RXO(RXO) - 2025 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION 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 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 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] - 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] Condensed Consolidated Statements of Operations 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][89] - 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] Condensed Consolidated Statements of Comprehensive Loss 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] - 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] Condensed Consolidated Statements of Cash Flows 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] - 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] - 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] Condensed Consolidated Statements of Changes in Equity 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] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering key accounting policies and specific financial items 1. Organization 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] - The company's core business includes truck brokerage, managed transportation, and last mile services, all presented as one reportable segment[23] 2. Basis of Presentation and Significant Accounting Policies 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] - No material changes to the company's significant accounting policies were reported as of June 30, 2025[26] - 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][29][30] 3. Acquisition 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] - The acquisition is expected to enhance RXO's competitive position with greater scale, broader service offerings, and strengths in diverse end markets[31] 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 This note provides financial information for RXO's single reportable segment, including adjusted EBITDA and segment assets - RXO operates as one reportable segment[39] 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 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] 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] 6. Restructuring Charges 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] 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] 7. Debt 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][46] - 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] - RXO was in compliance with all covenants of its Revolver and Notes as of June 30, 2025[47][52] 8. Fair Value Measurements 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] 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][56] 9. Stockholders' Equity 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] - The company had $123 million remaining under its 2023 Share Repurchase Program as of June 30, 2025[55] - No share repurchases were made under the program during the three or six months ended June 30, 2025[55] 10. Earnings per Share 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] - 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] 11. Commitments and Contingencies 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][62] - These misclassification claims are generally not covered by the company's liability and excess umbrella insurance policies[61] - 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] - Pursuant to the Separation and Distribution Agreement, RXO has agreed to indemnify XPO for liabilities arising from these misclassification claims[63] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 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] - The core truck brokerage business is characterized by robust free cash flow conversion and a high return on invested capital[68] - Proprietary digital brokerage technology is a major differentiator, enabling efficient access to capacity and supporting complementary managed transportation and last mile services[69][70][71] The Coyote Acquisition 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] - 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][73] Impact of Inflation 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] - 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] Basis of Presentation 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] - The financial statements include RXO, Inc. and its majority-owned subsidiaries, with all intercompany accounts and transactions eliminated[76] - 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] Results of Operations 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 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] - 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] - 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][84] Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024 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] - 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] - 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][92] Liquidity and Capital Resources This section discusses RXO's ability to generate and manage cash, including sources of liquidity, capital expenditures, and debt arrangements 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] - Principal uses of cash include funding operations, working capital, capital expenditures, debt repayment, share repurchases, and strategic business development transactions[96] - Management believes existing liquidity and capital sources are sufficient to support operations for the foreseeable future[97] Capital Expenditures 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] - The company has significant discretion over the amount and timing of its capital expenditures[98] Debt and Financing Arrangements 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] Financial Condition 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] - 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] Cash Flow Activity 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] - 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] - 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] Critical Accounting Policies 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] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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] - No material changes to the quantitative and qualitative disclosures about market risk were reported for the quarter ended June 30, 2025[105] ITEM 4. CONTROLS AND PROCEDURES 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 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] - This ensures that information required for SEC reports is recorded, processed, summarized, and reported timely, and communicated appropriately to management[106] Changes in Internal Control Over Financial Reporting 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] PART II—OTHER INFORMATION 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 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] ITEM 1A. RISK FACTORS 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] - No material changes to these risk factors have been reported[109] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 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] - $123 million remained authorized under the 2023 Share Repurchase Program as of June 30, 2025[111] - No share repurchases were made under the program during the three or six months ended June 30, 2025[111] ITEM 3. DEFAULTS UPON SENIOR SECURITIES No defaults upon senior securities were reported by RXO during the period - No defaults upon senior securities were reported[112] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to RXO's operations - Mine safety disclosures are not applicable to RXO[113] ITEM 5. OTHER INFORMATION No other information was reported in this section - No other information was reported in this section[114] ITEM 6. EXHIBITS 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] 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]