[PART I—FINANCIAL INFORMATION](index=4&type=section&id=Part%20I%E2%80%94Financial%20Information) This section provides RXO, Inc.'s unaudited condensed consolidated financial information, including financial statements, management's discussion, market risk disclosures, and controls and procedures [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents RXO, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, cash flows, and changes in equity, along with detailed notes explaining the company's organization, accounting policies, recent acquisition, segment reporting, revenue recognition, restructuring activities, debt, fair value measurements, stockholders' equity, earnings per share, and commitments and contingencies [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents RXO, Inc.'s condensed consolidated balance sheets, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (Millions $): | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Total Assets | 3,201 | 3,414 | | Total Liabilities | 1,613 | 1,802 | | Total Equity | 1,588 | 1,612 | | Cash and cash equivalents | 18 | 35 | | Accounts receivable, net | 1,065 | 1,227 | - Total assets decreased by **$213 million (6.2%)** from December 31, 2024, to June 30, 2025, primarily due to a **$162 million decrease in accounts receivable** and a **$17 million decrease in cash and cash equivalents**[100](index=100&type=chunk) - Total liabilities decreased by **$189 million (10.5%)** from December 31, 2024, to June 30, 2025, mainly due to a decrease in third-party transportation costs, partially offset by a **$36 million increase in long-term debt**[100](index=100&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines RXO, Inc.'s revenues, expenses, and net loss for the specified interim periods Condensed Consolidated Statements of Operations (Millions $, except per share amounts): | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | 1,419 | 930 | 2,852 | 1,843 | | Net Loss | (9) | (7) | (40) | (22) | | Basic Loss per share| (0.05) | (0.06) | (0.24) | (0.19) | - Revenue increased by **52.6%** for the three months and **54.7%** for the six months ended June 30, 2025, primarily driven by the Coyote acquisition and increased last mile volume[81](index=81&type=chunk)[89](index=89&type=chunk) - Net loss increased to **$9 million** for the three months ended June 30, 2025 (from $7 million in 2024) and to **$40 million** for the six months ended June 30, 2025 (from $22 million in 2024)[11](index=11&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This section details RXO, Inc.'s net loss and other comprehensive income/loss components, leading to total comprehensive loss Condensed Consolidated Statements of Comprehensive Loss (Millions $): | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | (9) | (7) | (40) | (22) | | Foreign currency gain (loss) | 3 | (2) | 5 | (2) | | Comprehensive loss | (6) | (9) | (35) | (24) | - Comprehensive loss for the three months ended June 30, 2025, improved to **$6 million** from $9 million in the prior year, largely due to a foreign currency gain[15](index=15&type=chunk) - For the six months ended June 30, 2025, comprehensive loss increased to **$35 million** from $24 million in the prior year, despite a foreign currency gain[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes RXO, Inc.'s cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, in millions $): | Metric | 2025 | 2024 | | :---------------------------------------- | :--- | :--- | | Net cash provided by operating activities | 21 | 2 | | Net cash used in investing activities | (43) | (22) | | Net cash provided by financing activities | 4 | 22 | | Net increase (decrease) in cash, cash equivalents and restricted cash | (16) | 2 | - Net cash provided by operating activities increased significantly to **$21 million** for the first six months of 2025, up from $2 million in the same period of 2024, primarily due to an increase in non-cash depreciation and amortization expense[101](index=101&type=chunk) - Net cash used in investing activities increased to **$43 million**, primarily due to a **$10 million payment for the Coyote acquisition** and a **$7 million increase in property and equipment purchases**[102](index=102&type=chunk) - Net cash provided by financing activities decreased to **$4 million** from $22 million, mainly due to lower net proceeds from revolving credit facilities and higher tax withholdings related to stock compensation awards[103](index=103&type=chunk) [Condensed Consolidated Statements of Changes in Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) This section presents the changes in RXO, Inc.'s total equity, common stock, and other equity components over the reporting period Condensed Consolidated Statements of Changes in Equity (Millions $, except shares in thousands): | Metric | Balance as of Dec 31, 2024 | Net Loss (6 months) | Other Comprehensive Income (6 months) | Stock Compensation Expense (6 months) | Balance as of June 30, 2025 | | :------------------ | :------------------------- | :------------------ | :------------------------------------ | :------------------------------------ | :-------------------------- | | Total Equity | 1,612 | (40) | 5 | 14 | 1,588 | | Common Stock Shares | 162,517 | — | — | — | 163,970 | - Total equity decreased by **$24 million** from $1,612 million at December 31, 2024, to $1,588 million at June 30, 2025, primarily due to the net loss, partially offset by stock compensation expense and other comprehensive income[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering key accounting policies and specific financial items [1. Organization](index=11&type=section&id=1.%20Organization) This note describes RXO, Inc.'s business operations as a technology-driven, asset-light brokered transportation platform - RXO, Inc. operates as a technology-driven, asset-light brokered transportation platform[23](index=23&type=chunk) - The company's core business includes truck brokerage, managed transportation, and last mile services, all presented as one reportable segment[23](index=23&type=chunk) [2. Basis of Presentation and Significant Accounting Policies](index=11&type=section&id=2.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note outlines the basis of financial statement preparation and significant accounting policies, including recent accounting pronouncements - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC rules, consistent with the 2024 Form 10-K[24](index=24&type=chunk) - No material changes to the company's significant accounting policies were reported as of June 30, 2025[26](index=26&type=chunk) - RXO is evaluating the impact of new FASB ASUs on income tax disclosures (effective 2025) and expense disaggregation (effective 2026/2027), as well as the recently enacted 'The One Big Beautiful Bill Act' tax law changes[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [3. Acquisition](index=12&type=section&id=3.%20Acquisition) This note details the acquisition of Coyote, including the purchase price, strategic rationale, and preliminary allocation of consideration - On September 16, 2024, RXO acquired Coyote, a technology-driven truckload freight brokerage, for **$1.038 billion in cash**, with an additional **$10 million** paid in Q1 2025 for working capital and other post-closing adjustments[31](index=31&type=chunk) - The acquisition is expected to enhance RXO's competitive position with greater scale, broader service offerings, and strengths in diverse end markets[31](index=31&type=chunk) Preliminary Allocation of Consideration to Coyote's Assets and Liabilities (Millions $): | (In millions) | Amount | | :------------ | :----- | | Total assets acquired | 1,041 | | Total liabilities assumed | (488) | | Net assets acquired | 553 | | Purchase price | 1,048 | | Goodwill recorded | 495 | [4. Segment Reporting](index=14&type=section&id=4.%20Segment%20Reporting) This note provides financial information for RXO's single reportable segment, including adjusted EBITDA and segment assets - RXO operates as one reportable segment[39](index=39&type=chunk) Segment Adjusted EBITDA (Millions $): | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Segment adjusted EBITDA | 52 | 34 | 81 | 53 | Segment Assets (Millions $): | Metric | June 30, 2025 | December 31, 2024 | | :----------- | :------------ | :---------------- | | Segment assets | 3,135 | 3,345 | [5. Revenue Recognition](index=14&type=section&id=5.%20Revenue%20Recognition) This note describes RXO's revenue recognition policies, including revenue by service offering and remaining performance obligations - The majority of RXO's revenue is generated in the U.S., with approximately **7-8%** from outside the U.S. for both the three and six months ended June 30, 2025 and 2024[40](index=40&type=chunk) Revenue by Service Offering (Millions $): | Service Offering | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Truck brokerage | 1,025 | 543 | 2,092 | 1,107 | | Last mile | 315 | 265 | 593 | 497 | | Managed transportation | 142 | 156 | 279 | 308 | - The fixed consideration component of remaining performance obligations was approximately **$22 million** as of June 30, 2025, with **98%** expected to be recognized over the next 3 years[42](index=42&type=chunk) [6. Restructuring Charges](index=15&type=section&id=6.%20Restructuring%20Charges) This note details restructuring activities, including severance and asset impairment charges, undertaken to improve operational efficiency - RXO engages in restructuring actions, including severance and impairment of real estate and equipment operating lease assets, to improve efficiency and profitability[43](index=43&type=chunk) Restructuring Activity (Six Months Ended June 30, 2025, in millions $): | Category | Reserve Balance as of Dec 31, 2024 | Charges Incurred | Payments | Reserve Balance as of June 30, 2025 | | :-------------------- | :--------------------------------- | :--------------- | :------- | :---------------------------------- | | Severance | 5 | 10 | (9) | 6 | | Equipment and facilities | 15 | 7 | (3) | 19 | | Total | 20 | 17 | (12) | 25 | - The majority of cash outlays related to the remaining **$25 million** restructuring liability at June 30, 2025, are expected to be complete within twelve months[43](index=43&type=chunk) [7. Debt](index=16&type=section&id=7.%20Debt) This note provides a summary of RXO's debt instruments, including revolving credit facilities and senior notes, and compliance with covenants Debt Summary (Millions $): | Debt Type | Principal Balance (June 30, 2025) | Carrying Value (June 30, 2025) | Principal Balance (Dec 31, 2024) | Carrying Value (Dec 31, 2024) | | :---------------------------- | :-------------------------------- | :----------------------------- | :------------------------------- | :---------------------------- | | Revolver | 35 | 35 | — | — | | 7.50% Notes due 2027 | 355 | 350 | 355 | 349 | | Finance leases, asset financing and short-term debt | 18 | 18 | 19 | 19 | | Total debt and obligations under finance leases | 408 | 403 | 374 | 368 | - The Revolver commitment was increased to **$600 million** in November 2024, with an effective interest rate of **8.00%** as of June 30, 2025[45](index=45&type=chunk)[46](index=46&type=chunk) - The **7.50% Notes due 2027** have an effective interest rate of **8.13%** as of June 30, 2025, and mature on November 15, 2027[50](index=50&type=chunk) - RXO was in compliance with all covenants of its Revolver and Notes as of June 30, 2025[47](index=47&type=chunk)[52](index=52&type=chunk) [8. Fair Value Measurements](index=17&type=section&id=8.%20Fair%20Value%20Measurements) This note describes the fair value measurements of RXO's financial instruments, categorizing them by valuation input levels - The carrying values of cash, accounts receivable, accounts payable, accrued expenses, and short-term debt approximated their fair values due to their short-term nature[53](index=53&type=chunk) Fair Value of Debt (Millions $): | Debt Type | Level | June 30, 2025 | December 31, 2024 | | :------------------- | :---- | :------------ | :---------------- | | Revolver | 3 | 35 | — | | 7.50% Notes due 2027 | 1 | 364 | 365 | - Level 1 debt is valued using quoted prices in active markets, while Level 3 debt uses unobservable inputs reflecting management's best estimates[54](index=54&type=chunk)[56](index=56&type=chunk) [9. Stockholders' Equity](index=17&type=section&id=9.%20Stockholders%27%20Equity) This note details RXO's stockholders' equity, including common stock outstanding and the status of its share repurchase program - As of August 5, 2025, there were **163,987,239 shares** of RXO's common stock outstanding[5](index=5&type=chunk) - The company had **$123 million** remaining under its 2023 Share Repurchase Program as of June 30, 2025[55](index=55&type=chunk) - No share repurchases were made under the program during the three or six months ended June 30, 2025[55](index=55&type=chunk) [10. Earnings per Share](index=18&type=section&id=10.%20Earnings%20per%20Share) This note presents the calculation of basic and diluted loss per share for RXO, Inc. for the reported periods Loss Per Share (Dollars): | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic loss per share | (0.05) | (0.06) | (0.24) | (0.19) | | Diluted loss per share | (0.05) | (0.06) | (0.24) | (0.19) | - Basic and diluted loss per share for the three months ended June 30, 2025, improved to **$(0.05)** from $(0.06) in the prior year[57](index=57&type=chunk) - Basic and diluted loss per share for the six months ended June 30, 2025, increased to **$(0.24)** from $(0.19) in the prior year[57](index=57&type=chunk) [11. Commitments and Contingencies](index=18&type=section&id=11.%20Commitments%20and%20Contingencies) This note outlines RXO's legal proceedings, including misclassification claims, and related indemnification agreements - RXO is involved in various legal proceedings, including class action and collective action cases related to misclassification claims for its last mile business[58](index=58&type=chunk)[62](index=62&type=chunk) - These misclassification claims are generally not covered by the company's liability and excess umbrella insurance policies[61](index=61&type=chunk) - RXO believes the misclassification claims are without merit and has not accrued for potential losses, as the incurrence of a loss is not considered probable or estimable at this time[64](index=64&type=chunk) - Pursuant to the Separation and Distribution Agreement, RXO has agreed to indemnify XPO for liabilities arising from these misclassification claims[63](index=63&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on RXO's financial condition and results of operations, covering business overview, the impact of the Coyote acquisition, inflation, basis of financial statement presentation, detailed analysis of operating results for the three and six months ended June 30, 2025, liquidity and capital resources, and critical accounting policies [Business Overview](index=20&type=section&id=Business%20Overview) This section provides an overview of RXO's business model as a technology-driven, asset-light brokered transportation platform - RXO, Inc. operates as a technology-driven, asset-light brokered transportation platform[67](index=67&type=chunk) - The core truck brokerage business is characterized by robust free cash flow conversion and a high return on invested capital[68](index=68&type=chunk) - Proprietary digital brokerage technology is a major differentiator, enabling efficient access to capacity and supporting complementary managed transportation and last mile services[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) [The Coyote Acquisition](index=21&type=section&id=The%20Coyote%20Acquisition) This section discusses the strategic rationale and financial impact of RXO's acquisition of Coyote - RXO acquired Coyote, a technology-driven truckload freight brokerage, on September 16, 2024, for **$1.038 billion in cash**, with an additional **$10 million** paid in Q1 2025[73](index=73&type=chunk) - The acquisition is expected to enhance RXO's competitive position by increasing scale, broadening service offerings, and strengthening its presence in diverse end markets[31](index=31&type=chunk)[73](index=73&type=chunk) [Impact of Inflation](index=21&type=section&id=Impact%20of%20Inflation) This section analyzes the potential effects of economic inflation on RXO's operating costs and pricing strategies - Economic inflation can negatively impact RXO's operating costs, including interest rates, fuel, and wages[74](index=74&type=chunk) - While historically offset by price increases, a competitive pricing environment during economic downturns may hinder the ability to obtain corresponding price increases from customers[74](index=74&type=chunk) [Basis of Presentation](index=21&type=section&id=Basis%20of%20Presentation) This section explains the accounting principles and consolidation policies used in preparing RXO's interim financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC rules, consistent with the 2024 Form 10-K[75](index=75&type=chunk) - The financial statements include RXO, Inc. and its majority-owned subsidiaries, with all intercompany accounts and transactions eliminated[76](index=76&type=chunk) - Operating results for the three and six months ended June 30, 2025, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2025[76](index=76&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of RXO's financial performance, including revenue and expense trends, for the reported periods [Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024](index=22&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20with%20Three%20Months%20Ended%20June%2030%2C%202024) This section compares RXO's operating results for the three months ended June 30, 2025, against the same period in 2024, highlighting key performance drivers Key Financial Highlights (3 Months Ended June 30, in millions $): | Metric | 2025 | 2024 | Change ($) | % Change | | :---------------------------------------- | :--- | :--- | :--------- | :------- | | Revenue | 1,419| 930 | 489 | 52.6% | | Net Loss | (9) | (7) | (2) | 28.6% | | Cost of transportation and services (% of revenue) | 78.8%| 75.3%| 3.5 pp | | | Direct operating expense (% of revenue) | 3.3% | 5.4% | (2.1) pp | | | Sales, general and administrative expense (% of revenue) | 15.1%| 16.6%| (1.5) pp | | - Revenue growth was primarily driven by a **$482 million increase from the Coyote acquisition** and a **$50 million increase from a 17% rise in last mile volume**[81](index=81&type=chunk) - Cost of transportation and services as a percentage of revenue increased due to lower freight rates not fully offset by corresponding reductions in purchased transportation costs and changes in last mile freight mix[82](index=82&type=chunk) - Direct operating expense and SG&A as a percentage of revenue decreased due to cost reduction initiatives and improved leverage from increased scale following the Coyote acquisition[83](index=83&type=chunk)[84](index=84&type=chunk) [Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024](index=24&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20with%20Six%20Months%20Ended%20June%2030%2C%202024) This section compares RXO's operating results for the six months ended June 30, 2025, against the same period in 2024, detailing significant financial changes Key Financial Highlights (6 Months Ended June 30, in millions $): | Metric | 2025 | 2024 | Change ($) | % Change | | :---------------------------------------- | :--- | :--- | :--------- | :------- | | Revenue | 2,852| 1,843| 1,009 | 54.7% | | Net Loss | (40) | (22) | (18) | 81.8% | | Cost of transportation and services (% of revenue) | 79.6%| 75.9%| 3.7 pp | | | Direct operating expense (% of revenue) | 3.3% | 5.6% | (2.3) pp | | | Sales, general and administrative expense (% of revenue) | 14.9%| 16.2%| (1.3) pp | | - Revenue increased by **$985 million** due to the Coyote acquisition and **$96 million** from a **20% increase in last mile volume**[89](index=89&type=chunk) - Cost of transportation and services as a percentage of revenue increased due to lower freight rates not fully offset by cost reductions and last mile freight mix changes[90](index=90&type=chunk) - Direct operating expense and SG&A as a percentage of revenue decreased due to cost reduction initiatives and improved leverage from the Coyote acquisition[91](index=91&type=chunk)[92](index=92&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses RXO's ability to generate and manage cash, including sources of liquidity, capital expenditures, and debt arrangements [Overview](index=24&type=section&id=Overview) This section provides a general overview of RXO's liquidity strategy, funding sources, and principal uses of cash - RXO's ability to fund operations and capital needs relies on cash from operations, supplemented by its revolving credit facility[96](index=96&type=chunk) - Principal uses of cash include funding operations, working capital, capital expenditures, debt repayment, share repurchases, and strategic business development transactions[96](index=96&type=chunk) - Management believes existing liquidity and capital sources are sufficient to support operations for the foreseeable future[97](index=97&type=chunk) [Capital Expenditures](index=25&type=section&id=Capital%20Expenditures) This section outlines RXO's capital expenditure plans, focusing on strategic investments in technology, equipment, and real estate - 2025 capital expenditures are focused on strategic investments in technology, equipment, and real estate[98](index=98&type=chunk) - The company has significant discretion over the amount and timing of its capital expenditures[98](index=98&type=chunk) [Debt and Financing Arrangements](index=25&type=section&id=Debt%20and%20Financing%20Arrangements) This section details RXO's compliance with covenants related to its outstanding debt and financing arrangements - RXO was in compliance with all covenants and other provisions of its outstanding debt and financing arrangements as of June 30, 2025[99](index=99&type=chunk) [Financial Condition](index=25&type=section&id=Financial%20Condition) This section summarizes RXO's financial position, including changes in assets, liabilities, and equity over the reporting period Financial Condition Summary (Millions $): | Metric | June 30, 2025 | December 31, 2024 | $ Change | % Change | | :-------------------- | :------------ | :---------------- | :------- | :------- | | Total current assets | 1,184 | 1,339 | (155) | (11.6)% | | Total long-term assets| 2,017 | 2,075 | (58) | (2.8)% | | Total current liabilities | 880 | 1,065 | (185) | (17.4)% | | Total long-term liabilities | 733 | 737 | (4) | (0.5)% | - Total assets decreased by **$213 million**, primarily due to a **$162 million decrease in accounts receivable** and a **$17 million decrease in cash and cash equivalents**[100](index=100&type=chunk) - Total liabilities decreased by **$189 million**, mainly due to a decrease in third-party transportation costs, partially offset by a **$36 million increase in long-term debt**[100](index=100&type=chunk) [Cash Flow Activity](index=25&type=section&id=Cash%20Flow%20Activity) This section analyzes RXO's cash flow from operating, investing, and financing activities for the reported periods Cash Flow Summary (Six Months Ended June 30, in millions $): | Activity | 2025 | 2024 | $ Change | | :-------------------------------- | :--- | :--- | :------- | | Net cash provided by operating activities | 21 | 2 | 19 | | Net cash used in investing activities | (43) | (22) | (21) | | Net cash provided by financing activities | 4 | 22 | (18) | - Net cash provided by operating activities increased by **$19 million**, primarily due to a **$29 million increase in non-cash depreciation and amortization expense**[101](index=101&type=chunk) - Net cash used in investing activities increased by **$21 million**, driven by a **$10 million payment for the Coyote acquisition** and a **$7 million increase in property and equipment purchases**[102](index=102&type=chunk) - Net cash provided by financing activities decreased by **$18 million**, primarily due to lower net proceeds from revolving credit facilities and higher tax withholdings related to stock compensation awards[103](index=103&type=chunk) [Critical Accounting Policies](index=26&type=section&id=Critical%20Accounting%20Policies) This section highlights RXO's critical accounting estimates and policies, noting any significant changes since the last annual report - There have been no significant changes in RXO's critical accounting estimates since December 31, 2024, as detailed in the 2024 Form 10-K[104](index=104&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) RXO is exposed to market risks related to foreign currency exchange rates, commodity prices, interest rates, and diesel fuel prices. No material changes to these disclosures were reported for the quarter ended June 30, 2025, compared to the 2024 Form 10-K - RXO is exposed to market risks from changes in foreign currency exchange rates, commodity prices, interest rates, and diesel fuel prices[105](index=105&type=chunk) - No material changes to the quantitative and qualitative disclosures about market risk were reported for the quarter ended June 30, 2025[105](index=105&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the conclusions regarding the effectiveness of RXO's disclosure controls and procedures and any changes in internal control over financial reporting, noting the ongoing integration of the Coyote acquisition [Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures](index=26&type=section&id=Conclusion%20Regarding%20the%20Effectiveness%20of%20Disclosure%20Controls%20and%20Procedures) This section presents management's conclusion on the effectiveness of RXO's disclosure controls and procedures as of the reporting date - As of June 30, 2025, RXO's CEO and CFO concluded that the company's disclosure controls and procedures were effective[106](index=106&type=chunk) - This ensures that information required for SEC reports is recorded, processed, summarized, and reported timely, and communicated appropriately to management[106](index=106&type=chunk) [Changes in Internal Control Over Financial Reporting](index=26&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports any material changes in RXO's internal control over financial reporting, including the impact of the Coyote acquisition - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, except for the ongoing integration of the Coyote acquisition into the company's overall internal controls[107](index=107&type=chunk) [PART II—OTHER INFORMATION](index=27&type=section&id=Part%20II%E2%80%94Other%20Information) This section provides additional information not included in the financial statements, covering legal proceedings, risk factors, equity sales, defaults, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=27&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding RXO's legal proceedings is cross-referenced to Note 11—Commitments and Contingencies in the condensed consolidated financial statements - Legal proceedings are detailed in Note 11—Commitments and Contingencies to the condensed consolidated financial statements[108](index=108&type=chunk) [ITEM 1A. RISK FACTORS](index=27&type=section&id=Item%201A.%20Risk%20Factors) A discussion of RXO's potential risks and uncertainties is provided in the "Risk Factors" section of the 2024 Form 10-K, with no material changes reported for the current period - Potential risks and uncertainties are discussed in the "Risk Factors" section of the 2024 Form 10-K[109](index=109&type=chunk) - No material changes to these risk factors have been reported[109](index=109&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the three or six months ended June 30, 2025. The company had $123 million remaining under its 2023 Share Repurchase Program, but no shares were repurchased during the period - No issuances of unregistered securities occurred during the three or six months ended June 30, 2025[110](index=110&type=chunk) - **$123 million** remained authorized under the 2023 Share Repurchase Program as of June 30, 2025[111](index=111&type=chunk) - No share repurchases were made under the program during the three or six months ended June 30, 2025[111](index=111&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=27&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported by RXO during the period - No defaults upon senior securities were reported[112](index=112&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to RXO's operations - Mine safety disclosures are not applicable to RXO[113](index=113&type=chunk) [ITEM 5. OTHER INFORMATION](index=27&type=section&id=Item%205.%20Other%20Information) No other information was reported in this section - No other information was reported in this section[114](index=114&type=chunk) [ITEM 6. EXHIBITS](index=28&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, as well as XBRL interactive data files - Exhibits include certifications (31.1, 31.2, 32.1, 32.2) and XBRL interactive data files (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[115](index=115&type=chunk) [Signatures](index=29&type=section&id=Signatures) The report was duly signed on behalf of RXO, Inc. by its Chief Executive Officer, Drew M. Wilkerson, and Chief Financial Officer, James E. Harris, on August 7, 2025 - The report was signed by Drew M. Wilkerson, Chief Executive Officer, and James E. Harris, Chief Financial Officer, on August 7, 2025[120](index=120&type=chunk)

Financial Data and Key Metrics Changes - The company achieved adjusted EBITDA of $38 million, at the high end of the guidance range provided last quarter [4][21] - Total revenue for the quarter was $1.4 billion, with a gross margin of 17.8% and an adjusted EBITDA margin of 2.7% [21][24] - Adjusted free cash flow conversion was 58%, with cash on the balance sheet increasing to $18 million [14][28] Business Line Data and Key Metrics Changes - Brokerage revenue was $1.025 billion, representing 69% of total revenue, with LTL volume growing by 45% year over year [23][34] - Truckload volume declined by 12%, primarily due to automotive weakness, while truckload gross profit per load improved by 7% sequentially [9][34] - Last Mile revenue increased by 19% year over year, with stops growing by 17%, marking the fourth consecutive quarter of double-digit growth [13][25] Market Data and Key Metrics Changes - The overall freight market remains soft, with a contraction of more than 3% in the cash freight index [6][15] - Automotive volume was down 28% year over year, contributing to the overall decline in truckload volume [34][102] - The company expects to continue operating in a soft freight market with limited spot opportunities [76] Company Strategy and Development Direction - The company is focused on driving profitable growth across market cycles while advancing its technology platform [16][19] - Growth will come from both the core truckload business and premium services, with a strong emphasis on LTL and Managed Transportation [19][20] - The integration of Coyote is nearly complete, with expectations for significant operating leverage as the market improves [31][49] Management's Comments on Operating Environment and Future Outlook - Management noted that while the freight market is soft, there are signs of tightening driven by capacity adjustments rather than improved demand [15][41] - There is cautious optimism among customers regarding trade policy clarity, which may unlock demand [31][106] - The company anticipates strong cash performance in the third quarter, with adjusted EBITDA expected to be between $33 million and $43 million [29][47] Other Important Information - The company has invested over $100 million annually in technology to enhance productivity and customer experience [19][20] - The integration of technology platforms is expected to be substantially complete by the end of the third quarter [12][49] - The company maintains a strong liquidity position with over $575 million in total committed liquidity [28] Q&A Session Summary Question: Comments on truckload volumes and optimizing price, volume, and service - Management explained that automotive weakness accounted for a portion of the volume decline, but efforts to optimize pricing and service have improved gross profit per load by 7% sequentially [55][56] Question: Margin characteristics of LTL growth compared to truckload - Management highlighted that LTL growth is driven by strong customer relationships and stable margins, with LTL now representing over 30% of overall volume [67] Question: Underlying freight market assumptions for the third quarter - Management expects continued automotive headwinds and a soft freight market, but anticipates improvements in procurement and profitability [76][78] Question: Impact of AI on productivity - Management noted that productivity has increased by 45% over the last two years, driven by AI and machine learning in pricing algorithms [110]

Financial Performance - RXO reported Q2 2025 adjusted EBITDA of $38 million[13] compared to $28 million in Q2 2024[12] - Q2 2025 revenue increased to $1419 million[12] from $930 million in Q2 2024[12], while gross margin was $252 million[12] compared to $177 million[12] - RXO reported Q2 2025 adjusted diluted EPS of $004[24], compared to $003 in Q2 2024[23] - Q2 adjusted free cash flow conversion was 58%[28], and the company remains confident in long-term conversion of 40%-60% across market cycles[29] Operational Highlights - LTL volume increased 45% year-over-year, representing 32% of the total volume[19] - Last Mile stop growth was 17% year-over-year, with a gross margin of 228%[19] - Truckload revenue per load increased 3% year-over-year, and the company expects 2025 contract rates to be up year-over-year[32] - Truckload gross profit per load increased by 7% sequentially in Q2[39] Technology and Integration - ERP consolidation was successfully completed during the second quarter[22] - Customer migration has already begun, and technology integration is anticipated to be substantially complete by the end of Q3[22] Outlook - RXO anticipates Q3 2025 adjusted EBITDA to be between $33 million and $43 million[48] - The company expects brokerage volume to be approximately flat year-over-year and brokerage gross margin to be between 135% and 150%[48]

RXO Second-Quarter 2025 Financial Results [Financial and Operational Highlights](index=1&type=section&id=Financial%20and%20Operational%20Highlights) RXO achieved 1% brokerage volume growth, a 45% LTL volume surge, and 17% Last Mile stop growth in Q2 2025, improving cash sequentially - Brokerage business outperformed the market, with volume growing **1% year-over-year**[2](index=2&type=chunk) - Less-than-truckload (LTL) volume was a key driver, growing **45% year-over-year**[2](index=2&type=chunk)[6](index=6&type=chunk) - Last Mile segment achieved **17% year-over-year stop growth**, its fourth consecutive quarter of double-digit growth[2](index=2&type=chunk)[6](index=6&type=chunk) - The company is realizing early benefits from its newly combined carrier and coverage operations, achieving a Brokerage gross margin of **14.4%**[2](index=2&type=chunk)[6](index=6&type=chunk) - Cash performance was strong, with the cash balance increasing sequentially from Q1 2025[2](index=2&type=chunk)[6](index=6&type=chunk) [Companywide Financial Performance](index=1&type=section&id=Companywide%20Financial%20Performance) RXO's Q2 2025 revenue grew significantly, reporting a GAAP net loss, but achieving increased adjusted net income and adjusted EBITDA Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue ($) | $1.4 billion | $930 million | | Gross Margin | 17.8% | 19.0% | | GAAP Net Loss ($) | $(9) million | $(7) million | | Adjusted Net Income ($) | $7 million | $4 million | | Adjusted EBITDA ($) | $38 million | $28 million | | Adjusted EBITDA Margin | 2.7% | 3.0% | | GAAP Diluted Loss Per Share ($) | $(0.05) | $(0.06) | | Adjusted Diluted EPS ($) | $0.04 | $0.03 | - The Q2 2025 GAAP net loss included **$10 million** in transaction, integration, restructuring, and other costs[4](index=4&type=chunk) - Adjustments for transaction, integration, restructuring costs, and amortization of intangibles impacted GAAP earnings per share by **$0.09**, net of tax[5](index=5&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) RXO's Q2 2025 segment performance was mixed, with Brokerage volume up 1% due to LTL, and Complementary Services achieving 17% Last Mile stop growth [Brokerage](index=2&type=section&id=Brokerage) The Brokerage segment's volume grew year-over-year, fueled by LTL volume offsetting a full truckload decline, achieving a solid gross margin Brokerage Segment Performance (Q2 2025 vs Q2 2024) | Metric | Change | | :--- | :--- | | Overall Volume | +1% YoY | | Less-than-truckload Volume | +45% YoY | | Full Truckload Volume | -12% YoY | - Brokerage gross margin was **14.4%** in the second quarter[7](index=7&type=chunk) [Complementary Services](index=2&type=section&id=Complementary%20Services) Complementary Services saw Last Mile stops grow significantly, with Managed Transportation providing synergy loads to Brokerage, and achieving a strong gross margin - Last Mile stops grew by **17% year-over-year**[8](index=8&type=chunk) - Managed Transportation continued to increase synergy loads provided to the Brokerage segment[8](index=8&type=chunk) - Complementary services gross margin was **22.8%** for the quarter[8](index=8&type=chunk) [Third-Quarter Outlook](index=2&type=section&id=Third-Quarter%20Outlook) RXO anticipates Q3 2025 adjusted EBITDA between $33 million and $43 million, with flat brokerage volume growth and a projected gross margin - Q3 2025 adjusted EBITDA is expected to be between **$33 million** and **$43 million**[9](index=9&type=chunk) - In Brokerage, Q3 2025 overall volume growth is expected to be approximately **flat year-over-year**[9](index=9&type=chunk) - Brokerage gross margin for Q3 2025 is projected to be between **13.5%** and **15.0%**[9](index=9&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) The unaudited condensed consolidated financial statements detail RXO's Q2 2025 net loss, total assets, and net cash provided by operating activities for the first six months [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, RXO generated $1.419 billion in revenue, but increased costs led to a net loss of $9 million Q2 Statement of Operations Highlights (in millions) | Account | Q2 2025 ($) | Q2 2024 ($) | | :--- | :--- | :--- | | Revenue | $1,419 | $930 | | Cost of transportation and services | $1,118 | $700 | | Sales, general and administrative expense | $214 | $154 | | Operating income (loss) | $0 | $0 | | Net loss | $(9) | $(7) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, RXO's balance sheet shows decreased total assets, with significant accounts receivable and goodwill, alongside total liabilities and equity Balance Sheet Summary (in millions) | Account | June 30, 2025 ($) | Dec 31, 2024 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | $18 | $35 | | Total current assets | $1,184 | $1,339 | | Total assets | $3,201 | $3,414 | | Total current liabilities | $880 | $1,065 | | Total liabilities | $1,613 | $1,802 | | Total equity | $1,588 | $1,612 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, net cash from operating activities improved, while investing activities used cash and financing activities provided a net cash inflow Six Months Ended June 30 Cash Flow Summary (in millions) | Activity | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $21 | $2 | | Net cash used in investing activities | $(43) | $(22) | | Net cash provided by financing activities | $4 | $22 | | Net (decrease) in cash | $(16) | $2 | [Supplemental Financial Information](index=8&type=section&id=Supplemental%20Financial%20Information) This section provides detailed breakdowns of revenue by service, GAAP to non-GAAP reconciliations, and gross margin analysis by segment, offering deeper operational insights [Revenue by Service Offering](index=8&type=section&id=Revenue%20by%20Service%20Offering) In Q2 2025, Truck Brokerage was the largest revenue contributor, with Last Mile revenue growing and Managed Transportation revenue seeing a slight decline Q2 Revenue by Service (in millions) | Service | Q2 2025 ($) | Q2 2024 ($) | | :--- | :--- | :--- | | Truck brokerage | $1,025 | $543 | | Last mile | $315 | $265 | | Managed transportation | $142 | $156 | | **Total (after eliminations)** | **$1,419** | **$930** | [Reconciliation of Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) The company reconciles its GAAP net loss to non-GAAP measures, adjusting Q2 2025's GAAP net loss to Adjusted EBITDA and Adjusted Net Income Q2 2025 Reconciliation of Net Loss to Adjusted EBITDA (in millions) | Line Item | Amount ($) | | :--- | :--- | | Net loss | $(9) | | Interest expense, net | $8 | | Income tax benefit | $(1) | | Depreciation and amortization expense | $30 | | Transaction and integration costs | $7 | | Restructuring and other costs | $3 | | **Adjusted EBITDA** | **$38** | Q2 2025 Reconciliation of Net Loss to Adjusted Net Income (in millions) | Line Item | Amount ($) | | :--- | :--- | | Net loss | $(9) | | Amortization of intangible assets | $11 | | Transaction and integration costs | $7 | | Restructuring and other costs | $3 | | Income tax associated with adjustments | $(5) | | **Adjusted net income** | **$7** | [Gross Margin Analysis](index=11&type=section&id=Gross%20Margin%20Analysis) RXO's overall gross margin decreased in Q2 2025, with Truck Brokerage at 14.4% and Complementary Services achieving a higher 22.8% gross margin Q2 Gross Margin as a Percentage of Revenue | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Truck brokerage | 14.4% | 14.7% | | Complementary services | 22.8% | 23.0% | | **Total Company** | **17.8%** | **19.0%** | [Important Disclosures](index=3&type=section&id=Important%20Disclosures) This section provides legal and financial disclosures, explaining non-GAAP measures and including a forward-looking statements disclaimer outlining risks [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) RXO explains its use of non-GAAP financial measures like Adjusted EBITDA and Adjusted EPS to analyze ongoing business operations by excluding non-core items - The company uses non-GAAP measures like adjusted EBITDA and adjusted EPS to facilitate analysis of ongoing business operations and assist with comparisons to prior periods[15](index=15&type=chunk) - Adjustments include transaction and integration costs, restructuring costs, and amortization of acquisition-related intangible assets[16](index=16&type=chunk)[17](index=17&type=chunk) - A reconciliation of the forward-looking Q3 2025 adjusted EBITDA to the corresponding GAAP measure is not available without unreasonable effort due to the variability of reconciling items[18](index=18&type=chunk) [Forward-looking Statements](index=3&type=section&id=Forward-looking%20Statements) This section serves as a legal safe harbor, cautioning that non-historical statements are forward-looking and subject to numerous risk factors - The release contains forward-looking statements regarding outlook, integration with Coyote Logistics, and cash synergies, which are based on current assumptions and are not guarantees of future performance[19](index=19&type=chunk) - Key risks that could affect future results include competition, pricing pressures, economic conditions, fuel price fluctuations, and the ability to successfully integrate the Coyote Logistics acquisition[20](index=20&type=chunk)

Core Viewpoint - RXO is anticipated to report a year-over-year decline in earnings despite an increase in revenues, which could significantly influence its stock price in the near term [1][2]. Earnings Expectations - The upcoming earnings report is expected to show quarterly earnings of $0.02 per share, reflecting a year-over-year decrease of 33.3% [3]. - Revenues are projected to reach $1.45 billion, representing a 56% increase from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has been revised down by 10.53% over the last 30 days, indicating a reassessment by analysts [4]. - The Most Accurate Estimate for RXO is higher than the Zacks Consensus Estimate, resulting in a positive Earnings ESP of +50.00% [12]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive reading indicates a likely earnings beat, particularly when combined with a strong Zacks Rank [10]. - RXO currently holds a Zacks Rank of 4, which complicates the prediction of an earnings beat despite the positive Earnings ESP [12]. Historical Performance - In the last reported quarter, RXO was expected to post a loss of $0.02 per share but actually reported a loss of $0.03, resulting in a surprise of -50.00% [13]. - Over the past four quarters, RXO has only beaten consensus EPS estimates once [14]. Conclusion - RXO does not appear to be a strong candidate for an earnings beat, and investors should consider additional factors when evaluating the stock ahead of the earnings release [17].

Core Viewpoint - The Portnoy Law Firm is investigating potential securities fraud involving RXO, Inc. and may file a class action on behalf of affected investors [1][3]. Group 1: Investigation Details - The investigation focuses on whether RXO and its executives may have violated federal securities laws by issuing materially false or misleading statements or failing to disclose material information in a timely manner [3]. - Investors who purchased RXO securities and suffered losses are encouraged to contact the firm to discuss their legal rights, with no cost or obligation to participate [4]. Group 2: Legal Support for Investors - The Portnoy Law Firm offers complimentary case evaluations and options for investors to pursue claims to recover their losses [2][4]. - The firm has a history of representing investors in claims against corporate wrongdoing, with the founding partner having recovered over $5.5 billion for aggrieved investors [5].

Core Viewpoint - Johnson Fistel, PLLP is investigating RXO, Inc. for potential violations of federal securities laws related to misrepresentation or failure to disclose material information to investors [1] Group 1: Investigation Details - The investigation focuses on whether RXO, Inc. or its officers and directors misrepresented or failed to disclose important information to investors [1] - Individuals who purchased RXO securities and experienced losses are encouraged to join the investigation [2] Group 2: Whistleblower Information - Individuals with nonpublic information about RXO are advised to consider assisting the investigation or utilizing the SEC Whistleblower program, which may offer rewards up to 30% of successful recoveries [3] Group 3: About Johnson Fistel, PLLP - Johnson Fistel, PLLP is a nationally recognized law firm specializing in shareholder rights, with offices across multiple states [4] - The firm has been ranked in the Top 10 Plaintiff Law Firms by ISS Securities Class Action Services in 2024, recovering approximately $90,725,000 for clients [5]

Core Insights - RXO and Triumph have expanded their partnership to provide new financial tools and services aimed at improving efficiency and profitability for carriers [1][3] - RXO Extra | Factoring, powered by Triumph, offers Factoring as a Service™ and LoadPay™, enabling carriers to access quick payments and seamless factoring services [2][3] Company Overview - RXO is a leading provider of asset-light transportation solutions, offering tech-enabled truck brokerage services and complementary solutions across North America [6] - Triumph is a financial and technology company focused on modernizing freight transactions through payments, factoring, and banking solutions [6][7] Service Details - RXO Extra | Factoring allows carriers to receive same-day payments on approved invoices, available 24/7, enhancing cash flow management [2][3] - LoadPay is a digital banking solution designed specifically for the freight industry, providing fast access to funds and tailored tools for transportation businesses [7] Loyalty Program - RXO Extra™ is a loyalty program that rewards carriers for hauling loads through RXO Connect, offering savings and bonuses as they progress through loyalty tiers [4]

Group 1 - RXO shares increased by 6.3% to close at $16.71, supported by higher trading volume compared to normal sessions, and this follows a 3.4% gain over the past four weeks [1] - RXO has been added to the Russell 2000 Value Index, which contributed to the recent stock price increase [1] - The company is expected to report quarterly earnings of $0.02 per share, reflecting a year-over-year decline of 33.3%, while revenues are projected to be $1.46 billion, an increase of 57.1% from the previous year [2] Group 2 - The consensus EPS estimate for RXO has been revised down by 4.8% over the last 30 days, indicating a negative trend in earnings estimate revisions, which typically does not lead to price appreciation [3] - RXO holds a Zacks Rank of 3 (Hold), indicating a neutral outlook [4] - RXO is part of the Zacks Transportation - Services industry, where another company, Hub Group, closed 4.9% higher at $35.06, with a 1% return over the past month [4]

Summary of RXO Conference Call Company Overview - **Company**: RXO - **Industry**: North American Transportation and Logistics Key Points and Arguments Market Environment - The load-to-truck ratio is currently around **5:1**, with tender rejections at approximately **6:1** [4][5] - The market is experiencing a shift from a capacity problem to a demand problem, with demand currently below **2019 levels** [6] - There is a slight recovery in demand expected as the market stabilizes post-April volatility [9][10] Demand and Capacity Dynamics - Different shippers are exhibiting varied behaviors in terms of ordering, leading to a lack of consensus in the market [11][12] - The technology sector has shown relative strength, while the automotive sector has seen a **26% decline** year-over-year in Q1, impacting gross margins significantly [13][14] Rate Environment - Truckload rates increased by **4%** in Q1, excluding fuel and length of haul, with contract rates up low to mid-single digits year-over-year [19][20] - Spot rates remain below contract rates, indicating a softer market environment [18] Regulatory and Capacity Considerations - Potential regulatory changes regarding cabotage could impact capacity by **low double digits** if implemented [22][23] - Regional dynamics are affecting capacity, particularly in the Southeast due to produce seasonality [27] Integration and Operational Updates - The integration of Coyote is progressing well, with a **4% voluntary turnover** among director-level staff [34] - Early signs of improved gross profit per load are expected as bids are implemented [40] - The company has already cut **$50 million** in costs, with a target of over **$70 million** in total cash synergies [41] Financial Performance and Projections - For Q2, RXO expects adjusted EBITDA between **$30 million to $40 million**, with variability based on volume and gross profit per load [67] - The company anticipates a decline in capital expenditures from **$70 million** in 2025 to about **$50 million** in 2026 [63][64] Last Mile and LTL Business - RXO is the largest player in big and bulky home delivery, with a **24% year-over-year increase** in stops [86] - The LTL segment is expected to provide stability, with a focus on large enterprise customers [95][96] Cash Flow and Capital Allocation - RXO plans to be opportunistic with cash flow, considering options such as debt repayment or share buybacks [100] Industry Outlook - The brokerage industry has seen **20%** of brokerages exit the market over the last two years, indicating a consolidation trend [77] - The company believes brokerage will continue to grow faster than the truckload market, potentially reaching over **30%** of the for-hire industry in the next few years [80] Additional Important Insights - The integration of technology systems is expected to enhance operational efficiency and cost savings [58][59] - The company is focused on maintaining strong relationships with carriers, which has resulted in increased freight opportunities [66] - RXO is exploring both organic growth and potential M&A opportunities in the last mile segment [88]