GXO Logistics, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS GXO Logistics, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, (Dollars in millions, shares in thousands, except per share amounts) 2025 2024 Revenue $ 2,977 $ 2,456 Direct operating expense 2,558 2,056 Selling, general and administrative expense 261 249 Depreciation and amortization expense 109 92 Transaction and integration costs 22 19 Restructuring costs and other 17 16 Regulatory matter and litigation expense 66 63 Operating loss ( 56 ) ( 39 ) Other income (expense), net ( 5 ) 6 Interest expense, net ( 32 ) ( 13 ) Loss before income taxes ( 93 ) ( 46 ) Income tax (expense) benefit ( 2 ) 10 Net loss ( 95 ) ( 36 ) Net income attributable to Noncontrolling Interests (“NCI”) ( 1 ) ( 1 ) Net loss attributable to GXO $ ( 96 ) $ ( 37 ) Loss per share Basic $ ( 0.81 ) $ ( 0.31 ) Diluted $ ( 0.81 ) $ ( 0.31 ) Weighted-average shares used in computation of loss per share Basic 118,991 119,273 Diluted 118,991 119,273 See accompanying Notes to Condensed Consolidated Financial Statements. 2 GXO Logistics, Inc. Condensed Consolidated Statements of Comprehensive Loss (Unaudited) Three Months Ended March 31, (In millions) 2025 2024 Net loss $ ( 95 ) $ ( 36 ) Other comprehensive income (loss), net of tax Foreign currency translation adjustments 74 ( 14 ) Cash flow hedges ( 1 ) 1 Pension plans ( 4 ) 2 Other comprehensive income (loss), net of tax 69 ( 11 ) Comprehensive loss, net of tax ( 26 ) ( 47 ) Less: Comprehensive income attributable to NCI 2 — Comprehensive loss attributable to GXO $ ( 28 ) $ ( 47 ) See accompanying Notes to Condensed Consolidated Financial Statements. 3 GXO Logistics, Inc. Condensed Consolidated Balance Sheets (Unaudited) March 31, December 31, (Dollars in millions, shares in thousands, except per share amounts) 2025 2024 ASSETS Current assets Cash and cash equivalents $ 288 $ 413 Accounts receivable, net of allowance of $ 20 and $ 15 1,895 1,799 Other current assets 446 429 Total current assets 2,629 2,641 Long-term assets Property and equipment, net of accumulated depreciation of $ 1,842 and $ 1,732 1,216 1,160 Operating lease assets 2,366 2,329 Goodwill 3,623 3,549 Intangible assets, net of accumulated amortization of $ 659 and $ 618 977 986 Other long-term assets 511 601 Total long-term assets 8,693 8,625 Total assets $ 11,322 $ 11,266 LIABILITIES AND EQUITY Current liabilities Accounts payable $ 720 $ 776 Accrued expenses 1,398 1,271 Current debt 175 110 Current operating lease liabilities 681 647 Other current liabilities 396 385 Total current liabilities 3,370 3,189 Long-term liabilities Long-term debt 2,545 2,521 Long-term operating lease liabilities 1,908 1,898 Other long-term liabilities 595 623 Total long-term liabilities 5,048 5,042 Commitments and Contingencies (Note 14) Stockholders’ Equity Common Stock, $ 0.01 par value per share; 300,000 shares authorized, 119,721 and 119,496 shares issued and 116,955 and 119,496 shares outstanding, respectively 1 1 Treasury stock, at cost; 2,766 and 0 shares, respectively ( 111 ) — Preferred Stock, $ 0.01 par value per share; 10,000 shares authorized, 0 issued and outstanding — — Additional Paid-In Capital (“APIC”) 2,635 2,629 Retained earnings 590 686 Accumulated Other Comprehensive Income (Loss) (“AOCIL”) ( 245 ) ( 313 ) Total stockholders’ equity before NCI 2,870 3,003 NCI 34 32 Total equity 2,904 3,035 Total liabilities and equity $ 11,322 $ 11,266 See accompanying Notes to Condensed Consolidated Financial Statements. 4 GXO Logistics, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, (In millions) 2025 2024 Cash flows from operating activities: Net loss $ ( 95 ) $ ( 36 ) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization expense 109 92 Stock-based compensation expense 12 8 Deferred tax benefit ( 10 ) ( 2 ) Other 5 14 Changes in operating assets and liabilities Accounts receivable ( 49 ) 70 Other assets 91 ( 42 ) Accounts payable ( 88 ) ( 106 ) Accrued expenses and other liabilities 54 52 Net cash provided by operating activities 29 50 Cash flows from investing activities: Capital expenditures ( 78 ) ( 73 ) Proceeds from sale of property and equipment 1 6 Purchase of Wincanton plc shares — ( 15 ) Net cash used in investing activities ( 77 ) ( 82 ) Cash flows from financing activities: Common stock repurchased ( 106 ) — Net borrowings under revolving credit facilities 56 — Repayments of finance lease obligations ( 11 ) ( 8 ) Taxes paid related to net share settlement of equity awards ( 6 ) ( 4 ) Other 1 4 Net cash used in financing activities ( 66 ) ( 8 ) Effect of exchange rates on cash and cash equivalents 11 ( 5 ) Net decrease in cash, restricted cash and cash equivalents ( 103 ) ( 45 ) Cash, restricted cash and cash equivalents, beginning of period 485 470 Cash, restricted cash and cash equivalents, end of period $ 382 $ 425 Reconciliation of cash, restricted cash and cash equivalents Cash and cash equivalents $ 288 $ 423 Restricted Cash (included in Current assets) 92 — Restricted Cash (included in Other long-term assets) 2 2 Total cash, restricted cash and cash equivalents $ 382 $ 425 Non-cash financing activities: Unsettled stock repurchases for which trades occurred $ 4 $ — Excise tax liability related to stock repurchases $ 1 $ — See accompanying Notes to Condensed Consolidated Financial Statements. 5 GXO Logistics, Inc. Condensed Consolidated Statements of Changes in Equity (Unaudited) Common Stock APIC Retained Earnings AOCIL Equity Before NCI NCI Total Equity (Shares in thousands, dollars in millions) Shares Amount Treasury Stock Balance as of December 31, 2024 119,496 $ 1 $ — $ 2,629 $ 686 $ ( 313 ) $ 3,003 $ 32 $ 3,035 Net income (loss) — — — — ( 96 ) — ( 96 ) 1 ( 95 ) Other comprehensive income — — — — — 68 68 1 69 Stock-based compensation — — — 12 — — 12 — 12 Vesting of stock compensation awards 370 — — — — — — — — Tax withholding on vesting of stock-based compensation awards ( 145 ) — — ( 6 ) — — ( 6 ) — ( 6 ) Common stock repurchased ( 2,766 ) — ( 111 ) — — — ( 111 ) — ( 111 ) Balance as of March 31, 2025 116,955 $ 1 $ ( 111 ) $ 2,635 $ 590 $ ( 245 ) $ 2,870 $ 34 $ 2,904 Common Stock APIC Retained Earnings AOCIL Equity Before NCI NCI Total Equity (Shares in thousands, dollars in millions) Shares Amount Balance as of December 31, 2023 119,057 $ 1 $ 2,598 $ 552 $ ( 239 ) $ 2,912 $ 34 $ 2,946 Net income (loss) — — — ( 37 ) — ( 37 ) 1 ( 36 ) Other comprehensive loss — — — — ( 10 ) ( 10 ) ( 1 ) ( 11 ) Stock-based compensation — — 8 — — 8 — 8 Vesting of stock compensation awards 394 — — — — — — — Tax withholding on vesting of stock-based compensation awards ( 83 ) — ( 4 ) — — ( 4 ) — ( 4 ) Balance as of March 31, 2024 119,368 $ 1 $ 2,602 $ 515 $ ( 249 ) $ 2,869 $ 34 $ 2,903 See accompanying Notes to Condensed Consolidated Financial Statements. 6 GXO Logistics, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Basis of Presentation and Significant Accounting Policies Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements of GXO Logistics, Inc. (“GXO” or the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. The Company’s Condensed Consolidated Financial Statements include the accounts of GXO and its majority-owned subsidiaries and variable interest entities of which the Company is the primary beneficiary. The Company has eliminated intercompany accounts and transactions. The accompanying Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2024. Certain amounts reported for prior periods have been reclassified to conform to the current period’s presentation. The Company presents its operations as one reportable segment. Accounting Pronouncements Issued But Not Yet Adopted In March 2024, the SEC adopted final rules designed to enhance public company disclosures related to the risks and impacts of climate-related matters. The new rules include disclosures relating to climate-related risks and risk management, as well as the board and management’s governance of such risks. In addition, the rules include requirements to disclose the financial effects of severe weather events and other natural conditions in the audited financial statements. Larger registrants will also be required to disclose information about greenhouse gas emissions, which will be subject to a phased-in assurance requirement. The disclosures are required for annual periods ending December 31, 2025. In April 2024, the SEC issued an order staying the implementation of the new climate-related disclosure rules pending completion of judicial review of consolidated changes to the rules by the U.S. Court of Appeals for the Eighth Circuit. In February 2025, the SEC requested that the court not schedule the matter for argument in order to allow time for the SEC to determine appropriate next steps. On March 27, 2025, the SEC voted to end its legal defense of the final rules, although judicial review remains ongoing. The Company continues to monitor developments and evaluate the potential impact of these rules on its Consolidated Financial Statements. 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 the disclosure requirements about income taxes paid and the rate reconciliation in 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. 7 2. Revenue Recognition Revenue disaggregated by geographical area was as follows: Three Months Ended March 31, (In millions) 2025 2024 United Kingdom $ 1,391 $ 913 United States 752 747 Netherlands 232 218 France 186 200 Spain 143 129 Italy 95 93 Other 178 156 Total $ 2,977 $ 2,456 The Company’s revenue can also be disaggregated by various verticals, reflecting the customer’s principal industry. Revenue disaggregated by industry was as follows: Three Months Ended March 31, (In millions) 2025 2024 Omnichannel retail $ 1,422 $ 1,022 Technology and consumer electronics 393 382 Industrial and manufacturing 362 266 Food and beverage 314 316 Consumer packaged goods 284 295 Other 202 175 Total $ 2,977 $ 2,456 Contract Assets and Liabilities The contract asset and contract liability balances from contracts with customers were as follows: March 31, December 31, (In millions) 2025 2024 Contract assets and contract costs included in: Other current assets $ 32 $ 37 Other long-term assets 200 196 Total contract assets $ 232 $ 233 Contract liabilities included in: Other current liabilities $ 276 $ 272 Other long-term liabilities 86 128 Total contract liabilities $ 362 $ 400 Revenue recognized included the following: Three Months Ended March 31, (In millions) 2025 2024 Amounts included in the beginning of year contract liability balance $ 197 $ 105 8 3. 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”). The CODM uses Adjusted EBITDA to communicate performance targets to the segment managers, allocate resources to the segments, and to monitor segment performance. Additionally, the CODM considers the performance of this measure against planned and forecasted amounts to make investing and resource allocation decisions. The actual results are used in assessing performance of the Company and in establishing management’s compensation. For disclosure purposes, we aggregate these three operating segments into one reportable segment. The Company’s segment results were as follows: Three Months Ended March 31, (In millions) 2025 2024 Revenue $ 2,977 $ 2,456 Direct operating expense 2,558 2,056 Selling, general and administrative expense (1) 246 236 Other (income), net (2) ( 5 ) ( 3 ) Segment Adjusted EBITDA $ 178 $ 167 Less: Corporate expenses (3) 15 13 Depreciation expense 80 73 Amortization of intangible assets acquired 29 19 Transaction and integration costs 22 19 Restructuring costs and other 17 16 Regulatory matter and litigation expense 66 63 Unrealized (gain) loss on foreign currency contracts (4) 10 ( 3 ) Interest expense, net 32 13 Loss before income taxes ( 93 ) ( 46 ) Income tax (expense) benefit ( 2 ) 10 Net loss $ ( 95 ) $ ( 36 ) (1) Excludes unallocated corporate expenses. (2) Other income, net excluding unrealized (gain) loss on foreign currency contracts. (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 Condensed Consolidated Statements of Operations. (4) Included in Other income, net in the Condensed Consolidated Statements of Operations . 9 4. Leases The Company has operating leases for real estate, warehouse equipment, trucks, trailers, containers and material handling equipment. In addition, the Company has finance leases for warehouse equipment. The following amounts were recorded in the Condensed Consolidated Balance Sheets related to leases: March 31, December 31, (In millions) 2025 2024 Operating leases: Operating lease assets $ 2,366 $ 2,329 Current operating lease liabilities $ 681 $ 647 Long-term operating lease liabilities 1,908 1,898 Total operating lease liabilities $ 2,589 $ 2,545 Finance leases: Property and equipment, net $ 274 $ 239 Current debt $ 47 $ 39 Long-term debt 265 237 Total finance lease liabilities $ 312 $ 276 The components of lease expense recorded in the Condensed Consolidated Statements of Operations were as follows: Three Months Ended March 31, (In millions) 2025 2024 Operating leases: Operating lease cost $ 206 $ 183 Short-term lease cost 47 49 Variable lease cost 44 40 Total operating lease cost (1) $ 297 $ 272 Finance leases: Amortization of leased assets $ 7 $ 7 Interest expense on lease liabilities 4 1 Total finance lease cost $ 11 $ 8 Total operating and finance lease cost $ 308 $ 280 (1) Operating lease cost is primarily included in Direct operating expense in the Condensed Consolidated Statements of Operations. Supplemental cash flow information was as follows: Three Months Ended March 31, (In millions) 2025 2024 Leased assets obtained in exchange for new lease obligations: Operating leases $ 197 $ 167 Finance leases 36 — 10 5. Acquisition Wincanton Acquisition On April 29, 2024, the Company completed the acquisition of Wincanton plc for total consideration of approximately £ 762 million ($ 958 million as of acquisition date) (the “Wincanton Acquisition”). The Wincanton Acquisition is subject to a review by the Competition and Markets Authority (the “CMA”) in the U.K., which is expected to be completed by June 25, 2025. In connection with the Wincanton Acquisition, the Company incurred transaction costs of $ 21 million and $ 15 million for the three months ended March 31, 2025 and 2024, respectively, which were included in Transaction and integration costs in the Condensed Consolidated Statements of Operations. 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 237 Other current assets 63 Total current assets 390 Long-term assets Property and equipment 140 Operating lease assets 163 Intangible assets (1) 529 Other long-term assets 153 Total long-term assets 985 Total assets $ 1,375 LIABILITIES Current liabilities Accounts payable $ 67 Accrued expenses 307 Current debt 10 Current operating lease liabilities 22 Other current liabilities 125 Total current liabilities 531 Long-term liabilities Long-term debt 211 Long-term operating lease liabilities 141 Other long-term liabilities 241 Total long-term liabilities 593 Total liabilities $ 1,124 Net assets purchased $ 251 Purchase price $ 958 Goodwill recorded (2) $ 707 (1) The Company acquired $ 529 million of intangible assets, comprised of customer relationships, trade names, and intellectual property with weighted-average useful lives of 12.5 years. (2) 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. 11 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, 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. 6. Goodwill The following table presents the changes in Goodwill for the three months ended March 31, 2025: (In millions) Balance as of December 31, 2024 $ 3,549 Acquisition (1) ( 19 ) Impact of foreign exchange translation (2) 93 Balance as of March 31, 2025 $ 3,623 (1) This includes a $ 19 million goodwill reduction for the preliminary purchase price allocation for the Wincanton Acquisition. (2) Changes to goodwill amounts resulting from foreign currency translation after the acquisition date are presented as the impact of foreign exchange translation. As of March 31, 2025 and December 31, 2024, there were no accumulated goodwill impairment losses. 7. Debt and Financing Arrangements The following table summarizes the carrying value of the Company’s debt: March 31, December 31, (In millions, except percentages) Rate (1) 2025 2024 Unsecured notes due 2026 (2) 1.65 % $ 400 $ 399 Unsecured notes due 2029 (3) 6.25 % 593 593 Unsecured notes due 2031 (4) 2.65 % 397 397 Unsecured notes due 2034 (5) 6.50 % 490 490 Three-Year Term Loan due 2025 5.67 % 50 50 Five-Year Term Loan due 2027 (6) 5.80 % 399 399 Finance leases and other debt Various 391 303 Total Debt 2,720 2,631 Less: Current debt 175 110 Total Long-term debt $ 2,545 $ 2,521 (1) Interest rate as of March 31, 2025. (2) Net of unamortized discount and debt issuance costs of $ 0 million and $ 1 million as of March 31, 2025 and December 31, 2024, respectively. (3) Net of unamortized discount and debt issuance costs of $ 7 million as of March 31, 2025 and December 31, 2024. (4) Net of unamortized discount and debt issuance costs of $ 3 million as of March 31, 2025 and December 31, 2024. (5) Net of unamortized discount and debt issuance costs of $ 10 million as of March 31, 2025 and December 31, 2024. (6) Net of unamortized debt issuance costs of $ 1 million as of March 31, 2025 and December 31, 2024. Revolving Credit Facilities The Company has a five-year unsecured, multicurrency revolving credit facility expiring in 2029 (the “Revolving Credit Agreement”). The aggregate commitment of all lenders under the Revolving Credit Agreement is equal to $ 800 million, of which $ 100 million is available for the issuance of letters of credit. As of March 31, 2025, and 12 December 31, 2024, no amounts were outstanding under the Revolving Credit Agreement and letters of credit were $ 1 million under this agreement. 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 ($ 226 million as of March 31, 2025) in aggregate at any time, expiring in March 2027. Loans under the Wincanton Revolving Credit Agreement bear interest at daily simple Sterling Overnight Index Average rate plus a margin. As of March 31, 2025, and December 31, 2024, the Company had £ 59 million ($ 76 million as of March 31, 2025) and £ 15 million ($ 19 million as of December 31, 2024) of borrowings outstanding under the Wincanton Revolving Credit Agreement, respectively. Covenants and Compliance The covenants for the Company’s debt securities, 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 March 31, 2025, the Company complied with the covenants contained in its debt and financing arrangements. Factoring Programs The Company sells certain of its trade receivables on a non-recourse basis to third-party financial institutions under various factoring agreements. Information related to the trade receivables sold was as follows: Three Months Ended March 31, (In millions) 2025 2024 Receivables sold in period $ 602 $ 291 Cash consideration 598 289 Net cash provided by (used in) operating cash flows ( 12 ) 3 8. 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; • 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, generally 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 March 31, 2025 and December 31, 2024, due to their short-term nature. 13 Debt The fair value of debt was as follows: March 31, 2025 December 31, 2024 (In millions) Level Fair Value Carrying Value Fair Value Carrying Value Unsecured notes due 2026 2 $ 384 $ 400 $ 380 $ 399 Unsecured notes due 2029 2 619 593 617 593 Unsecured notes due 2031 2 341 397 336 397 Unsecured notes due 2034 2 510 490 514 490 Three-Year Term Loan due 2025 2 49 50 49 50 Five-Year Term Loan due 2027 2 394 399 394 399 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 notional amount and fair value of derivative instruments were as follows: March 31, 2025 December 31, 2024 Balance Sheet Location (In millions) Notional Amount Fair Value Notional Amount Fair Value Derivatives designated as net investment hedges: Cross-currency swap agreements (1) $ 100 $ 2 $ 270 $ 12 Other current assets Cross-currency swap agreements 487 8 1,177 48 Other long-term assets Cross-currency swap agreements (2)(3) 272 11 98 7 Other current liabilities Cross-currency swap agreements (3) 1,165 23 325 2 Other long-term liabilities Derivatives designated as cash flow hedge: Interest rate swaps $ 125 $ 2 $ 125 $ 3 Other long-term assets Derivatives not designated as hedges: Foreign currency option contracts (4) $ 330 $ 4 $ 300 $ 13 Other current assets Foreign currency option contracts 138 3 26 — Other current liabilities Foreign currency forward contracts 152 — — — Other current assets Foreign currency forward contracts 19 — 125 1 Other current liabilities (1) In February 2025, the Company terminated a cross-currency swap with a notional amount of $ 100 million scheduled to mature in November 2025. (2) In February 2025, the Company amended one cross-currency swap with a notional amount of $ 98 million to $ 102 million scheduled to mature in December 2025. (3) In February 2025, the Company entered into three cross-currency swap agreements with an aggregate notional amount of $ 250 million, of which $ 100 million is scheduled to mature in November 2025 and $ 150 million is scheduled to mature in November 2030. (4) As of March 31, 2025, two foreign currency option contracts not designated as hedges had an aggregate notional amount of $ 12 million and fair value of zero . As of March 31, 2025 and December 31, 2024, 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. 14 The effect of hedges on AOCIL and in the Condensed Consolidated Statements of Operations was as follows: Three Months Ended March 31, 2025 Three Months Ended March 31, 2024 (In millions) Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative Gain (Loss) Reclassified from AOCIL into Net Income (1) Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1) Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivative Gain (Loss) Reclassified from AOCIL into Net Income (1) Gain (Loss) Recognized in Net Income on Derivative (Excluded from effectiveness testing) (1) Derivatives designated as net investment hedges Cross-currency swap agreements $ ( 76 ) $ ( 3 ) $ 1 $ 32 $ ( 2 ) $ 1 Derivatives designated as cash flow hedges Interest rate swaps $ ( 1 ) $ — $ — $ 2 $ — $ — (1) Amounts reclassified to Net income are reported within Interest expense, net in the Condensed Consolidated Statements of Operations. Derivatives Not Designated as Hedges Gains and losses recognized in Other income, net in the Condensed Consolidated Statements of Operations for foreign currency options and forward contracts were as follows: Three Months Ended March 31, (In millions) 2025 2024 Foreign currency gain (loss) on foreign currency contracts $ ( 8 ) $ 2 9. Earnings per Share The computations of basic and diluted earnings per share were as follows: Three Months Ended March 31, (Dollars in millions, shares in thousands, except per share amounts) 2025 2024 Net loss attributable to common shares $ ( 96 ) $ ( 37 ) Basic weighted-average common shares 118,991 119,273 Diluted weighted-average common shares 118,991 119,273 Basic loss per share $ ( 0.81 ) $ ( 0.31 ) Diluted loss per share $ ( 0.81 ) $ ( 0.31 ) Antidilutive shares excluded from diluted weighted-average common shares 3,418 2,692 15 10. Stockholders’ Equity Stock Repurchase Plan On February 18, 2025, the Company’s board of directors authorized and announced the repurchase of up to $ 500 million (the “Repurchase Plan”) of its common stock. 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 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. The repurchase of shares of the Company’s common stock is recorded as treasury stock within equity and is accounted for under the cost method inclusive of share repurchase costs and excise tax on share repurchases in excess of issuances. During the three months ended March 31, 2025, the Company repurchased approximately 2.8 million shares of its common stock for an aggregate purchase price of $ 111 million, including share repurchase costs and excise tax. Accumulated Other Comprehensive Income - Loss The following tables summarize 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, 2024 $ ( 195 ) $ 31 $ 4 $ ( 155 ) $ 2 $ ( 313 ) Other comprehensive income (loss) before reclassifications 131 ( 76 ) ( 1 ) ( 6 ) ( 1 ) 47 Amounts reclassified to net income — 2 — 1 — 3 Tax amounts — 17 — 1 — 18 Other comprehensive income (loss), net of tax 131 ( 57 ) ( 1 ) ( 4 ) ( 1 ) 68 As of March 31, 2025 $ ( 64 ) $ ( 26 ) $ 3 $ ( 159 ) $ 1 $ ( 245 ) 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, 2023 $ ( 83 ) $ ( 47 ) $ 5 $ ( 113 ) $ ( 1 ) $ ( 239 ) Other comprehensive income (loss) before reclassifications ( 41 ) 33 1 1 1 ( 5 ) Amounts reclassified to net income (loss) — 1 — 1 — 2 Tax amounts — ( 7 ) — — — ( 7 ) Other comprehensive income (loss), net of tax ( 41 ) 27 1 2 1 ( 10 ) As of March 31, 2024 $ ( 124 ) $ ( 20 ) $ 6 $ ( 111 ) $ — $ ( 249 ) 16 11. Employee Benefit Plans Defined Benefit Plans The Company sponsors defined benefit pension schemes in the U.K. (the “U.K. Retirement Plans”). The funded status of the U.K. Retirement Plans was recorded in Other long-term assets in the Condensed Consolidated Balance Sheets. The U.K. Retirement Plans do not allow for new plan participants or additional benefit accruals. The Company considers other international retirement plans to be immaterial to its Condensed Consolidated Financial Statements and they are excluded from the below disclosure. Components of the net periodic benefit income recognized under the U.K. Retirement Plans were as follows: Three Months Ended March 31, (In millions) 2025 2024 Interest cost $ ( 21 ) $ ( 9 ) Expected return on plan assets 27 13 Amortization of prior service cost — — Amortization of net loss ( 1 ) ( 1 ) Net periodic pension income (1) $ 5 $ 3 (1) Net periodic pension income is recorded in Other income, net in the Condensed Consolidated Statements of Operations. Defined Contribution Plans The Company has defined contribution retirement plans for its U.S. employees and employees of certain foreign subsidiaries. Defined contribution costs were as follows: Three Months Ended March 31, (In millions) 2025 2024 Defined contribution costs (1) $ 31 $ 17 (1) Defined contribution costs were primarily recorded in Direct operating expense in the Condensed Consolidated Statements of Operations. 12. Restructuring Costs and Other Restructuring costs 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 in other current liabilities in the Condensed Consolidated Balance Sheets: (In millions) Balance as of December 31, 2024 $ 10 Charges incurred 17 Payments ( 7 ) Balance as of March 31, 2025 $ 20 As of March 31, 2025, $ 16 million of the restructuring liability is expected to be paid within the next 12 months. 13. Income Taxes Income tax for the three months ended March 31, 2025, was a $ 2 million income tax expense compared with a $ 10 million income tax benefit for the same period in 2024. The Company’s effective tax rate for the three months 17 ended March 31, 2025, was an expense on a pre-tax loss of ( 2.7 )%, compared to a benefit on a pre-tax loss of 21.1 % for the same period in 2024. The change to the Company’s effective tax rate was primarily driven by non-deductible transaction costs and a non-deductible regulatory matter. In 2021, the Organization 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 has reviewed its global legal entity structure and considered all the jurisdictions for which the Company is potentially subject to Pillar Two. The Company has determined that most of its entities are not subject to Pillar Two, because these jurisdictions either are subject to tax in excess of 15%, can apply a safe-harbor, or the entities are organized in jurisdictions that have not (yet) fully enacted Pillar Two. For the three months ended March 31, 2025 and 2024, Pillar Two did not have a material impact on the Company’s income tax expense/benefit. Pillar Two did not have a significant impact on the Company’s fiscal 2024 and the Company currently does not expect it to have a significant impact on its fiscal 2025 income tax expense. 14. 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 July 2, 2024, the Italian authorities launched an investigation into the deductibility of value-added tax payments by the Company to certain third-party service providers. The challenged amount is € 84 million ($ 91 million as of March 31, 2025). As of March 31, 2025, the Company deposited € 84 million ($ 91 million as of March 31, 2025) into a designated bank account in connection with the ongoing investigation. This amount is classified as restricted cash under “Current Assets” in the Condensed Consolidated Balance Sheets. In April 2025, the Company made a partial payment of € 15 million ($ 17 million) to the Italian authorities funded from the designated bank account reducing the restricted cash balance. For the three months ended March 31, 2025, the Company accrued € 61 million ($ 66 million) of expense associated with this contingency which is recorded within the Regulatory matter and litigation expense line in the Condensed Consolidated Statements of Operations for the probable and reasonably 18 estimable loss. The Company expects to reach a settlement agreement in 2025 consistent with the amount recorded for the three months ended March 31, 2025. 19