Core Viewpoint - The law firm Robbins Geller Rudman & Dowd LLP is investigating potential violations of U.S. federal securities laws involving RXO, Inc. [1] Group 1 - The investigation is focused on RXO, Inc. and its compliance with federal securities laws [1]

Core Insights - Alger Weatherbie Specialized Growth Fund's second-quarter 2025 investor letter highlights the impact of trade policy uncertainty and subsequent market recovery, with the S&P 500 achieving a record high and the fund outperforming the Russell 2500 Growth Index [1] Company Overview - RXO, Inc. (NYSE:RXO) is a truck brokerage company that connects customers with carriers, primarily operating in truckload (TL) and less-than-truckload (LTL) shipping [3] - The company also provides managed transportation services, freight forwarding, and last-mile delivery solutions [3] Performance Analysis - RXO, Inc. experienced a one-month return of -0.49% and a 52-week decline of 42.07%, with shares closing at $16.15 and a market capitalization of $2.648 billion as of September 23, 2025 [2] - The company's performance was negatively impacted by weaker-than-expected revenues and earnings, despite a strong LTL segment; the TL business faced lower shipping volumes [3] Market Position - RXO, Inc. was held by 31 hedge fund portfolios at the end of Q2 2025, an increase from 16 in the previous quarter, indicating growing interest [4] - Despite the potential of RXO, the company is not considered among the top 30 most popular stocks among hedge funds, with certain AI stocks viewed as having greater upside potential and lower downside risk [4]

Group 1 - Robbins Geller Rudman & Dowd LLP is investigating potential violations of U.S. federal securities laws involving RXO, Inc. [1]

Core Insights - RXO Inc. is identified as a strong IPO stock with a Buy rating from Barclays analyst Brandon Oglenski, who set a price target of $17 [1][3] - The company reported Q2 2025 total revenue of $1.4 billion and a gross margin of 17.8% [1] - RXO achieved an adjusted EBITDA of $38 million, reaching the high end of its guidance, with an adjusted EBITDA margin of 2.7% [2] Financial Performance - Brokerage revenue was $1.025 billion, accounting for 69% of total revenue, with a brokerage gross margin of 14.4% [2] - Despite a 12% decline in truckload volume and a 28% year-over-year drop in automotive volume, truckload gross profit per load increased by 7% sequentially [3] - The company's strategy of optimizing price, volume, and service has contributed to improved gross profit per load [3] Technological Advancements - RXO has utilized AI and machine learning for over a decade, resulting in a 45% increase in productivity over the last two years [3]

Group 1 - The freight market remains soft, with varying conditions observed as the industry transitions from Q2 to Q3, particularly around the holiday season [1] - There are pockets of tightness in the market, which can be problematic when there are no corresponding spot loads available [1] - The impact of the produce season has been more significant this year, especially in southern and West Coast states, affecting market dynamics [2]

Summary of RXO FY Conference Call (September 10, 2025) Company Overview - **Company**: RXO (NYSE: RXO) - **Industry**: Transportation and Logistics Key Points and Arguments Market Conditions - The freight market remains soft, with varying conditions across different regions, particularly noted during the transition from Q2 to Q3 [3][4] - There are pockets of tightness in the market, especially around holiday seasons, but overall demand remains muted [3][11] - The Southern and West Coast states have experienced significant impacts from the produce season, more so than in previous years [4] Segment Exposure - RXO's business segments are approximately 20% to 25% each in industrial manufacturing, retail e-commerce, and food and beverage, with automotive and homebuilding making up the remainder [5][6] - The housing market's softness has contributed to a prolonged downturn in the freight market, with each new home equating to approximately 7.5 truckloads [6] Customer Sentiment and Tariff Clarity - Customers express cautious optimism regarding tariff clarity, with many planning their budgets based on a clearer direction around tariffs [9][10] - The sentiment varies, with some customers optimistic about the upcoming peak season while others remain pessimistic [11][13] LTL Business Growth - RXO's LTL (Less Than Truckload) business has grown significantly, now accounting for 32% of overall volume, up from 10% at the time of the spin-off [15][16] - The company aims to increase LTL's share to 50% or more, driven by strong relationships with large enterprise customers [15][16] - RXO Connect platform is a key driver for LTL growth, providing visibility and efficiency for customers [19][25] Integration of Coyote - The integration of Coyote is progressing well, with high retention of top customers and successful technology integration [40][41] - However, profitability has not met expectations due to market conditions and pricing strategies [42][48] - The company anticipates improvements in gross profit per load as they adjust pricing strategies [45][49] Financial Outlook - RXO expects gross margins to remain stable, with a range of 33% to 43% anticipated for Q3 [38] - The company is focused on achieving mid-single-digit EBITDA margins (5% to 6%) in the long term, with potential for upside through technology investments [71][72] Technology Investments - RXO invests over $100 million annually in technology, focusing on enhancing productivity and operational efficiency [63][64] - The company leverages AI and machine learning to improve pricing algorithms and operational processes [63][66] Competitive Landscape - RXO acknowledges the competitive pressures from asset-based carriers and the need to differentiate through technology and service offerings [28][32] - The company believes that brokers will continue to gain market share, potentially reaching 30% to 40% in the long term [34] Challenges and Risks - The automotive sector presents a significant headwind, with a noted decline in volume impacting overall profitability [78][81] - The company is cautious about the cyclical nature of the market and the potential for further downturns [48][72] Additional Important Insights - The company is committed to continuous improvement and operational efficiency, aiming to exceed initial synergy estimates from the Coyote acquisition [55][57] - RXO's focus on technology and customer relationships is seen as a critical factor for future growth and stability in a fluctuating market [63][70]

Summary of RXO (RXO) 2025 Conference Call Company Overview - RXO is a spinout of XPO Logistics, established in November 2022, during a freight recession, aiming to build a strong foundation at the bottom of the cycle for future growth [3][4] - The company operates primarily in three segments: truck brokerage, managed transportation, and last mile delivery [4][5][6] Industry Insights - The current freight cycle has been unusually prolonged, with the downturn lasting nearly three years, which is unprecedented in the speaker's 20-year experience [9][10] - Key metrics for assessing the freight market include tender rejection rates and load-to-truck ratios, with current tender rejection rates at approximately 6%, indicating a slow recovery [11][12] Demand vs. Supply Dynamics - The speaker emphasizes that the current challenges are more demand-driven rather than supply-driven, with demand levels below those of 2019 [13][14] - The company has seen significant impacts from sectors such as retail, e-commerce, automotive, and homebuilding, with automotive being particularly affected [15] Tariffs and Trade Policy - There is a growing confidence among shippers due to clarity in trade policies, which may eventually translate into increased consumer demand and industrial production [16][17] Technology and Competitive Advantage - RXO invests approximately $100 million annually in technology, viewing it as essential for operational efficiency and customer engagement [21][22] - The company has achieved a 45% increase in productivity over the last two years, attributed to technology and operational improvements [22] Growth Segments - RXO has reported a 45% growth in LTL (Less Than Truckload) volumes and a 17% growth in last mile deliveries, indicating strong performance even in a downturn [40][41] - The company aims for LTL to constitute over 50% of its volume mix in the long term, benefiting from stable gross margins [43] Market Penetration and Future Outlook - Brokerage penetration in the trucking market has increased from 6-7% to the low 20s, with expectations to reach 30-40% in the coming years [34][35] - The speaker anticipates continued consolidation in the brokerage market, with the top brokers expected to control a larger share of the market [57] Cost Management and Cash Flow - RXO has implemented cost efficiencies, with significant reductions in operating expenses and capital expenditures expected in the coming year [29][30] - The company reported a 58% adjusted free cash flow conversion from EBITDA in Q2, indicating strong cash flow dynamics [62] Strategic Focus - RXO is focused on maintaining a balance between short-term profit protection and long-term growth investments, particularly during downturns [64][65] - The company is open to strategic M&A opportunities that align with its growth objectives and cultural fit [60] Conclusion - RXO is positioned to leverage its technology, strong customer relationships, and market insights to navigate the current freight cycle and capitalize on future growth opportunities in the logistics sector [48][49]

Core Viewpoint - The article emphasizes a fundamentals-based approach to value investing, challenging the notion that low multiple stocks are inherently cheap and advocating for companies with long-term growth potential and strong balance sheets [1]. Group 1: Investment Philosophy - The focus is on identifying companies that provide long-term durability at affordable prices, rather than merely seeking low multiple stocks [1]. - There is a recognition that investing in successful companies carries risks, particularly the risk of overpaying, highlighting the importance of valuation [1]. - The article suggests that in certain situations, the potential for growth may outweigh immediate price concerns, indicating a broader perspective on investment timing [1].

[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]