As Malcolm noted, we are creating the warehouses of the future. We’re talking with customers every day about supply chain efficiency and how to solve their complex problems. Every company with goods to move is looking for ways to make their fulfillment operations more productive today and more resilient tomorrow. Our competitive advantage is helping our customers bring efficiency to life in their site operations. Customers’ needs for automation differ based on their experience and business model. Some want to invest in transformational large-scale automation. Others need a new partner to take over an existing operation, and many are outsourcing their operations for the first time. We pride ourselves on being able to meet any customer need with tailored solutions for best-in-class results.
Of our billion dollars in new wins for 2023, approximately 45% will be automated through the contract. In addition, we typically see annual conversion rates of 5% to 7% from manual to modular adaptive tech through our own continuous improvement programs. This means we expect over half of that billion dollars of new wins or result in automated revenue for GXO. One of the biggest wins is a 15-year contract with the global sports brand, where we’ve selected and designed the appropriate technologies to enable a completely integrated end-to-end flow through the warehouse. This solution is key to the customer’s European growth plan, it provides them with capacity for same-day fulfillment of up to 3 million units per week. Our deep experience and domain expertise with this level of complex automation was the primary driver for our success in winning this contract and continues to differentiate GXO in the market.
Looking forward, the industry as a whole is nearing an inflection point with more and more global brands pursuing this type of transformation. We have nearly half a billion dollars of large-scale automated sales opportunities. On average these large-scale automations carry significantly longer contract duration. Our automation portfolio also delivers margins more than 200 basis points above group levels, making our business stickier and our growth more profitable. In addition to driving momentum in automated sales, our team is heavily involved in retrofitting both mature and new technologies to improve site-level productivity. We regularly pilot new innovations, and if the solution meets our performance thresholds, we then deploy it across our network.
In 2023, we increased our total units of warehouse automation by 50%, that included doubling our vision tech, which optimizes auto validation and minimizes errors. It’s a highly efficient technology that can be rolled out in operations across numerous verticals without requiring significant capital investment. The operations where we implemented this tech saw an average margin expansion of 300 basis points. We’re also actively identifying practical applications for AI in our existing operations and have successfully trialed solutions for PIC productivity and workforce management. We’re excited that the PIC solution delivered a productivity increase of approximately 15% and we’re now rolling out the application to dozens of sites in 2024. Finally, given our rapidly expanding scale and leadership position, we’re beginning to achieve meaningful procurement savings.
We’re already benefiting from significant reductions to this price in various categories. GXO has built a global technology ecosystem that is unrivaled in our industry and the need for our solutions continues to grow every day. Our scale and reach have materially shaped the warehouse automation landscape and we’re beyond excited as to what lies ahead and the major impact of GXO’s role in building the supply chain of tomorrow. And with that, I’ll pass back to you, Malcolm.
Malcolm Wilson: Thanks, Adrian. This was the year that we proved our business model. With resilient margins, strong cash flow, and adjusted EBITDA growth that surpassed our expectations, we won a billion dollars of great new business and expanded the gap with the competition through our investment in high return automation that meets our customers’ increasing demand for outsourcing. Before we close, I want to thank our employees for their tremendous performance during peak and throughout 2023, their hard work and continued commitment to our values with the engine that delivered a truly great year for GXO. Looking forward to 2024 and beyond, we’re building this momentum. Our automation leadership is driving stickiness and profitable growth with global customers looking to make their operations more efficient.
We expect our growth to accelerate, driven by new wins, with incremental one revenue for 2025 tracking nearly 30% ahead of where we were a year ago. We are very excited about our growth trajectory as we focus on delivering the best possible solutions to our customers and generating strong returns for our shareholders. With that, we’ll hand the mic back to Daryl and transition to Q&A.
Operator: Thank you. We will now be conducting the question-and-answer session. [Operator Instructions] Our first questions come from the line of Stephanie Moore with Jeffries. Please proceed with your questions. Hey Stephanie, can you check if you’re muted, please? Stephanie, are you able to hear us? Okay, we’ll come back to you.
Stephanie Moore: Sorry about that. Can you hear? Oh, I’m sorry. Can you hear me now? Sorry about that.
Operator: We can hear you, yes.
Stephanie Moore: Great. Okay, Baris, thank you so much for all the color and [Technical Difficulty] outlook for 2024. But maybe if you could discuss what you’re seeing across geographies and invertebrates and early 2024 results that could give you confidence that volumes and revenue growth can accelerate from 4Q? Thank you.
Malcolm Wilson: Hi, Stephanie. Good morning, it’s Malcolm here. Let me cover some points on that. So if we look at the broad macro where GXO is operating, continental Europe business, that’s actually continued to do well. It recovered through the middle part of last year. And we’re seeing similar trends right now in that business. Pleasingly, I think we’re starting to see some recovery in our North American business and U.K. business. Green shoots, it’s early days, but definitely we’re seeing, as we’ve moved into ‘24, we’re seeing a different landscape than as we’ve left 2023. When we look at the different categories of products that we deal with. We can broadly say that our food and beverage related business, technology, consumer, electronics, industrial manufacturing, they’re all really the highlights.
I would say slower is our omni-channel retail and consumer packaged goods. So there’s no doubt the consumer is still under pressure. You know, we look at the metrics. We can see consumer spending money on services. But goods, it’s still a sluggish environment. Staying with the macro, I think one of the pronounced trends we’ve seen during the latter part of last year, and it’s a trend we’re starting ‘24 with, is across all of the different geographies. Our customers have been managing carefully inventory levels. I think there’s been an adjustment to take into account what was generally a sluggish 2023. People have managed inventory levels smartly. We’ve been super proactive in working with our customers to do that also and customers have valued our inputs on that.
And generally I think we’ve seen organizations prioritizing price more than volume. And that gives you a feel for our last quarter volumes. It’s early days, but I would say our trading results for January, they’re definitely indicating a stronger trajectory for ‘24 than we were seeing in the last quarter. So it’s a bit early to judge what the first-half of the year will look like, but definitely encouraging signs. When we talk to customers, I would say, directionally speaking, they all expect their activity to be increasing sequentially as we’re moving through 2024. Probably a slower first-half with a faster second-half. And I think that’s broadly in line with every kind of commentary that we’re seeing at the moment. What’s pleasing for us is we’ve just finished ’23, we had really a great season for new business, a billion dollars of new business against that slower macro, that should not be underestimated.
So we’re very pleased with that. As Adrian mentioned, a lot of big ticket implementations going on this year. Our pipeline is strong, you know, it’s held up incredibly strong and maybe one of the most pleasing aspects for us is our pre-pipeline. Don’t talk about our pre-pipeline a lot, but our pre-pipeline right now is about 20% up year-over-year, and there are a lot of big transformative projects coming into that, projects that will require a lot of automation. So all of that gives us a good feeling about 2023. And obviously from a GXO perspective, as we move progressively through ‘24, you know, our comps become considerably easier as we go through. So substantial growth on the pipeline, I think, is what we’re seeing right now. And we’re going into the year with a degree of confidence about ‘24 and how it’s going to pan out.
Stephanie Moore: Great. No, that was tremendously helpful. And then just as a follow-up to your guidance for 2024, it does look like your free cash flow expectations assumed the higher free cash flow conversion. Is there a structural change there that we could expect a similar level of conversion on a go-forward basis? Thanks.
Malcolm Wilson: Yes, let me hand you over to Baris, Stephanie, for that detail.
Baris Oran: Hi, Stephanie. We had excellent collection and capital efficiency, and we had record free cash flow. Our free cash flow in Q4 was $151 million up year-over-year, and our strong Q4 helped us deliver over $300 million of free cash flow for the entire year, which was a conversion rate of 41%, comfortably ahead of our 30% to 40%. And with this pace, we forecast roughly debt levels to be around 1 time debt EBITDA by the end of 2025, creating roughly $2 billion of balance sheet capacity to be allocated either to accretive, disciplined M&A in all geographies or we evaluate potential of returning capital back to shareholders through a buyback. So we will create incremental cash flow beyond investing in our automation and technology, and that’s driven by excellent collection and capital efficiency.
Stephanie Moore: All right. Thank you guys so much. Appreciate it.
Operator: Thank you. Our next questions come from the line of Chris Wetherbee with Citigroup. Please proceed with your questions.
Chris Wetherbee: Hey, thanks. Good morning, guys. I guess maybe wanted to talk a little bit about the organic revenue guide for 2024. I was hoping maybe you could break that down into the parts, what you see in terms of new business wins, what attrition looks like. Also importantly, how volume plays out. Fourth quarter volume sort of implied seems fairly weak, so I want to get a sense of how you see that ramping up over the course of ’24?
