Financial Data and Key Metrics Changes - The company reported total revenue of $1.5 billion for Q4 2025, with a gross margin of 14.8% and adjusted EBITDA of $17 million, reflecting a decline in brokerage gross margin due to increased transportation costs and soft demand [15][16] - Adjusted loss per share was $0.07, and a $12 million goodwill impairment was noted related to restructuring within the managed transportation business [15][16] - For the full year, total revenue was $5.7 billion, with an adjusted EBITDA of $109 million and an adjusted EBITDA margin of 1.9% [18] Business Line Data and Key Metrics Changes - Brokerage revenue was $1.1 billion, down 14% year-over-year, representing 72% of total revenue, with a gross margin of 11.9%, which declined 160 basis points sequentially and 130 basis points year-over-year [15][16] - Complementary services revenue was $431 million, flat year-over-year, with a gross margin of 20.2%, down 110 basis points sequentially and 90 basis points year-over-year [16][17] - Managed transportation generated $133 million in revenue, down 6% year-over-year, while last-mile business revenue grew by 3% year-over-year, totaling $298 million [17] Market Data and Key Metrics Changes - Overall brokerage volume declined by 4% year-over-year, with truckload volume down 12% and less-than-truckload (LTL) volume up 31% [25][26] - The company noted that tender rejections and load-to-truck ratios reached the highest levels of the year in December, indicating tightening market conditions [6][31] - The regulatory changes have led to significant supply-side dynamics, impacting the truckload market and contributing to a structural change in the industry [31][36] Company Strategy and Development Direction - The company is focused on optimizing its cost structure and gross profit per load while expanding its carrier base and growing stable sources of EBITDA [3][4] - RXO aims to leverage its technology platform and customer relationships to drive growth, particularly in managed transportation and LTL [10][12] - The company is investing in AI capabilities to enhance operational efficiency and improve service delivery [10][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for a demand recovery, citing positive macroeconomic indicators and a strong late-stage sales pipeline [24][36] - The company anticipates continued soft demand in the first quarter of 2026, with expected adjusted EBITDA between $5 million and $12 million [22][35] - Management highlighted the importance of maintaining strong customer relationships and the potential for significant earnings power during a market recovery [70][80] Other Important Information - The company finalized a new $450 million asset-based lending facility, which replaces its previous $600 million revolver, providing better pricing and flexibility [20][21] - The company achieved an adjusted free cash flow conversion of 43% for the year, indicating strong cash generation despite market challenges [19][60] Q&A Session Summary Question: Can you unpack the 50% increase in the late-stage brokerage pipeline? - Management noted that the increase reflects strong customer relationships and a return to growth mode following the integration of Coyote, with bids typically implemented in the second quarter [39][40] Question: How is AI helping with SMB outreach? - Management highlighted significant progress in AI capabilities, improving productivity and margin opportunities, with a 19% increase in productivity year-over-year [41][42] Question: How do company actions and market dynamics interact in 2026? - Management indicated that while positive macro developments are noted, company-specific initiatives are expected to drive growth and resume historical outperformance [46][47] Question: What impact has winter weather had on Q1? - Management quantified the impact of winter weather on EBITDA at approximately $2 million, affecting both brokerage and last-mile operations [50][52] Question: What are the expectations for spot volumes and EBITDA in the coming quarters? - Management noted that spot volumes are up year-over-year, and for every dollar of gross margin improvement, it translates to significant EBITDA potential [56][57] Question: What is the outlook for managed transportation earnings contribution? - Management emphasized that managed transportation provides synergy across the organization, contributing positively to overall earnings [64][65] Question: How does the company define truckload outperformance? - Management defined outperformance in terms of volume, pricing, and EBITDA, with expectations for improved gross profit per load driving significant earnings power [68][70]