monte Carlo simulation model for the estimated fair value were as follows: Year Ended December 31, 2024 2023 2022 Weighted-average risk-free interest rate 4.9 % 4.7 % 2.5 % Expected volatility 30 % 32 % 37 % 59 A summary of RSU and PSU award activity for the year ended December 31, 2024, is presented in the following table: RSUs PSUs (In thousands, except per share) Number of RSUs Weighted-Average Grant Date Fair Value Number of PSUs Weighted-Average Grant Date Fair Value Outstanding as of December 31, 2023 1,337 $ 51.31 295 $ 67.46 Granted 867 50.48 230 49.01 Vested (1) ( 582 ) 46.58 ( 17 ) 78.75 Forfeited and canceled ( 243 ) 53.66 ( 51 ) 64.09 Outstanding as of December 31, 2024 1,379 $ 52.38 457 $ 58.11 (1) The number of RSUs and PSUs vested includes common stock shares that the Company withheld on behalf of its employees to satisfy the tax withholding. The total fair value of RSUs that vested during 2024 and 2023 was $ 31 million and $ 22 million, respectively. The total fair value of PSUs that vested during 2024 and 2023 was $ 1 million and $ 7 million, respectively. As of December 31, 2024, unrecognized compensation cost related to RSUs and PSUs of $ 64 million is anticipated to be recognized over a weighted-average period of approximately 2 years. Restricted Stock Awards In 2024, the Company granted 12 thousand RSAs at a weighted average price of $ 50.38 , resulting in a fair value of the RSAs of $ 1 million. These shares vested and were issued upon grant. 15. Employee Benefit Plans Pension Plans Certain eligible employees of the Company participated in various retirement plans in Europe. The Company sponsors a defined benefit pension scheme in the U.K. (the “GXO U.K. Retirement Plan”). In connection with the Wincanton Acquisition, the Company assumed multiple pension schemes covering certain employees in the U.K. and Ireland (the “Wincanton Retirement Plan”). The Company recognized £ 109 million ($ 137 million) of assets on the acquisition date, reflecting the funded status of the Wincanton Retirement Plan which is recorded in Other long-term assets. The GXO U.K. Retirement Plan and the Wincanton Retirement Plan (collectively the “U.K. Retirement Plans”) do not allow for new plan participants or additional benefit accruals. Other than the U.K. Retirement Plans, the Company deems other retirement plans to be immaterial to its Consolidated Financial Statements and are excluded from the disclosure below. U.K. Retirement Plans A reconciliation of the projected benefit obligation, fair value of the plan and the funded status, the amount recognized in financial statements, the assumptions used, the plan assets and funding requirements are shown below. 60 The change in the projected benefit obligation was as follows: December 31, (In millions) 2024 2023 Projected benefit obligation at beginning of year $ 830 $ 788 Liabilities assumed from Wincanton acquisition 895 — Interest cost 69 40 Actuarial (gain) loss (1) ( 73 ) 9 Settlements ( 2 ) — Benefits paid ( 86 ) ( 48 ) Foreign currency exchange rate changes ( 16 ) 41 Projected benefit obligation at end of year $ 1,617 $ 830 (1) Actuarial gains or losses are due to changes in the discount and mortality rates. The change in the fair value of the plan assets and funded status was as follows: December 31, (In millions) 2024 2023 Fair value of plan assets at beginning of year $ 883 $ 826 Assets assumed from Wincanton acquisition 1,032 — Actual return on plan assets ( 44 ) 60 Employer contributions 3 1 Settlements ( 2 ) — Benefits paid ( 86 ) ( 48 ) Foreign currency exchange rate changes ( 16 ) 44 Fair value of plan assets at end of year $ 1,770 $ 883 Funded status of the plan assets at end of year (1) $ 153 $ 53 (1) Funded status is recorded within Other long-term assets. The amounts included in AOCIL that have not yet been recognized in net periodic benefit cost were as follows: December 31, (In millions) 2024 2023 Net actuarial loss $ ( 211 ) $ ( 156 ) Prior-service credit 13 14 Net loss recognized in AOCIL $ ( 198 ) $ ( 142 ) The components of net periodic benefit cost recognized were as follows: Year Ended December 31, (In millions) 2024 2023 2022 Interest cost component $ ( 69 ) $ ( 40 ) $ ( 21 ) Expected return on plan assets for the period 93 50 54 Amortization of prior-service credit 1 1 — Amortization of net loss ( 4 ) ( 3 ) — Net periodic pension income recognized (1) $ 21 $ 8 $ 33 (1) Net periodic pension income is recorded within Other income, net. 61 The amount recognized in other comprehensive income was as follows: Year Ended December 31, (In millions) 2024 2023 2022 Net gain (loss) $ ( 64 ) $ 1 $ ( 51 ) Amortization prior-service credit and net loss 3 2 — Other comprehensive income (loss) $ ( 61 ) $ 3 $ ( 51 ) The weighted-average assumptions used to determine the projected benefit obligation and the net periodic benefit cost were as follows: Year Ended December 31, 2024 2023 Weighted average assumptions used to determine benefit obligation at December 31: Discount rate 5.50 % 4.77 % Rate of compensation increase (1) — % — % Weighted average assumptions used to determine net periodic benefit cost for the year ended December 31: Discount rate 5.02 % 5.03 % Rate of compensation increase (1) — % — % Expected long-term rate of return on plan assets 5.91 % 6.10 % (1) No rate of compensation increase was assumed as the plans are frozen to additional participant benefit accruals. The Company’s U.K. Retirement Plans’ assets are invested by its trustees, which include representatives of the Company, to meet each of the U.K. Retirement Plans’ projected future pension liabilities. The target asset allocations for our pension plans are based upon analyzing the timing and amount of projected benefit payments, projected company contributions, the expected returns and risk of the asset classes and the correlation of those returns. The target strategic asset allocation for the U.K. Retirement Plans consists of approximately 75 % liability-driven investments, intended to minimize market and interest rate risks, and approximately 25 % growth and income assets. The actual asset allocations of the U.K. Retirement Plans are in line with the target asset allocations. The fair values of investments held in the pension plans by major asset category were as follows: December 31, (In millions) Level 2024 2023 Cash and cash equivalents Level 1 $ 17 $ 11 Fixed income securities Level 1 2 21 Cash and cash equivalents Level 2 123 — Money market Level 2 — 18 Equities Level 2 93 134 Fixed income securities Level 2 1,719 890 Repurchase agreements (1) Level 2 ( 388 ) ( 266 ) Total net assets in fair value hierarchy $ 1,566 $ 808 Private markets (2) 204 75 Investments, at fair value $ 1,770 $ 883 (1) Repurchase agreements represent short-term borrowings. The plans have an obligation to return the cash after the agreement's term. Due to the agreements' short-term nature, the outstanding balance of the obligation approximates fair value. (2) Investments that are measured using the net asset value per share (or its equivalent) practical expedient are not classified in the fair value hierarchy. The amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total defined benefit pension plan assets. 62 The expected benefit payments for the defined benefit pension plan are summarized below. These estimates are based on assumptions about future events. Actual benefit payments may vary from these estimates. (In millions) 2025 2026 2027 2028 2029 2030-2035 Expected payments $ 103 $ 108 $ 112 $ 112 $ 114 $ 584 The Company’s funding practice is to evaluate the tax and cash position, and the funded status of the plan, in determining the planned contributions. The Company estimates that it will contribute approximately $ 1 million to the U.K. Retirement Plan in 2025. Defined Contribution Plans The Company has defined contribution retirement plans for its U.S. employees and employees of certain foreign subsidiaries. The Company’s contributions for the years ended December 31, 2024, 2023 and 2022, were $ 92 million, $ 66 million and $ 54 million, respectively. Defined contribution costs were primarily recorded in Direct operating expense in the Consolidated Statements of Operations. 16. Restructuring Charges and Other Restructuring costs and other primarily related to severance, including projects to optimize the Company’s finance, human resources and information technology functions, and closing certain corporate and administrative offices, which were not associated with customer attrition. The following table summarizes changes in the restructuring liability, which is included within Other current liabilities in the Consolidated Balance Sheets. (In millions) Balance as of December 31, 2023 $ 7 Charges incurred 27 Payments ( 24 ) Balance as of December 31, 2024 $ 10 The remaining severance liability at December 31, 2024, is expected to be substantially paid within 12 months. 17. Income Taxes Income (loss) before taxes related to the Company’s domestic and foreign operations was as follows: Year Ended December 31, (In millions) 2024 2023 2022 U.S. $ ( 88 ) $ 97 $ 105 Foreign 234 169 159 Income before income taxes $ 146 $ 266 $ 264 63 The components of income tax expense (benefit) are presented in the following table: Year Ended December 31, (In millions) 2024 2023 2022 Current: U.S. federal $ ( 2 ) $ 24 $ 40 U.S state and local — 7 2 Foreign 48 43 29 Total current income tax expense $ 46 $ 74 $ 71 Deferred: U.S. federal $ ( 12 ) $ ( 3 ) $ ( 9 ) U.S state and local ( 1 ) ( 2 ) ( 3 ) Foreign ( 25 ) ( 36 ) 5 Total deferred income tax benefit $ ( 38 ) $ ( 41 ) $ ( 7 ) Total income tax expense $ 8 $ 33 $ 64 Income tax expense (benefit) for 2024, 2023 and 2022 varied from the amount computed by applying the statutory income tax rate to income (loss) before income taxes. The Company’s U.S. federal statutory tax rate was 21% for 2024, 2023 and 2022. A reconciliation of the expected U.S. federal income tax expense (benefit), calculated by applying the federal statutory rate to the Company’s actual income tax expense (benefit) is presented in the following table: Year Ended December 31, (In millions) 2024 2023 2022 Tax expense at U.S. federal statutory tax rate $ 31 $ 56 $ 55 State taxes, net of U.S. federal benefit — 4 ( 1 ) Foreign rate differential ( 11 ) ( 14 ) ( 10 ) Foreign operations (1) 3 5 15 Contribution- and margin-based taxes 5 5 5 Valuation allowances ( 19 ) ( 4 ) ( 3 ) Stock-based compensation 1 1 ( 1 ) Intangible assets (2) — ( 17 ) — Transaction costs 8 — 5 Return to Provision ( 12 ) ( 3 ) ( 4 ) Other 2 — 3 Total income tax expense $ 8 $ 33 $ 64 (1) Foreign operations include the cost of inclusion of foreign income in the U.S. net of foreign taxes and permanent items related to foreign operations. (2) In 2023, the Company recorded an income tax benefit related to the rights to use trade names, trademarks and other intellectual property. The Organisation for Economic Co-operation and Development (“OECD”) issued administrative guidance for the Pillar Two Global Anti-Base Erosion rules (“Pillar Two”), which generally imposes a 15% global minimum tax on multinational companies. Many Pillar Two rules are effective for fiscal years beginning on January 1, 2024, with other aspects to be effective from 2025. The Company continues to monitor legislative developments as the enactments in certain jurisdictions may have an adverse effect on its financial statements. 64 Components of the Net Deferred Tax Asset or Liability The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities are presented in the following table: December 31, (In millions) 2024 2023 Deferred tax assets Net operating loss and other tax attribute carryforwards $ 92 $ 79 Accrued expenses 122 84 Other 22 17 Gross deferred tax assets 236 180 Valuation allowances ( 26 ) ( 50 ) Total deferred tax assets, net of valuation allowance 210 130 Deferred tax liabilities Intangible assets ( 213 ) ( 105 ) Property and equipment ( 118 ) ( 78 ) Pension and other retirement obligations ( 28 ) ( 6 ) Other ( 18 ) ( 8 ) Gross deferred tax liabilities ( 377 ) ( 197 ) Net deferred tax liability $ ( 167 ) $ ( 67 ) The deferred tax asset and deferred tax liability above are reflected in the Consolidated Balance Sheets as follows: December 31, (In millions) 2024 2023 Other long-term assets $ 89 $ 74 Other long-term liabilities ( 256 ) ( 141 ) Net deferred tax liability $ ( 167 ) $ ( 67 ) Investments in Foreign Subsidiaries As of December 31, 2024, the Company maintained a partial indefinite reinvestment assertion on its post- 2017 undistributed foreign earnings. 65 Operating Loss and Tax Credit Carryforwards The Company’s operating loss and tax credit carryforwards were as follows: December 31, (In millions) Expiration Date (1) 2024 2023 Federal net operating losses for all U.S. operations 2030 $ 17 $ 32 Tax effect (before federal benefit) of state net operating losses Various times starting in 2027 3 2 Federal tax credit carryforwards n/a — 4 State tax credit carryforwards Various times starting in 2025 8 7 Foreign net operating losses available to offset future taxable income Various times starting in 2025 326 252 (1) Some credits and losses have unlimited carryforward periods. Valuation Allowances The Company established valuation allowances for some of its deferred tax assets, as it is more likely than not that these assets will not be realized in the foreseeable future. The Company concluded that the remaining deferred tax assets will more likely than not be realized, though this is not assured, and as such no valuation allowances have been provided on these assets. The balances and activity related to the Company’s valuation allowances were as follows: (In millions) Beginning Balance Additions Reductions Ending Balance 2024 (1) $ 50 5 ( 29 ) $ 26 2023 (2) $ 44 16 ( 10 ) $ 50 2022 $ 45 3 ( 4 ) $ 44 (1) In 2024, the Company released $ 22 million of valuation allowances in France. (2) In 2023, due to the PFS Acquisition, the Company acquired $ 8 million of valuation allowances. Unrecognized Tax Benefits A reconciliation of the beginning unrecognized tax benefits balance to the ending balance is presented in the following table: Year Ended December 31, (In millions) 2024 2023 2022 Beginning balance $ 4 $ 3 $ 3 Increases related to positions taken during prior years — 1 1 Reduction due to expiration of statutes of limitations — — ( 1 ) Settlements with tax authorities ( 1 ) — — Gross unrecognized tax benefits $ 3 $ 4 $ 3 Total unrecognized tax benefits that, if recognized, would impact the effective income tax rate as of the end of the year $ 3 $ 4 $ 3 The Company could reflect a reduction to unrecognized tax benefits of approximately $ 3 million over the next 12 months due to statutes of limitations expirations or because tax positions are sustained on audit. 66 The Company is subject to taxation in the U.S. and foreign jurisdictions. As of December 31, 2024, there is no ongoing examinations in the United States. Various foreign tax returns for years after 2009 are open under relevant statutes of limitations and are subject to audit. 18. Commitments and Contingencies The Company is involved, and will continue to be involved, in numerous legal proceedings arising from the conduct of its business. These proceedings may include personal injury claims arising from the transportation and handling of goods, contractual disputes and employment-related claims, including alleged violations of wage and hour laws. The Company establishes accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company reviews and adjusts accruals for loss contingencies quarterly and as additional information becomes available. If a loss is not both probable and reasonably estimable, or if an exposure to a loss exists in excess of the amount accrued, the Company assesses whether there is at least a reasonable possibility that a loss, or additional loss, may have been incurred. If there is a reasonable possibility that a loss, or additional loss, may have been incurred, the Company discloses the estimate of the possible loss or range of loss if it is material and an estimate can be made, or discloses that such an estimate cannot be made. The determination as to whether a loss can reasonably be considered to be possible or probable is based on management’s assessment, together with legal counsel, regarding the ultimate outcome of the matter. Management of the Company believes that it has adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable. Management of the Company does not believe that the ultimate resolution of any matters to which the Company is presently a party will have a material adverse effect on its results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s financial condition, results of operations or cash flows. Legal costs related to these matters are expensed as they are incurred. The Company carries liability and excess umbrella insurance policies that are deemed sufficient to cover potential legal claims arising in the normal course of conducting its operations. In the event the Company is required to satisfy a legal claim outside the scope of the coverage provided by insurance, its financial condition, results of operations or cash flows could be negatively impacted. On June 14, 2024, the Company’s subsidiary GXO Warehouse Company, Inc. entered into a Confidential Settlement Agreement (the “Settlement Agreement”) to settle all claims in connection with a dispute between the Company and one of its customers related to the start-up of the customer’s warehouse that occurred in 2018 (the “Dispute”). A payment under the Settlement Agreement was made by the Company on July 5, 2024. As of July 10, 2024, the Dispute, which was litigated under the caption Lindt et al. v. GXO Warehouse Company, Inc., docket no. 4:22-cv-00384-BP, in Federal District Court for the Western District of Missouri (the “Court”), was dismissed with prejudice with each side to bear their own costs and fees, and the Court retained jurisdiction to enforce the terms of the Settlement Agreement. Among other things in the Settlement Agreement, the parties each denied the allegations and counterclaims asserted in the Dispute and agreed to a mutual release of claims arising from, under or otherwise in connection with their prior business relationship and the Dispute, in exchange for a payment by the Company of $ 45 million. The Company intends to pursue reimbursement in connection with this Dispute under its existing insurance policies. The Company recognized $ 59 million expense for the year ended December 31, 2024, for the settlement, associated legal fees, and other related expenses. On July 2, 2024, the Italian authorities launched an investigation into the deductibility of value-added tax payments by the Company to certain third-party cooperative labor providers for their services from 2017 through 2023. The alleged amount is approximately € 84 million ($ 87 million as of December 31, 2024). It is probable that a loss may be incurred; however, the possible range of losses is not reasonably estimable given the status of the ongoing investigation. The Company is cooperating in this matter and believes that it has a number of credible defenses. During 2024, the Company deposited a total of € 68 million ($ 70 million as of December 31, 2024) into a designated bank account in connection with the ongoing investigation. This amount is classified as restricted cash under “Other 67 Long-Term Assets” on the Consolidated Balance Sheets. In January 2025, the Company deposited the additional restricted cash amount of approximately € 16 million ($ 17 million). 19. Subsequent Events Share Repurchase Program On February 18, 2025, the GXO board of directors authorized the repurchase by the Company of up to $ 500 million (the “Repurchase Plan”) of its common stock, effective immediately. The Repurchase Plan permits shares of common stock to be repurchased from time to time in management’s discretion, through a variety of methods, including a 10b5-1 trading plan, open market purchases, privately negotiated transactions or otherwise. The timing and number of shares of common stock repurchased will depend on a variety of factors, including price, general business and market conditions, alternative investment opportunities and funding considerations. The Company intends to fund the repurchases from existing cash, borrowings on the Company’s revolving credit facility and/or other financing sources. The Repurchase Plan does not obligate the Company to repurchase any specific number of shares of common stock and may be suspended or discontinued at any time. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. None.