It continues to allow us to be a leader of the environment when it comes to automating the warehousing space. So very pleased to have Adrian in the role. Adrian, over to you.
Adrian Stoch: Before I address the strategy part of it, I just want to share about my philosophy when it comes to how I approach the question of automation. I don’t look at the automation opportunity through the lens of the robots per se. My operational perspective is focused on how to solve complex problems and design the best solutions that bring value to our customers and deliver ROI. And so that gets me to specifically answer your question, Christyne, is the automation agenda, is it about revenue? Is it about margin? Is it about customer acquisition? The answer is all of the above. What we’ve seen in Q3, even with the macro and the headwinds is that the GXO thesis on our automation differentiation is proven to be positive.
And I saw it in my previous role multiple times with the positive impact of not only launching sites that are highly automated, but then using our adaptive tech where we go in after a site is already live and implement additional technologies to further integrate and bring efficiencies. So, it is our differentiation, and it is in the interest of all three of the items you mentioned.
Christyne McGarvey: That’s really helpful. Maybe I’d like to just ask one to round out some of the M&A conversation, the thing on kind of a strategic focus. As you look forward, do you think the pace of acquisitions that we’ve seen from you in the last couple of years post spin is kind of what we should expect from GXO going forward? Or do you feel like it’s just been a function of the opportunities that you’ve seen? Do you think it could pick up the pace? Just curious more broadly how you think of M&A is fitting into the strategy going forward and the pace at which you think you might operate on a go-forward basis?
Baris Oran: This is Baris. Let me take that. It basically depends on the cash generation we have, how much room we have, if it didn’t staying within the investment grade balance sheet that’s first. Secondly, the opportunity set. And third, how does it compare to investing in our own stock. Those will determine the pace and the size of M&A execution in the Company. But today, the environment we’re looking into is more like bite-size capability-enhancing, geography enhancing M&A transaction instead of transformation M&A transaction, and we are always mindful that our stock — investing in our stock is an option for us.
Operator: Our next questions come from the line of Brian Ossenbeck with JPMorgan. Please proceed with your question.
Brian Ossenbeck: Wanted to ask, if you can just come back and follow up on the reasons for the EBITDA update and upgrade here. It sounded like PFS maybe had a bigger impact, but I think in some of the commentary, it sounds like it was fairly small. So I just wanted to see if that was a driving factor for the EBITDA increase here. And then maybe for Adrian, when you think about the 200 basis point margin upside for automation, I know you touched on it briefly just now, but you see that’s going higher over time as you get better value-added services? Or do you think that actually accelerates the growth and helps tap the addressable market maybe a little bit faster?
Baris Oran: Brian, this is Baris. On the EBITDA of credit, PFS contribution was low single-digit millions of dollars. It basically shows the resiliency of our business model. And despite volume headwinds and FX and pension headwinds, this business is delivering a steady slightly improving margin expectation in Q4, excluding FX and pension. So, we are looking into proving yet again how strong this business model is. But those are the components. Our operating profits increased in Q3 and operating productivity projects, number one, PFS small contribution; number two, against volume headwinds and FX and pension headwinds, but all put together with the resiliency of our contract structure. Adrian?
Adrian Stoch: So, in terms of the 200 basis points and do I see further opportunity? I do both from a growth acceleration perspective, but also in terms of margin improvement. I’ll give a specific example. So, we recently piloted and we’re still in the pilot phase, but seeing significant benefits from an AI program on being more predictive with respect to labor planning in a site where we’ve been able to be more precise by a factor of close to 5%. And so, the reason why I’m very optimistic on the ability for automation and AI to help improve our margins and our efficiencies is because when we have a successful pilot, and there’s many of these just this is one example I am mentioning. We have the opportunity to then standardize and take it to our global sites close to 1,000 sites. So absolutely, I do see it both as a growth lever and a margin improvement level.
Brian Ossenbeck: Maybe one more for you in terms of the site level operations, I think there has been an area of improved performance here in a softer backdrop. So you mentioned some of the post go-live implementations. Maybe give a little bit more color in terms of how that’s progressing. Is this more of an opportunity to fill in some of the growth that was pretty fast over the last couple of years. And so, this is kind of an outsized opportunity that you’re collecting on now? Or is this sort of what we should think about more so going in the future when a site ramps up, you can actually go back in and potentially add more margin uplift after the fact.
Malcolm Wilson: Yes, it is a significant opportunity, Brian. And we’ve been very active on this program that we call adaptive tech. In the deck, actually on Slide 11, it describes how we’ve increased the number of technology units by 67% year-over-year, and this has predominantly been through our adaptive tech program. And so, some examples in the space of wearable tech, collaborative robots, vision technology, where the site, it doesn’t really matter whether the site is manual, partially automated highly automated. There is always opportunity for continuous improvement through the adaptive tech program. And part of my remit is to formalize and standardize our best practices and where we’ve seen ROI in existing implementations is to take those to other sites. So, I see this opportunity as very compelling and extremely significant.
Operator: Our next questions come from the line of Amit Mehrotra with Deutsche Bank. Please proceed with your question.
Amit Mehrotra: I guess for my first question, I want to double-click on that organic growth discussion at the beginning of the call. So Malcolm, I want to understand a little bit better — the organic growth is basically going to be zero in the fourth quarter, but you won a bunch of contracts, including the Sainsbury contract, which I think was your highest whenever that is being realized right now. So the cross currents are that, obviously, the base business is declining significantly, either because of volume or churn. And so I’m just trying to understand, is churn going up, it would intuitively make sense to me that churn would go up in the environment that we’re in. But I don’t know if that’s true or not. If you can help us think about what’s — I’m trying to get in the mind of the customer a little bit from the context of churn.
Malcolm Wilson: Amit, it’s Malcolm. So it’s mainly a volume issue. So if you think about churn, churn is pretty consistent with previous quarters. But definitely, what we’re seeing is on our consumer-related businesses, and it’s not universal on every single customer. But as a broad brush, we can say our consumer-related business is those two facets of a lot of our customers are choosing to not discount. So maybe we can say inventory levels over the past few quarters have normalized out and inventories being elevated probably over the past couple of years through starting with the pandemic, starting with supply chain disruption, starting with different aspects of manufacturing problems. But now we can see inventory levels generally normalized out.
