Welcome to the GXO first quarter 2025 earnings conference call and webcast. My name is Morgan, and I will be your operator for today's call. At this time, all participants are in the listen-only mode. Later, we will conduct a question-and-answer session. If anyone should require operator assistance during the conference, please press star zero on your cell phone keypad. Please note that this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the company regarding forward-looking statements, the use of non-GAAP financial measures, and the company's guidance. During this call, the company will be making certain forward-looking statements within the meaning of applicable securities law, which, by their nature, involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those projected in the forward-looking statements. A discussion of factors that could cause actual results to differ materially is contained in the company's SEC filings. The forward-looking statements in the company's earnings release or made on this call are made only as of today, and the company has no obligation to update any of these forward-looking statements except to the extent required by law. The company also may refer to certain non-GAAP financial measures as defined under applicable SEC rules during this call. Reconciliations of such non-GAAP financial measures, the most comparable GAAP measures, are contained in the company's earnings release and the related financial tables that are on its website. Unless otherwise stated, all results reported on this call are reported in United States dollars. The company will also remind you that its guidance incorporates business trends to date and what it believes today to be appropriate assumptions. The company's results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes in global economic conditions, and consumer demand and spending, labor market and global supply chain constraints, inflationary pressures, and the various factors detailed in its filings with the SEC. It is not possible for the company to actually predict demand for its services, and therefore, actual results could differ materially from guidance. You can find a copy of the company's earnings release, which contains additional important information regarding forward-looking statements and non-GAAP financial measures, in the investors' section on the company's website. I will now turn the call over to GXO's Chief Executive Officer, Malcolm Wilson. Mr. Wilson, you may begin. Thanks, Morgan, and good morning, everyone. I appreciate you joining us today for our first quarter 2025 earnings call. With me in Greenwich are Baris Oran, our Chief Financial Officer, and Kristine Kubacki, our Chief Strategy Officer. For the first quarter of 2025, GXO delivered a strong set of results against a dynamic macro backdrop. We generated revenue of $3 billion, which was up 21% year- over- year, and we beat expectations on adjusted EBITDA. Our new business wins in the quarter were $228 million, and our sales pipeline, excluding Wincanton, grew to a three-year high of $2.5 billion. I'd especially like to highlight the progress we've made in developing our business in the healthcare sector. We finalized a landmark deal with the U.K. National Health Service supply chain. This is our largest ever contract and carries a total lifetime value of about $2.5 billion. We'll commence operations for the NHS early in the third quarter. We've also recently signed other exciting healthcare contracts, most notably with Siemens Healthineers, and we have a rapidly growing pipeline of opportunities in the space. Our success in developing our healthcare business is a direct result of our acquisition of Clipper Logistics, which brought with it strong relationships within the sector, and it's proof positive that our M&A strategy to target companies in growth verticals is working. We expect to make similar progress in target verticals like aerospace and defense and industrials, starting with our European business as a result of our integration of Wincanton. The Wincanton business is trading well and performing as expected. We're very pleased to be nearing the conclusion of the CMA process, and we expect that over the coming couple of months, we'll be able to start bringing the two businesses together and realizing our target $58 million of cost synergies. We also continue to grow with our existing customer base. Feedback from our customer interviews reflects that our customer satisfaction has risen nearly 10% since last year, which supports our continuing growth. New business signed with existing customers has increased year- over- year, and we expanded our relationships with Boeing, Kimberly-Clark, Mitsubishi, and Schneider Electric. Our sales pipeline, excluding Wincanton, is up 13% from last year. Our pipeline is diversified across our regions and verticals, which sets us up for a balanced growth and reinforces the resilience of our business model. Before I pass the mic to Baris to walk you through our detailed financials for the quarter, I'd like to touch on our outlook for the remainder of 2025. We're operating in an environment that demands unprecedented agility from global supply chains. The structural tailwinds of outsourcing, automation, and e-commerce continue to drive our industry's growth, illustrating that the need for our solutions is more important than ever. For the first quarter, 41% of our new wins are in newly outsourced business, 39% involve automation, and 42% come from e-commerce. On top of this, the complexity related to potential tariffs has created a new array of challenges for our customers, including rising costs, a need to rapidly react to changing prices, and fluctuating inventory levels. Our customers are managing through this while, most importantly of all, continuing to serve their end customers seamlessly. The range of activities we're undertaking to support our customers in this environment is evolving in real time and includes everything from strategic reviews of how to manage volatility to value-added services like retagging and rebagging millions of SKUs that are already in circulation. In parallel, we're still innovating. We're making rapid progress towards our vision of the tech-enabled warehouse, which Kristine will update you on in a moment. In a world with increasing complex trade dynamics, the need for brands all over the world to rely on a partner who can help them navigate the global supply chain cost-effectively has never been higher. GXO's combination of cutting-edge technology and our long-term contractual business model with a customer base that's diversified by both geography and vertical gives us confidence in our long-term growth. We've secured over $700 million of incremental revenue for 2025, plus another $300 million already for 2026. We've delivered a strong first quarter, and taking into account the volatility of the macroeconomic environment, the contractual nature of our business, and our diverse geographical footprint, we're reaffirming our guidance for organic growth and adjusted EBITDA for the full year 2025. With that, I'll pass you over to Baris. Baris, over to you. Thanks, Malcolm. Good morning, everyone. As Malcolm said, in the first quarter of 2025, GXO delivered revenue of $3 billion, growing 21% year- over- year, of which 3% was organic. All three of our regions delivered organic growth, led by our continental European business. We already have an established foothold in many of our global customers who are looking to expand in Europe over the coming years, and we see more momentum in this region than we did just a year ago. As Malcolm mentioned, we are also excited by our progress in newer geographies like Germany and newer verticals like healthcare. We're pleased that our M&A strategy is working. Our first quarter adjusted EBITDA was $163 million. Our strong operating results were primarily driven by a faster-than-anticipated ramp-up of new facilities and off-site level productivity initiatives. We recorded a net loss of $95 million, which was primarily driven by a one-time charge related to a regulatory matter, as well as transaction and restructuring costs. Excluding these charges, our adjusted net income was $34 million. As we highlighted earlier, our operational teams are implementing a number of sizable automated startups. These new sites are maturing ahead of expectations. We are also working on a number of initiatives to improve operating productivity across our sites. These efforts have been one of the main drivers of our strong operating results in the first quarter. We expect to see their impact accelerate sequentially every quarter of this year, as in parallel, the drag from the customer footprint realignments that we have called out last quarter are moderating into the second quarter, which improves our visibility. Our integration of Wincanton will provide another catalyst for group-adjusted EBITDA growth. Our first quarter free cash flow reflected normal seasonality as well as the Wincanton acquisition. We are on track to deliver our target of 25%-35% adjusted EBITDA to free cash flow conversion for the full year. Our operating return on invested capital remains well above our target at 45%, including Wincanton, and has risen 12 percentage points from the first quarter of 2024. This improvement demonstrates our ability to invest back into our business with high returns. In February, our board authorized a $500 million share buyback, and during the quarter, we acted on this authorization and made strategic purchases of 2.8 million shares, or 2.4% of shares outstanding. We remain laser-focused on our capital allocation and continue to prioritize investments in technologies and services that drive the greatest returns. As our focus in 2025 will be on accelerating our organic growth and the integration of Wincanton, we would like to reiterate that M&A is not in our near-term agenda. As a reminder, for 2025, we continue to expect to deliver organic revenue growth of 3%-6%, adjusted EBITDA of $840 million-$860 million, adjusted diluted earnings per share of $2.40-$2.60, and adjusted EBITDA to free cash flow conversion of 25%-35% in line with our historical performance. We are able to deliver these results in spite of the macro volatility as a result of our geographic diversification and our long-term contractual business model, which is designed to provide the maximum flexibility for our customers while protecting GXO from economic fluctuations that are outside of our control. GXO is a resilient business, as we have proven over the last four years as a public company, and we are well-positioned to deliver value for our customers and our shareholders. With that, I'll pass the mic to Kristine. Kristine, over to you. Thanks, Baris. Good morning, everyone. We're pleased with our results for the first quarter of 2025, and we're even more energized by the transformative opportunities that lie ahead. As Malcolm mentioned, even as we expand our offerings to support our customers through the dynamic global trade environment, we remain focused on our mission to build the supply chain of the future. Today, I'd like to update you on the exciting progress we're making with AI and other cutting-edge technologies. Over the past year, we've been piloting and launching our AI modules for proactive replenishment, SKU dimensioning, and order routing, and we now have over 20 implementations live in our operations. These tools have been driving record-setting productivity improvements in stock replenishment, order allocation, and item inspection. In the first quarter of 2025, as our implementations have matured, we've now seen our first cost savings resulting from these tools. These cost savings will ramp up over the course of 2025 in tandem with the other site-level productivities Baris mentioned a few moments ago. We're also identifying opportunities to leverage the capabilities of these tools to bring value to our customers in new ways. Reverse logistics is one of the most congested and complex processes in fulfillment, and our focus on debottlenecking product flow is key to our AI strategy. In a European operation for a leading apparel brand, we're working on adapting our proactive replenishment capabilities into a tool that minimizes the number of touches required to process a returned product. We'll keep you posted on our progress on our AI rollout over the coming months. Beyond AI, we continue to lead the market in cutting-edge technology. A few other areas of focus for us in 2025 include automation for inbound unloading, humanoid development for multiple use cases, and inventory cycle counting, which is a critical but traditionally manual and extremely time-consuming process. Through our operational incubator program, we've leveraged an emerging technology solution that has enabled us to increase the frequency of a warehouse inventory count from a quarterly process that's done manually to a fully automated process that occurs every day. GXO is the market leader in tech-enabled fulfillment, and our long-time focus on technology gives us a particular advantage in the current environment. Beyond driving operational efficiencies, our tech leadership equips us with the ability to rapidly adjust to volume fluctuations and support our customers through shifting trade patterns. As tariff considerations prompt many of our customers to examine their fulfillment costs and capabilities, GXO's automation advantage positions us as a partner of choice to navigate this complexity. We'll keep you posted as we continue to build on the supply chain of the future, and with that, I'll pass it back to Malcolm. Thanks, Kristine. We've delivered a strong quarter, supported our customers' changing needs against the dynamic macro backdrop, and continued to sharpen our advantage as the leader in tech-enabled fulfillment. I'd like to note that we're able to deliver these results not merely in spite of the macro volatility, but because the level of support we're able to offer to our customers becomes even more critical during uncertain economic periods. Our long-term contractual business model and geographic diversification provide both stability and growth opportunities in spite of macro volatility. We are not just a resilient business, but a partner who helps leading brands all over the world to navigate complexity. I'd also like to highlight our pride that in the first quarter of 2025, GXO was named to the Forbes Diamond list in Poland and listed as a top 500 employer in the U.K. by the Financial Times. We were also named Supplier of the Year by DuPont, with whom we have had a 20-year business partnership. Our results, customer satisfaction, and operational performance continue to set GXO apart, and our contractual business model, industry-leading automation, and global footprint reinforce our confidence in our long-term future. We'll hand the mic back to Morgan for Q&A. If you would like to ask a question at this time, please press star, then the number one on your telephone keypad. Please be prepared to ask your question when prompted. Once again, to ask a question at this time, please press star, then the number one on your telephone keypad now. Your first question comes from Stephanie Moore with Jefferies. Your line is open. Hi, good morning, everyone, and congrats on the great results. This is Joe Hafling on for Stephanie Moore. Baris, I think this question maybe goes to you. I wanted to talk a little bit about the guide. I guess, could you maybe unpack for us maybe the scenario planning that you've done under the surface that gave you the confidence to reaffirm the guidance here in the context of this uncertain macro and also with the really strong Q1 results? Maybe the puts and takes of how you're thinking about the guide. Sure. Right now, our business is trading well in a dynamic environment, and the base case for our guidance is flat volume year- over- year in 2025. Should we see a softer environment in the U.S. economy, we estimate that we would still land within our narrow guidance range for 2025. To be specific, even if we were to see our second-half volume in our consumer-facing business in the U.S. decline by, let's say, low to mid-single digits, we would still be forecasting to be within this tight EBITDA guidance range. We are pretty comfortable with the guidance we provided. Got it. Maybe a little bit nitpicky, three months ago, the U.S. dollar was rallying, and since that time, we've seen the pound and euro appreciate versus the dollar. I guess, how should we think about the impact of FX on your results in 2025? How much is hedged, and maybe what does this mean for 2026 if FX rates hold where they are? FX will be a tailwind for us in 2026. Definitely, we will see an improvement if the current rates would stay. For Q2, we were pretty much fully hedged for Q2 of 2025. For Q3, we are about three quarters hedged. The protection that we acquired was around EUR 1.07-EUR 1.08 for euro, and GBP 1.26-GBP 1.29 for pound. We do not have a crystal ball where the currencies will go. The impact for 2025 Q2 and onwards will be limited, and we will see more upside in 2026. Great. That's all very helpful. Thanks so much, and congrats again on the good first quarter. Thank you. Your next question comes from Brian Ossenbeck with JPMorgan. Your line is open. Hey, good morning. Thanks for taking the question. First, wanted to ask about the NHS deal. Maybe you can go into a little bit of background, how you won it, what the opportunities are, maybe in other areas of healthcare, and then how you expect it to ramp up. Obviously, quite large, we'll be expecting some startup costs in the back half of the year that comes on the books. Yeah. Hi, Brian. Good morning. It's Malcolm. Brian, it's a real landmark deal for us, so that's first and foremost to say. In terms of the background, look, we've been kind of working in this healthcare vertical since we acquired the Clipper business. They had existing relationships in a range of healthcare customers, and we saw the opportunity coming along. It's been a very long and intense tender process where we've competed with a whole array of large, global, established healthcare logistics competitors. I think it's testament to a big vote of confidence securing this contract with the U.K. National Health logistics activity. It's a big vote of confidence in the work that we've done in setting up this new business stream for us. In terms of scale, I mean, it's a huge piece of business. We will take over in place around eight locations, a couple of thousand people, several hundred delivery trucks and vans. It is a takeover-in-place environment, so we're not anticipating any significant type of startup costs going into this. The team have been planning this startup for a considerable amount of time. You have seen the announcements earlier this week. Obviously, we have been aware of the award since the last quarter, but obviously tied under confidentiality arrangements, and that hence only announcing it publicly in the last week. I think the last thing to say is it is, for us, like making a mini M&A. It is of that scale. It brings a whole host of new opportunities. We have now a very strong pipeline of health-related customers waiting to join us, not just in the U.K. We are expanding that expertise out into European business and indeed here in the U.S. Already, you can see us starting to announce some new business wins in the health industry, like Siemens and several others are in the hopper and will be being made known as we move through quarter two. Very, very exciting time for us. Just to follow up on the broader macro environment, can you give some general context and maybe some of your conversations on inventory levels, what your customers are telling you, and I guess more specifically, you're seeing in these facilities? Anything on bonded warehouses because obviously tariffs are a bit of a moving target. Wondered if there's any play for you in there, if that's a big part of the business where you can kind of help provide some of those opportunities to navigate that uncertainty. Sure, sure, Brian. Look, I'll pass over in a moment to Baris on the bonded warehouse aspect, but as we've said already, all three regions, very strong performance. North American business actually was our strongest region in quarter one, largely due to the kind of customer mix that we have, a lot of aerospace, technology infrastructure, industrial type of customers. Also, I have to say, we benefited a little bit. We refreshed some management towards the end of last year. They're really hitting now, and we're seeing improved efficiency and productivity arrangements. The consolidation process that we were under, that's really gathered good momentum. All of those things gave us some good momentum in quarter one. Continental Europe, that's just been rock solid, no different than past quarters. It's performing exceptionally well. The surprise for us in quarter one was actually slightly softer volumes than we expected in our U.K. business. We believe that's just some of our customers reacting to the new employment taxes that the U.K. government brought in earlier in the year. As we've moved into Q2, in fact, we've seen already our U.K. activity rebounding. I think, as Baris already said, we've moved into Q2. We're a good way through it now. We're seeing a very similar trend that we were seeing in quarter one. In terms of volumes, and here it's really a North American message, we did see some positive volume development in the first quarter as some of our customers, I think, brought extra inventories into the warehouse. Important to mention, that's not affecting our quarter results. We don't actually transpose that into top line. Although we see incremental volumes, we'll likely see those starting to move out of the warehouses as we progress through quarter two and as we progress into quarter three and even start planning for peak season. I guess the last thing to say is just to reinforce what Baris just indicated, all the internal efficiency initiatives that we've been driving, coupled with our geographic mix, two-thirds of our business is in Europe. We don't have any exposure to China. It's really kind of giving us a very strong confidence for the remainder of the 2025 year, even against this very dynamic macro environment. In a normal environment, as a management team, definitely we would have been raising our outlook for 2025. There's no doubt about it, but I think it's a prudent approach. We can't ignore that there's an elevated level of uncertainty across all markets at the moment. That is the very reason why, as Baris indicated, we're just choosing right now. We're reaffirming our full-year guide, which, as you're aware, is that 3%-6% organic and that very narrow band of $840 million-$860 million on the EBITDA. Malcolm, if I would take a look at the inventory levels, we have elevated inventory levels in North America, especially in large ticket items, including technology. They had inventory levels pretty high going into Q2, and it continues into May. There is availability of inventory in the system. There is also elevated inventory in fashion, but less than technology. At the end of the day, two-thirds of our business is outside of the U.S. Half of our business is open book, and the other half is contractual minimum volume requirements and inflation pass-throughs. We have a very diversified customer base, as you highlighted. Our omnichannel retail business in North America is slightly smaller than our presence in Europe. Therefore, our presence in technology, aerospace, and defense and diversification in North America is playing well in the same market. Baris, quick thoughts on the bonded warehouses. Is that a big factor for GXO's offering? It is. In North America, our consumer vertical, we have seen significant increase in requests, especially on bonded warehouses, rebagging and retagging of inventory. At this level, it is not material; it does not have a material impact on our financials, but it is another example of how GXO is supporting our customers during volatile times. Okay. Thank you both for all that information. Appreciate it. Thank you. Your next question comes from Ravi Shanker with Morgan Stanley. Your line is open. Great. Thanks. It's great to hear about the record pipeline of new business. Just want to follow up with kind of some of the existing contracts. Obviously, we're getting to the point where we are now getting to the five-year mark since the pandemic, and I think that's your average contract length. How do you think about visibility into some of those contracts come up for renewal and maybe some of those customers realize that, hey, they kind of signed up for some vision of a pandemic future that hasn't quite played out? Is there a risk that there may be some kind of potential cliff coming in contract renewals in excess of your normal churn of business? Hi, Ravi. It's Malcolm. No, we're not seeing any sign of that, or indeed, have we any concern about that? I mean, a typical contract period nowadays is around five years. That's a typical kind of contract that we sign. A process for us is we don't generally see the contracts coming to an end before they're renewed. We are working with the customer. Customers' demands change from time to time. The requirement in terms of sizes of warehouse can change. It's a gradual process of renewing the contract. We don't have any cliff of higher volume of contract renewals. It's quite normal. We're renewing a typical normal level of contracts every year. In fact, although we've not actually announced because we're still in confidentiality, we have actually just renewed two very large new pieces of business, two large existing customer relationships here in North America, two big flagship sites, in fact. No real cliff that we see on the horizon and really high levels of customer satisfaction. I think our teams are doing a very good, solid job, and I think customer satisfaction is speaking for itself. Clearly, as we're seeing, customers are gravitating to GXO. They are recognizing the benefits that we're bringing to them from a technology aspect and how we're able to help them and improve their business. Great. Thanks for the call. Maybe as a follow-up, Kristine, I think you mentioned that you are starting to see some of the cost savings from automation projects showing up. Can you help quantify what the savings are like, how they compare versus your expectations, and how they are expected to ramp as those projects mature? Hi, Ravi. It's Kristine here. Thanks for the question. We've been working and developing and piloting on this proprietary warehouse AI for over a year, and we really are thrilled with the progress we made. In the first quarter, as I said, we recorded our first non-pilot cost savings as a result of the proprietary AI implementations. We'll continue to deliver the savings from these implementations throughout 2025. While the financial impact, as I mentioned, is immaterial for 2025, we are creating that flywheel that will deliver outsized savings for the years to come. Note that deploying this AI in the ground operations is a lift for every site. Every warehouse that we have is different and very bespoke. Also, this is how we improve productivity, and AI is one of those areas that we're lifting there. We'll take this into consideration with other productivity initiatives, but we're really excited what we're seeing in terms of the AI applications and processes across the warehouse. It's early days, Ravi, but we're excited. It has a huge potential for us. Understood. Thank you. Your next question comes from Chris Wetherbee with Wells Fargo. Your line is open. Hey, thanks. Good morning, guys. I guess I'm kind of curious how conversations are going in terms of building the pipeline. I know the value of the pipeline is obviously at very high levels as it stands right now, but I'm kind of curious how the conversations have been evolving in the context of tariffs. You guys obviously have a greater exposure to Europe than the U.S. Does this accelerate conversations? Does it put things on pause for a period of time where maybe we see a period of time where the incremental new revenue book kind of drops? I'm just kind of curious what the tenor and tone of the conversations you're having with your customers are right now, given the backdrop. Chris, let me come in on that. It's Malcolm here. We've really actually seen no material impact in terms of sales pipeline regarding tariffs. I mean, it'd be wrong to say that we've not been in discussions with some customers who may be momentarily hesitated. I can think of one particular large tender where the customer was just a bit hesitant because of trade tensions. Even that one customer I can think of, it's fully back on track. It's fully re-engaged. In fact, speaking to the team, my understanding is we'll actually be signing new contracts on that. It's quite a big piece of business here in North America. We'll be signing contracts in either next week or early the week after. No impact right now in terms of what we're seeing in terms of customer demand. Remember, most of the business that we undertake, it tends to be very long-term. Customers are signing for five years, but really, they're making decisions for the future 10 years. That's why you see such a long tenure of business relationships that we have. Pipeline right now, $2.5 billion. That's up 13% year over year. I think we're reaping the benefits of some of the redesign that we did during 2024 of our sales organizations. If you remember, we appointed Richard Cawston, our Chief Revenue Officer. He's been redesigning, repopulating, refreshing some of our sales organizations. No doubt, we're seeing some of the benefit coming through from that. In terms of the one business, again, 228, that puts us right on track for our expectation for 2025. 228 in quarter one, $732 million already booked for 2025. That would give us just around 7% organic gross wins against our full-year expectation of 8%. We are right on track of everything that we expected to be at. Impressively, I think what we are also seeing now is a lot of e-commerce projects re-emerging. It is making up a sizable proportion of our overall sales pipeline. I think our geographic exposure, the work that we have been doing in moving into new verticals, and I do want to stress that. I think our company in parts of the geographic where we work, Europe in particular, historically, we were probably a little bit overexposed to omnichannel retail. The move into new verticals like healthcare, that is helping really diversify the business. I think it just adds that bit more overall to the resiliency. Maybe also, Kristine, please jump in on this. Thanks, Malcolm. Yeah, Chris, it's Kristine here. Just for some added context, we have $732 million of incremental revenue from wins we expect to land in 2025 as of the end of the first quarter. This is 8% compared to the position we were in 12 months ago. Almost two-thirds of these wins is based in the U.K. and continental Europe. Even more exciting is that we already have $316 million of incremental revenue for wins expected to land in 2026. This is 30% above where we were just 12 months ago. More than 70% of this relates to contracts based in the U.K. and continental Europe. I would just say, as complexity and uncertainty continues to increase for our customers, that's where our value proposition certainly comes into play, or the visibility we're gaining momentum into 2026 at this point. That's great. Very helpful answer. Appreciate that. Quick follow-up, just on organic revenue growth. Presumably, we're expecting an acceleration in the coming quarters. Any shape you can help us with in terms of how to think about that growth rate as we go through the next couple of quarters here? Sure, Chris. It's Barry Shear. We do see an acceleration of our organic growth throughout 2025. For the full year, the building blocks of revenue growth will be roughly 8% coming from wins and -5% churn. As we highlighted, we put zero volume growth year over year in our model and 1.5% coming from pricing. We will see that acceleration throughout the years. So far, the direction is very positive. Our growth in Q1 reflects new business wins and growth in our existing business, balancing the churn, including customer realignment we discussed last year. Everything is going in line with the plan. Great. Thanks very much. Appreciate it. Thank you. Your next question comes from Bruce Chan with Stifel. Your line is open. Yeah. Thanks, Operator. Good morning, everybody. A lot of really good commentary around business wins in the pipeline. Maybe I'll switch gears a little bit. I know that the CMA review process kind of is what it is, and we're certainly hopeful that it gets the green light. Maybe I can ask about some of the alternatives that you propose in terms of sale of the grocery business versus the reorganization. Is there one of those that you prefer, and how should we think about the timeline for each if you don't get the outright approval? What I'm trying to get at here is, what's the various timeline scenario for when you can start with the integration? Bruce, hi. It's Malcolm here. Obviously, this subject is very near to my heart as a British national. First and foremost, I mean, through all this process, the Wincanton business, it's been trading really well since the acquisition. We're very pleased with the management. We're very pleased with how the revenue is developing. Obviously, I think we're overall very, very happy with the business that we have acquired. We're nearing the conclusion of the discussions with the CMA. In fact, in the coming weeks, we're expecting to receive either a full clearance of the deal. That's still quite possible. Alternatively, what we might receive is a request that we dispose of a very small part of the Wincanton. Clearly, behind the scenes, there's an awful lot of discussion being taken place. When I say a very small proportion of the Wincanton, I do want to give real context to that. It's probably around maybe a bit less than $100 million of revenue in actually a lower margin part of the business. To give you context, it's about 6% of the original Wincanton business that we acquired. I know 6% is like it feels like this is a process that's gone on for a long period of time for such a relatively small actual activity. As I mentioned, behind the scenes, we've been preparing for both of these scenarios. We're well advanced on it. Importantly, in parallel, what we've been also doing is talking with the CMA and working together to get to a point where they will allow us to commence the integration of the rest of the business, so the rest of the sort of 90%+ of the business. They'll allow us to integrate it. That is very important because clearly, when we do that, we start to unlock that large amount of cost synergy, which really will drive straight into our margins. It's one of the reasons you'll see margin expanding as we progress through 2025. In terms of timing, we're very close now to the final stage. We think that all of these events will be happening in the early summer. We're not kind of, we're no longer multiples of months away. We're multiples of weeks away. I think probably by the time we're undertaking our quarter two earnings call, we'll actually be underway. We'll be starting already with the integration. It'll be underway, and we'll be well in advance of either both of those scenarios. Clearly, if it's a green light, everything will just move immediately. If it's a disposal, the disposal will move very, very quickly. It's a lot of work already taking place. Overall, I think the timing that we can now see probably gives us a small upside against our existing plan. We're not building that into our full-year outlook for all the reasons that we've already talked about. I think we'd be in a much better position as we get to our quarter two earnings to reassess that. Okay. Perfect. That's a great update. Thank you. Thank you. Your next question comes from Bascome Majors with Susquehanna. Your line is open. Thanks for taking my questions. You've talked about in the footnotes a dispute with the Italian tax authorities. I think it's about maybe $150 million booked in recent quarters. Can you talk about where that stands and what you reserve there? Is the tax rate on a go-forward basis burden for a negative outcome there? Could there be some risk to the EPS line if that doesn't go the way you hope? Thank you. Hi. This is Barry Shear. First of all, this does not have an impact on our tax rate for 2025. It's anticipated to be around 25%. It's driven by OECD initiatives, pillar two increases that you see in all companies, a minimum tax rate in many jurisdictions. It does not have an impact on our adjusted EPS. You will remember in Q2 2024, we disclosed a contingency related to discussions with the Italian authorities around the historic VAT payments linked to a cooperative labor practice unique to our Italian business. This is similar to many other international companies operating in Italy. The initial challenge amount was $91 million, as we highlighted previously. The current accrual of $66 million, which is lower than the initial amount. The amount is associated with this contingency, and we expect to reach a settlement in 2025, consistent with this amount of $66 million. This is most likely to be paid in Q2. The amount is an add-back in our calculation and does not impact 2024 or 2025 adjusted EBITDA or adjusted EPS. As this cash was booked into a separate account, this has already been reflected in our leverage levels since Q3 of 2024. Thank you for that. Thank you. Your next question comes from Brandon Oglenski with Barclays. Your line is open. Hey, good morning, everyone. Thanks for taking the question. Baris, maybe I'll direct this at you, but to get to your midpoint of your full-year EBITDA guidance, it looks like you do need a little bit of ramp in earnings in the back half of the year, which I think you saw last year as well. Can you talk to maybe the seasonality of the business now, especially in light of all the customer alignment activity you had in the first quarter? Sure. In Q1, we saw an overperformance related to improvements in productivity, especially in startups. Our 2025 guidance reflects limited amount of synergies from Wincanton in 2025, around GBP 10 million, and assuming we begin the integration in late Q2 and early Q3. The ramp of our EBITDA is basically reflecting maturing startups we have and the productivities that we have in the startups as well as our existing business. Okay. Appreciate that. This might be a really nuanced question, but have you guys done any analysis of how much Chinese import products might be moving through customer facilities, especially in the U.S.? Is there any way to quantify what that volume or revenue exposure might be within the system? Sure. We have done the analysis. As you know, about two-thirds of our business is overseas. We have a smaller omnichannel retail business in the U.S. compared to Europe. We look into the detail. Our customers have done phenomenal work in diversifying their supply chain base during the last couple of years. Currently, only on the consumer business, if you look at that business, slightly less than a quarter of the product is coming primarily from one location, China. Sorry, just to clarify. So a quarter of the retail business in the U.S., you think, is exposed to that? Quarter of the business in the U.S., which is less than two-thirds of our business, is exposed to volatility coming from imports coming from China. Our customers have done a really good job on diversifying the supply chain base through the last couple of years. Today, we do not see any shortage of inventory in our warehouses. In fact, the warehouses, especially in technology and fashion, there has been an elevated level of inventory, and things are in good shape. Of course, we do not have a crystal ball, but it looks like our customers have done a really, really good job in diversifying. We do not see much of a risk in our EBITDA in the guidance we provide. Remember, I provide the specific comment around the scenario that we have developed. If we do see a softer U.S. economy and if we see our customer-facing business in the U.S. decline by low to mid-single digits in volumes, we still forecast to be within this tight EBITDA range. Thank you, Baris. Appreciate it. Thank you. Your next question comes from Ariel Rosa with Citi. Your line is open. Hi. Good morning. Thanks for taking our questions. Congrats on the great results. This is Ben Moore on for Ari at Citi. With your Q1 direct operating expenses stepping up to 85.9% as a percent of revenue, I think that may have been due to Wincanton with a higher direct OpEx mix than legacy GXO, maybe specific to 1Q. Could you give more color on your outlook on the shape of that direct OpEx line as a percent of revenue through the remainder of the year? Hi, Baris. Baris Oran. You're exactly right. It's driven by Wincanton having a higher percentage. And they do have a lower percentage in SG&A. Once we start integrating, of course, the profitability of that operation will start lifting. In our model, we put starting integration late Q2, early Q3. We're waiting for the approval, as Malcolm highlighted. Great. Great. Appreciate that. In terms of your share of IBACs, the 2.4% afloat is quite strong, stronger than your typical rail average, 1% a quarter or 4% a year. Do you expect that 2.4% per quarter run rate maybe through the rest of 2025, if the trade war lasts that long, for a possible 10% of your float as much as that through the year? What is your kind of thinking for share buybacks relative to the length of the trade war for the rest of the year? The board had authorized around $500,000,000 of share repurchase in February. Through the end of the first quarter, we purchased about 2.8 million shares for about $110,000,000. We continue to see our shares as attractively valued, but always balancing share repurchase against our capital allocation priorities, including organic growth and leverage levels. We will give you an update at the end of Q2 as where we stand. Great. Thanks so much for the color. Again, congrats on the great results. Thank you. This concludes the question-and-answer session. I would like to now turn the call back over to Malcolm Wilson for any further remarks. Thank you, Morgan. Thank you for hosting our call today. We delivered a strong opening quarter to the year, with every region demonstrating strong organic growth and a healthy sales pipeline, which for our combined business now stands at $2.5 billion. During the quarter, we've been able to announce some impressive new customer wins, including the large 10-year deal with the National Health Service supply chain, which is a landmark new vertical deal for GXO. We've also seen growth in key markets like Germany and have continued to diversify our industrial verticals. We're close to final conclusion with the U.K. regulatory authority on the Wincanton acquisition. We're looking forward to integrating the business in the summer. Customers are looking to GXO to help them successfully navigate these times of elevated uncertainty and a dynamic economy. Our leadership in creating value through automation, technology, and AI are growing in their importance. With that, I'd like to wish everybody a great rest of the day. Thank Thank you very much for joining us and your attendance on our call. Thank you. This concludes today's conference call. Thank you for attending, and have a wonderful rest of your day.