RXO, Inc. — Call Transcript 2025

Great. Well, good morning, everybody. Thank you all for being here this morning. If you, for those of you that don't know me, my name is Joe Haefele. I work with Steph Moore on the Jefferies team, helping to cover the transport side, and we're pleased to have the RXO team here with us. We've got CEO Drew Wilkerson and Chief Strategy Officer, Jared Weisfeld. Guys, if you wanna give a brief introduction and maybe give a thirty-second overview of RXO, where we stand today, and then I can jump to some Q&A. Yeah. Good morning. I'm Drew Wilkerson, Chairman and CEO of RXO. RXO is a spin-out of XPO Logistics. We did it at a great part of the cycle. It was November of 2022, and we've now been in a downturn since we've done the spin-off of a freight recession. So it, it has been an interesting time and a fun time to be able to do it, because for us, if we can build our base at the bottom of the cycle, we like the setup and what it creates for an inflection in an upcycle. If you look at RXO, there are three main components to our business. We're led by our truck brokerage business. We're the third largest truck brokerage, so if you think of helping shippers get things from point A to point B, we work with over a hundred thousand carriers, on a monthly basis, as far as how we're doing that. The second part of our business is managed transportation. This is where it is a complete outsource of a portion or all of a customer's business, and we essentially become their transportation department. We love the managed transportation business because, one, we get access to a lot of data, which helps us in our other lines of business, but also, if we're doing our job well, managed transportation gets to act as a customer to the rest of our other lines of business, and then the last line of business is our last mile business. If you look at last mile, we are the leader in that space. So think about big and bulky goods, washer, dryer, refrigerators, stoves, going into someone's house, doing the installation, and again, that's an asset-light business that is doing that. So if you think of the largest brands that are doing business on the big and bulky side, they start their conversation with RXO because we've got a network that nobody else has. We've got locations that put us within a hundred and twenty miles of 90% of the U.S. population. That's great. I hate to, you know, maybe start with some macro, but I'd be remiss if I didn't talk about the trucking cycle here, so- I thought I started with the macro. Yeah, I'm gonna have to double-click on it a little bit. So maybe from your seat, you know, how are you assessing the current state of the freight cycle, and what are the leading indicators maybe that you're looking for? You know, we're all waiting for a turn. At some point, what are the things you guys are laser-focused on trying to kind of get the timing of that and the shape of the recovery? Yeah, I don't think, well, one, the last part of your question, I don't think anybody's getting the timing or the shape of the recovery right at this point. You know, I've been doing this for 20 years, and there's never been a freight cycle that has been down as long as what this one has been since I've been doing this. Now, whenever you look at it, this is still a cyclical business, and it's still built off of supply and demand, so nothing has changed in terms of that. Some of the key metrics that we watch on a daily basis, on a weekly basis, on a monthly basis, is what is happening with tender rejections? So if you think about loads that are getting tendered out from a customer, how often are they getting rejected? And typically, whenever that starts to hit double-digit range is whenever you start to see a little bit of volatility in the market. We haven't been there for the last almost three years of what that's been. So if you look at tender rejections right now, I think they're sitting around 6%. Now, that's up on a year-over-year basis, it's up on a two-year stack, so it is moving in the right direction, and right now, what you're seeing is more of a slow, stairstep recovery than a sharp inflection. And then, you know, outside of tender rejections, we also watch load-to-truck ratio. Typically, whenever that hits six to seven to one, it correlates with tender rejections hitting 10%. Got it. Drew, you just mentioned this is, you know, a three-year freight recession, one of the longest in your history, being in the industry. You know, what has made this cycle so different? What has caused this downturn to be so long? And at this point in the cycle, is it still a supply issue, are we still oversupplied, or is the demand side really the question that we're waiting for? For two years, we told you that there was too much capacity out in the market. For the last year, we have probably been one of the only ones that have said, "We actually think capacity is in an okay state." It is more on the demand side. If you look at demand, we're below 2019 levels, so take COVID out. You had the COVID highs, but if you look at 2019 and 2018, we're below those levels of where we were at. Capacity, if you look at seated drivers that are actually operating out on the road, that's in line with what it was in 2019. So for us, we look at this more on the demand side than the supply side. For our business, you know, when you think about what drives it, retail and e-commerce is a huge piece of our business. Automotive is a good size and a good portion of our business. We do a good bit of manufacturing and industrial and home-building supplies. And then from the Coyote acquisition, we picked up a lot of food and beverage. That was not one of our core verticals at RXO, but it was at Coyote. That business was built off of food and beverage. So when you look at what the makeup of our business is, we've probably been hit the hardest on the automotive side, as well as on the home building side. Great, that makes a lot of sense. You know, I think tariffs comes up a lot also in supply chain, so maybe if you could give a rundown of maybe the impact of tariffs you're seeing on your business and the extent that you have visibility into the shifting freight flows, and trade patterns. You know, what are you guys seeing on the ground? What are you hearing from your customers as they're navigating this tariff environment? So we talked earlier this year in terms of- Tariffs creating shipper uncertainty, right? And ultimately, you know, when you look at what's happened from April to now, I think what we said a couple weeks ago on our earnings call was, you know, we are seeing some incremental clarity, given what's gone on with respect to trade policy. So I think that the confidence is starting to build on behalf of the shippers. Question is, does that eventually translate into consumer demand, industrial production? I think that's still to be determined, but I think we are seeing incremental confidence on behalf of the shippers, given the clarity we've seen on trade policy, which at this point we've, you know, struck multiple trading deals with our largest trade partners across the globe. So, that, that's how I'd characterize it. Got it. And is there an opportunity for RXO to serve as sort of a supply chain partner in this period of uncertainty? And maybe a broader question of, you know, how we should think about brokerage and scale and being able to kind of partner with these smaller companies and, you know, help them serve in this time of uncertainty? I think when you look at our model, you know, volatility in the market is a good thing. If the market is moving up or down, that's a really good thing for our business if, and that creates opportunities to create solutions in those supply chains. If you think about the market moving up and capacity tightening, what that means is what I started out talking about with tender rejections, if we're in a good position with those customers, which we are, we have great relationships. Our top customers have been with us for sixteen years on average. The spot loads, as those tender rejections go up, come to us, and those are typically at a much higher gross profit per load. If the market's falling, like what you saw in 2022 as the market started to fall, what that means is, at that point, you're holding the line on your contractual rates, and you're pulling down purchase transportation. Now, when you're in a steady state of a downturn, there's a little bit. That's probably the pain point for us, but anytime the market is moving up or down, that gives us the opportunity to create solutions for our customers, so we love living in a period of volatility. Got it. You know, also, maybe if we could talk about your, you know, your tech stack, your investment in technology. In the past, you had talked about 97% of loads created or covered digitally. You know, how do you see technology and using technology as a competitive advantage for RXO, and, and how are you pushing the envelope, you know, today to kind of continue to grow that? Yeah, so we view our investment as tech in technology as table stakes. When you think about how much we're spending in tech per year, I think last quarter, we talked about how we're spending about $100 million per year in our investments in technology. And, you know, the way we think about it fundamentally in terms of our investment in technology, it's the combination of technology and people. So it's not just leveraging technology. Leveraging technology is critical, and it's important, but it's also marrying that with our people in terms of. You think about the brokerage industry, the customer relationships. Our top 20 customers have been with us for 16 years on average, so I think it's that combination. But when you then you drill down into technology, how we think about it is holistically across how we use it internally, how we use it to help our customers, and how we use it to help our carriers. In terms of how we use it internally, we've been leveraging machine learning for over a decade. How we leverage that from a pricing algorithm standpoint, how we think about leveraging AI, agentic AI, generative AI. We think about sales enablement. How do we make our people more productive? That's mission critical, and you think about what we've seen from a productivity standpoint. Over the last two years, our productivity is up over 45%, so loads per person per day. Bringing on more volume without adding headcount in that linear fashion allows you to have really strong incremental margins over time. You think about how we're leveraging it from a customer side in terms of the ability to go ahead and have that connectivity with our customers, and our customers range from anywhere from Fortune 100 down to SMB. With the acquisition of Coyote, you know, SMB was about 20% of their volume, so having access to a wide variety of customers and enabling that connectivity with our tech stack is critical. And then on the carrier side, the ability to go ahead and, you know, have RXO Go, the mobile app, across our carrier ecosystem, you know, which leads into that 97% of loads created or covered digitally. You know, it's also just not about the number of carriers that we have on the platform. As Drew mentioned, you know, over 125,000 carriers on the platform. What's the engagement with those carriers, right? How often do they come back to the platform? When the carrier comes on to RXO Connect, they're coming back 70% of the time the following week. We're thinking about it pretty holistically across those three cohorts. Got it. Maybe piggybacking off of that, you know, talking about the digital capabilities, a couple of years ago, there was a big push for these digital-first, digital-only brokers. I'm thinking of the Convoy and the Transfix of the world. You know, what do you think in hindsight has been the learnings from those digital-first brokers versus what, you know, you guys and some of the bigger brokers are doing today with technology? Yeah, I mean, I can't tell you what the learnings for them was, 'cause we're not in their boardrooms. I can tell you for us, you know, we built the business off of strong technology and strong operators, and it was never one or the other for us, and so for us, this is still a people business. Relationships matter. I talked about our top customers being with us for sixteen years. They're not doing business with a robot. Now, they want business to be automated, but when you're talking about somebody that has a history of creating solutions, they want somebody on the other side of the table as they're having those conversations, and what they're doing. If you look at our technology from our pricing algorithms, we've brought in some of the best technologists in the world, people who have built pricing algorithms for hotels and the airline industries. But we partnered them with great operators because they don't know the business well enough, and I think that if you look over the last decade, that's been some of our secret sauce, that it was never technology or operations. It was being able to build from the ground up with strong technology, the best technology in the industry, as well as having operators who have a lot of experience in what they're doing and seeing multiple different market cycles and the ability to move our pricing dial, not just once a quarter, not just once a month, once a day. Our pricing algorithm moves every minute as far as what it should be pricing to the customer and the carrier. Okay, thanks. Maybe marrying kind of the three-year freight recession here and using technology to increase productivity, you know, what are you guys doing today on the cost side to kind of manage your own costs here at the bottom of the cycle? Yeah, so when you think about the SG&A efficiencies that we've had, right? How we're thinking about the business, I think I would go back to, you know, Drew's opening remarks, right? We are thinking about how to go ahead and prime the business for incremental operating leverage. How do we make sure that, you know, for the next downturn, that we're troughing at higher EBITDA margins than we were this year, right? So going ahead and putting in an efficient cost structure that makes sense across all market cycles, right? So you think about the cost actions that we've taken. We've talked about on the Coyote side with respect to the acquisition, right? More than $70 million of total cash synergies. So that's comprised of $60 million of operating expenses and $10 million of CapEx. So heading into next year, you'll see a $10 million reduction in Coyote CapEx. Cumulatively, you'll see a $20 million reduction heading into next year. And then on the cost side, in terms of operating expenses, you know, embedded within our Q2 results included $50 million of operating expenses that were already taken out, so call it $12.5 million or so per quarter, with another $10 million coming out later this year, associated with the rest of the tech integration as we combine the platforms, decommissioning Coyote's legacy platform, Bazooka, and putting everything onto RXO Connect, which will be substantially complete here by the end of the month. So we made a ton of progress with the integration. But I think it's also not just that, it's also... You think about just this continuous mindset of continuous improvement, right? How do we go ahead and make sure that we're always optimizing the cost structure? You think about the ability to go ahead and leverage technology that Drew and I just talked about, and continue to do that in a way that is efficient from a cost structure standpoint. I think there is still significant more opportunity as it relates to cost, as well. So that's how we think about it. Great, thanks for that answer. And how do you think about that cost structure, maybe, you know, flexing in an up cycle? You know, your ability to take on more loads per day in an up cycle with your current cost structure, you know, how quickly can you, do you need to add on more headcount? You know, how should we think about the cost structure evolving in an up cycle? Yeah, so we're staffed for growth currently, and I think leveraging that technology is key to ensure that, you know, one, we're staffed for growth, but then when the up cycle does come, how do we go ahead and make sure our people continue to be productive and be more productive in leveraging that tech? And we talked about productivity being up, you know, 45% over the last two years in terms of loads per person per day. You know, there will be a point where, you know, depending on the strength of that up cycle, will we have to add more labor? For sure, but do we do it in a way that is efficient, so you've got that relationship that makes sense in terms of contribution margins, where you're adding headcount at a lower rate relative to volume growth? And this business is all about incrementals. If you think about, you know, the 2.7% EBITDA margins that we posted last quarter, you know, in the brokerage business, depending on, you know, whether it's attributable to volume or price, you could have incremental margins that can be in excess of 75%, right, in terms of that flow-through from gross profit to EBITDA. So making sure that you've got that right cost structure and you're optimizing for incremental contribution margins, I think allows for, you know, pretty strong cross-cycle profitability. Great. You know, in the past, I think one of the closely followed kind of metrics was this broker penetration of the broader truckload market. You know, where do we stand on that today, you know, in the bottom of this cycle, and where do you see that going, Drew, over the long term? Yeah, so if you take a step back and look at whenever I started in the industry, I think it was at like six or seven% of brokerage penetration into the overall for-hire trucking market. Today, it's sitting in the low 20s. I think that you'll see it get into the 30s in the near term, over the next few years, and I think longer term, you'll see it getting to the 40%. If you look at the forwarding business, it was ahead of where the brokerage business started, and it's now sitting at roughly 50-50. Asset-based carriers still drive the market. They still set where pricing is going, but I do think that you'll see brokers continuing to take share, and there's a couple of reasons for that. You know, whenever I started in the industry, brokers did some of what I've talked about at the beginning. It was typically whenever an asset-based carrier was falling off a load, they were rejecting a tender, that brokers were coming in there, and they were picking it up. Now, if you're a customer, you can look at it and say, "Hey, I've got access to over 100,000 carriers." You know, the average fleet, I think like 90-something% of the overall for-hire trucking carriers have less than six trucks. You know, so if you think of large enterprise customers, which is what our business was built on, they're not signing up a six-truck carrier. But what they will allow is for somebody like an RXO to be an aggregator of capacity for them, to be able to go on their platform, to be able to say, "Hey, we have this carrier that hauls with us X amount of times per month. We know their service. We know the relationship." So when you think about that, we're able to flex capacity up and down more than what an asset-based carrier can do in any given market. Great, thanks for that answer. And I'll throw some, maybe some recent stats on you in terms of where you're seeing some growth, but in the 2Q, 45% growth in LTL volumes, 17% growth in stops on the final mile side. You know, even at the bottom of the cycle, you're seeing growth in these two segments here. You know, how are you maybe leveraging the Coyote side to drive continued kind of growth into those segments, and where do you see yourself going in these two growth segments? Sure. So let's break that down first between LTL and then last mile. So, last quarter, we grew LTL volume within our brokerage business by 45% year over year. We talked about earlier this year that we onboarded several large customers on the LTL business, and that ramped throughout Q1, so Q2 had the full quarter impact of that growth. But if you think about it holistically, LTL, you know, for us, really started four to five years ago in terms of where we are in growing that business. That was, you know, low single-digit % of our volume, legacy RXO, four or five years ago. And at the time of the acquisition of Coyote, it was about 20%. So that business has experienced tremendous growth. Legacy Coyote also had an LTL business, which is also about 20% of their volume, and that business is now 32% of our truckload volume. So you think of our brokerage volume. So you think about, you know, that massive growth that we've had. I think it's also important to break down the differences between Legacy RXO and Legacy Coyote LTL, where Legacy RXO was built on large enterprise-type customers, in many cases where we've been servicing that truckload freight very well, and they come to us because LTL has been a pain point for them. So how do we go ahead and leverage our larger scale on behalf of our customers? And they then go ahead and outsource LTL to us. So that's been a big growth driver for us. And on the Coyote side, it's been more transactional and maybe a bit more SMB oriented. So really nice combination in terms of diversity associated with the two different LTL businesses. Longer term, we said this on our earnings call last month. We think LTL has the ability to get to, you know, 50% plus of our mix, and that business has very strong gross margins, higher than the truckload gross margin percentage. Lower gross profit per load, but higher gross margin percentage, and it's much more stable. We talk about every earnings call, you know. We show that slide on historical LTL gross profit per load, and it's very stable. I think adding that as part of our growth pillar as it relates to just incremental pillars of volume that have more stable EBITDA. That's certainly part of our strategy. And then you think about the last mile side. Last mile now, it's four consecutive quarters of double-digit growth. Stop growth was up 17% year over year, and what are we doing? We're seeing continued share gains with our existing customers. We're onboarding new customers, and in some cases, we've also had Legacy Coyote customers onboard into our last mile business. So, that growth will decelerate into the back half of the year, as we've talked about, because we are benefiting from some of those onboardings that occurred last year. But you think about how weak the big and bulky market has been for the last three, four years. We are significantly outpacing the growth in that market, and the team continues to execute incredibly well within last mile. Got it. You know, one of the things that we talk about in the brokerage space a lot is, you know, we've touched on this tech angle. You know, how do you maintain a differentiation at RXO, you know, when all these competitors are trying to go after the same, you know, tech angle? What moats do you think is specific to RXO, you know, versus kinda some other competitors? I, I would start by saying, like, when you look at anything that is customer-facing, anything that is carrier-facing, anything that is for our employees, that's homegrown, and so that is unique to RXO. You know, Jared talked about employee productivity being up, you know, over 45% on a two-year stack, over 18% just from the prior year. You know, we're seeing the benefits of what we've been building for the last decade. You know, for us, we think about it very simply as we build tech: Is this something that is gonna help us gain market share? Is this going to something that is gonna help us operate at how well we buy versus market, so impacting our gross profit per load during any given cycle? What does this do to our employee productivity over the long term when we're building it? Now, you know, there's been a lot out there on AI, not just in the transportation industry, but in all industries. And I think, you know, when you look at it for us, you probably won't see us put out as many press releases as what some in our industry, as well as some outside of our industry, are doing, because it is a secret sauce for us of what we've been building on the customer, the carrier, and the employee side, and we think over the long term, it's what will allow us to outperform. If you look prior to the AI becoming, you know, the hot topic of what was going on, we were doing machine learning pricing algorithms before most were talking about it. I think for us, technology, as I said at the beginning, has always been in the foundation of what we're doing, and we're partnering it with great operators. And so when you're building technology with the people who know how to do the code, they know how to build the technology, and you're partnering with people who understand the transportation industry, it does become a differentiator for the product that you ultimately build. Great, thank you. We're about ten minutes left. I wanted to open it up to the floor, maybe if there are any questions from the audience. If not, I can kinda keep running through some questions I've got. Second is why LTL has grown. Just maybe spend another minute on why LTL has grown so quickly for you. You said that you're solving pain points for customers, but there's plenty of excess capacity from the asset-based LTL carrier, so what is the pain point that you're solving for them? I think first, don't think about us as taking share from asset-based carriers, right? Like, it is more redistributing that freight out to other asset-based carriers. We view ourselves as a sales channel for a lot of these LTL carriers and what they're doing. You know, 'cause again, like, we're an asset-light company, so it has to end up back on the truck. For us, it's about making sure that for the customer, we're putting it with the right truck, with the right carrier for the lane. When you look at our share gains, it starts with our existing customers, as Jared mentioned earlier. If you think of our existing customers, these are people that we have 10-, 15-year relationships with, and they've been doing truckload business. That's how we built the business. They know our technology platform, to your point, or earlier. Like, they've seen it. They know what it can do for them. So when they know, "Hey, we're comfortable with the platform, we're comfortable with the people," and then I start to think about LTL, and I think about claims, lost shipments, damages. I'm on three or four platforms from different national providers. I can get on one platform. I can still work with, you know, three, four, five national providers, plus I'm going to get to work with some of the regionals to make sure I'm getting the right truck on the right load. It becomes less of a pain point for the customer, because for these customers, LTL, a lot of times, in terms of revenue, makes up, like, low to mid-single digits % of the overall freight under management that they're putting out there. But in terms of time, it takes a lot more time whenever you think about the things I mentioned earlier, of claims, lost shipments, and damages. So for us, the LTL growth, I think, will be lumpy at times, because you're onboarding large customers, and so, like, you've seen that grow, growing 40%. We've talked about it's gonna be another strong quarter for us again in LTL growth this quarter. But these are large customers who are coming on, and you don't actually know the timing of how they all hit at the same time. But we think, you know, over the long term, you know, whenever I look at some companies that have built LTL out, and they had a head start on us, C.H. Robinson, I think over 50% of their volume is LTL. Echo is a company that was public at one point. I think, like, 60%-70% of their overall volume is on LTL, and that creates, for us, stability and gross profit per load. In the truckload gross profit per load, it moves a lot with what's going on in the market, but if you look at our earnings deck, there's a chart that shows you gross profit per load on LTL, and, like, you see a little bit of movement, but it's not like the truckload that's moving up and down, like the peaks and the valleys. It's very, very stable as far as what happens on the LTL. Great. Maybe a quick follow-up on that. Just given the consolidated nature of LTL, is there an argument for LTL brokerage to also be more consolidated? Just because, you know, the relationships that you're driving is kind of on a smaller base. I think it's two things. I think, yes, there's. Not just in LTL, but I think in brokerage in general, there's opportunity for consolidation in the market, and I think that you'll continue to see consolidation in the market. I think right now, the top, after the Coyote acquisition, it was top 10, so now it's top nine brokers make up around 50% of the overall brokerage market. I think that you'll see that consolidate, the top three or four owning 60%, 70% of the market over the next several years. And you, when you look at it, technology, being able to service customers at scale, that happens at the top with these large customers. So I don't think it's something specific to LTL. I think it's something specific to brokerage, and if you think about other modes like refrigerated, flatbed, cross-border, hazmat, there's a lot of opportunity out there. The other place that you see opportunity for consolidation, where there's not as many players out there, but is on the managed transportation side, which, again, would be on the truckload and the LTL side. Got it. Maybe, Drew, talking about the flatbed and the hazmat side, you know, are there verticals maybe that RXO, as a brokerage provider, doesn't play in today? How do you think about growing into those future verticals, and how does M&A fit into the long-term strategic framework at RXO? Yeah. So we built the business off of 53-foot dry vans. You know, one or two swing doors, you know, is what it was built off of. If you look at refrigerated, flatbed, cross-border, hazmat, LTL, these are all strategic initiatives for us that we will and are growing organically. If there's something out there that makes sense on the M&A side, we would absolutely take a look at it. I think, you know, you look at Coyote, it's the largest transaction. I'm fairly certain I'm right on this. It's the largest transaction from one asset-light company to another asset-light company, and, you know, for us, like, M&A is part of our capital allocation strategy, but it has to be the right M&A. It has to be a strategic fit. It has to be a cultural fit. So the bar for M&A is very, very high, and it's got to be something that is gonna create shareholder value over the long term. Got it. Jared, you kind of mentioned this with some of the cost takeouts and the productivity gains, but maybe double-clicking that on a different angle, you know, looking at the cash flow perspective. Even without a cycle turn, what are some of the cash flow dynamics that we should all make sure we're aware of, you know, kind of going into the second half in 2026? Yeah, so when you think about free cash flow, Q2 was one of our strongest quarters that we've had since spin, putting up a 58% adjusted free cash flow conversion from EBITDA, and we signaled that Q3 would be another strong adjusted free cash flow quarter. We did benefit from, you know, some harmonizing of working capital as it relate to the Coyote acquisition, but I think the longer-term view on this, and I think this goes to the root of your question, is, you know, the free cash flow profile of this business longer term is incredibly strong. You think about, you know, the characteristics of this business, right? Think about our fixed costs in terms of cash outflows. We've got about, you know... Next year, we talked about $50 million of CapEx, which will come down by about $20 million year over year from $70 million this year. And then you think about interest expense, roughly, call it, $30 million. Anything above, call it, that $80 million threshold, right, from an adjusted EBITDA basis, on a normalized year, obviously, this year we still have some restructuring and, integration charges related to Coyote, but we'll hit the, balance sheet at, you know, call it, $0.75 on the dollar, just adjusted for our long-term effective tax rate of 25%. So you think about, you know, You know, you think about, on a normalized basis, what the adjusted EBITDA profile of this company looks like, call it, you know, mid, you know, 5-6% type adjusted EBITDA margins, and you think about that $80 million of fixed outflow between CapEx and interest, right? All of that will drop to the bottom line in terms of on the balance sheet with re- at 75 cents on the dollar. So you think about the cumulative free cash flow generation of this business and the capabilities that we have, further enhanced by all the cost takeouts that you mentioned that we talked about, you know, that's what gets us excited about thinking about that cross-cycle earnings power and the associated free cash flow generation of the business. Got it. Maybe last question from me. Drew, you're a public company CEO, you've got to make the quarters. How do you balance between, you know, maybe short-term profit protect, protection, and in doubling down on the bottom of the cycle, investing in growth, and being ready for, you know, and for your customers in the upcycle? You've been through a couple different cycles. You know, what strategies do you think, you know, really work here at the bottom of the cycle? I think if you're running the company effectively, especially in times like what we're in right now, you wanna run the company wherein you're in a continual state of mindset improvement, and looking at ways to operate the company. I said this in the opening, and I laugh when I said it, but I was serious: it's times like these that help you build a stronger base and a stronger foundation as a company. So for us, like, you know, I was serious, like, spinning off at the bottom of the cycle is a great opportunity for us to create the foundation for who RXO is, and prepare ourselves for the upcycle. With all of that said, you know, while we have to report out quarterly, that's not how we look at the business. We look at the business of what it's going to do over the next three, four, five years, what it's going to do through a cycle. You know, I'm probably alone in this, but I'm not a CEO who looks at our stock price on a daily basis. You know, Jared calls me if it goes up or down too much, but you know, for the most part, you know, I mean, like, I learned from Brad Jacobs a year ago-years ago, the only time that the stock price matters is when you buy and when you sell, and I'm not selling any stock right now. Great. That was a great answer. You have a couple minutes left here. I wanted to maybe open it up for any last-minute questions from the audience, but other than that, we can kind of wrap up here. Got one more. Sorry, I won't be bashful, but the 97% number in terms of sort of digital order entry, what is that number through the cycle? In other words, what % of brokered freight that you're touching is fully natively digital? No phone calls- Right. No bill of lading paperwork, et cetera. So, I wanna be clear, the 97% was created or covered, and that was at Legacy RXO, so created is on the customer side, covered is on the carrier side. We haven't put out something that said, "created and covered," but what we talked about at Legacy RXO is, we were much farther ahead on the customer side than what we were on the carrier side, so if you think about the customer side, it was very easy to automate with large enterprise customers and getting them onto the technology platform. With smaller carriers, and you're talking about some drivers that are owner-operators, that are still operating off of their flip phone, it's a little bit more difficult to get them to come in at the same rate. But with that said, Coyote was actually ahead of RXO on the carrier side of how they were operating, 'cause they were working with larger carriers and private fleets. So I expect that 97% number came down a little bit. I don't have the number right in front of me, but it came down a little bit post-Coyote acquisition of created and covered. But I think longer term, you know, the goal would be to look at how do we have created and covered in the 60%-70% range? Yeah. Can you maybe give an example of how AI is increasingly helping your customers, maybe more specifically in the last, like, few months, something that's transitioning or something that's kicking in that you're providing for a customer that's accretive to you and accretive to your customer? Yeah. I'll give you two examples. I'll start on the last mile side of the business. Whenever you're thinking about going into somebody's home and scheduling delivery appointments and keeping them updated throughout the day, you're talking about people who, a lot of times, if they're having a washer or dryer or refrigerator delivered to their home, they've taken off of work. So, like, making sure that we're doing what we're saying we're doing, the scheduling, the routing, all of that is being done on the AI side. On the brokerage side, an example that I'd give you is, you know, whenever I started, and I started at the desk level, talking to carriers and customers. As I became more efficient at my job and I became better, I got an assistant. Now, that assistant is actually a robot, and so, like, to be able to go in there and how we're tracking and tracing loads, what we're doing on the call center side, what we're doing from the pricing side, all of that is running through AI now for us. Can you talk a little bit about moving into markets like hazardous, hazmat, for example? How is that in an asset-light model any different? Is it just driving the channel, the carrier awareness, sales process, and software updates? Like, what makes that a difficult transition? It's not a difficult transition. I think it's more of a focus for us. Like, you know, the easiest way to scale up, you know, when we were at XPO, was through dry van freight, and, like, you could go into large enterprise customers, and we were able to build a base. So I think it's more of the shift in focus than it is on anything. And not a shift in focus, 'cause we're still focused on the truckload side, but it's more of, "Hey, we have these capabilities. We have the capacity. We have carriers who have hazmat authorities." And so it's making sure that you're lining up the right capacity for the customer whenever you're going out there. But it's not something that is, you need technological advances to be able to do. It's something we could have done in the beginning, but we wanted to be able to build the base and the foundation first. It's also higher gross profit per load, as I'm sure you could imagine. Much higher. Great. Well, thank you so much, everybody. Thank you. Thanks so much.

Speaker 2: Great. Well, good morning, everybody. Thank you all for being here this morning. If you, for those of you that don't know me, my name is Joe Haefele. I work with Steph Moore on the Jefferies team, helping to cover the transport side, and we're pleased to have the RXO team here with us. We've got CEO Drew Wilkerson and Chief Strategy Officer, Jared Weisfeld. Guys, if you wanna give a brief introduction and maybe give a thirty-second overview of RXO, where we stand today, and then I can jump to some Q&A. Great. great Well, good morning, everybody. well good morning everybody Thank you all for being here this morning. thank you all for being here this morning If you, for those of you that don't know me, my name is Joe Haefele. if you for those of you that don't know me my name is joe haefele I work with Steph Moore on the Jefferies team, helping to cover the transport side, and we're pleased to have the RXO team here with us. i work with steph moore on the jefferies team helping to cover the transport side and we're pleased to have the rxo team here with us We've got CEO Drew Wilkerson and Chief Strategy Officer, Jared Weisfeld. we've got ceo drew wilkerson and chief strategy officer jared weisfeld Guys, if you wanna give a brief introduction and maybe give a thirty-second overview of RXO, where we stand today, and then I can jump to some Q&A. guys if you wanna give a brief introduction and maybe give a thirty-second overview of rxo where we stand today and then i can jump to some q&a

Speaker 1: Yeah. Good morning. I'm Drew Wilkerson, Chairman and CEO of RXO. RXO is a spin-out of XPO Logistics. We did it at a great part of the cycle. It was November of 2022, and we've now been in a downturn since we've done the spin-off of a freight recession. So it, it has been an interesting time and a fun time to be able to do it, because for us, if we can build our base at the bottom of the cycle, we like the setup and what it creates for an inflection in an upcycle. If you look at RXO, there are three main components to our business. We're led by our truck brokerage business. Yeah. yeah Good morning. good morning I'm Drew Wilkerson, Chairman and CEO of RXO. i'm drew wilkerson chairman and ceo of rxo RXO is a spin-out of XPO Logistics. rxo is a spin-out of xpo logistics We did it at a great part of the cycle. we did it at a great part of the cycle It was November of 2022, and we've now been in a downturn since we've done the spin-off of a freight recession. it was november of 2022 and we've now been in a downturn since we've done the spin-off of a freight recession So it, it has been an interesting time and a fun time to be able to do it, because for us, if we can build our base at the bottom of the cycle, we like the setup and what it creates for an inflection in an upcycle. so it it has been an interesting time and a fun time to be able to do it because for us if we can build our base at the bottom of the cycle we like the setup and what it creates for an inflection in an upcycle If you look at RXO, there are three main components to our business. if you look at rxo there are three main components to our business We're led by our truck brokerage business. we're led by our truck brokerage business We're the third largest truck brokerage, so if you think of helping shippers get things from point A to point B, we work with over a hundred thousand carriers, on a monthly basis, as far as how we're doing that. The second part of our business is managed transportation. This is where it is a complete outsource of a portion or all of a customer's business, and we essentially become their transportation department. We love the managed transportation business because, one, we get access to a lot of data, which helps us in our other lines of business, but also, if we're doing our job well, managed transportation gets to act as a customer to the rest of our other lines of business, and then the last line of business is our last mile business. We're the third largest truck brokerage, so if you think of helping shippers get things from point A to point B, we work with over a hundred thousand carriers, on a monthly basis, as far as how we're doing that. we're the third largest truck brokerage so if you think of helping shippers get things from point a to point b we work with over a hundred thousand carriers on a monthly basis as far as how we're doing that The second part of our business is managed transportation. the second part of our business is managed transportation This is where it is a complete outsource of a portion or all of a customer's business, and we essentially become their transportation department. this is where it is a complete outsource of a portion or all of a customer's business and we essentially become their transportation department We love the managed transportation business because, one, we get access to a lot of data, which helps us in our other lines of business, but also, if we're doing our job well, managed transportation gets to act as a customer to the rest of our other lines of business, and then the last line of business is our last mile business. we love the managed transportation business because one we get access to a lot of data which helps us in our other lines of business but also if we're doing our job well managed transportation gets to act as a customer to the rest of our other lines of business and then the last line of business is our last mile business If you look at last mile, we are the leader in that space. So think about big and bulky goods, washer, dryer, refrigerators, stoves, going into someone's house, doing the installation, and again, that's an asset-light business that is doing that. So if you think of the largest brands that are doing business on the big and bulky side, they start their conversation with RXO because we've got a network that nobody else has. We've got locations that put us within a hundred and twenty miles of 90% of the U.S. population. If you look at last mile, we are the leader in that space. if you look at last mile we are the leader in that space So think about big and bulky goods, washer, dryer, refrigerators, stoves, going into someone's house, doing the installation, and again, that's an asset-light business that is doing that. so think about big and bulky goods washer dryer refrigerators stoves going into someone's house doing the installation and again that's an asset-light business that is doing that So if you think of the largest brands that are doing business on the big and bulky side, they start their conversation with RXO because we've got a network that nobody else has. so if you think of the largest brands that are doing business on the big and bulky side they start their conversation with rxo because we've got a network that nobody else has We've got locations that put us within a hundred and twenty miles of 90% of the U.S. population. we've got locations that put us within a hundred and twenty miles of 90% of the u.s population

Speaker 2: That's great. I hate to, you know, maybe start with some macro, but I'd be remiss if I didn't talk about the trucking cycle here, so- That's great. that's great I hate to, you know, maybe start with some macro, but I'd be remiss if I didn't talk about the trucking cycle here, so- i hate to you know maybe start with some macro but i'd be remiss if i didn't talk about the trucking cycle here so-

Speaker 1: I thought I started with the macro. I thought I started with the macro. i thought i started with the macro

Speaker 2: Yeah, I'm gonna have to double-click on it a little bit. So maybe from your seat, you know, how are you assessing the current state of the freight cycle, and what are the leading indicators maybe that you're looking for? You know, we're all waiting for a turn. At some point, what are the things you guys are laser-focused on trying to kind of get the timing of that and the shape of the recovery? Yeah, I'm gonna have to double-click on it a little bit. yeah i'm gonna have to double-click on it a little bit So maybe from your seat, you know, how are you assessing the current state of the freight cycle, and what are the leading indicators maybe that you're looking for? so maybe from your seat you know how are you assessing the current state of the freight cycle and what are the leading indicators maybe that you're looking for You know, we're all waiting for a turn. you know we're all waiting for a turn At some point, what are the things you guys are laser-focused on trying to kind of get the timing of that and the shape of the recovery? at some point what are the things you guys are laser-focused on trying to kind of get the timing of that and the shape of the recovery

Speaker 1: Yeah, I don't think, well, one, the last part of your question, I don't think anybody's getting the timing or the shape of the recovery right at this point. You know, I've been doing this for 20 years, and there's never been a freight cycle that has been down as long as what this one has been since I've been doing this. Now, whenever you look at it, this is still a cyclical business, and it's still built off of supply and demand, so nothing has changed in terms of that. Some of the key metrics that we watch on a daily basis, on a weekly basis, on a monthly basis, is what is happening with tender rejections? So if you think about loads that are getting tendered out from a customer, how often are they getting rejected? Yeah, I don't think, well, one, the last part of your question, I don't think anybody's getting the timing or the shape of the recovery right at this point. yeah i don't think well one the last part of your question i don't think anybody's getting the timing or the shape of the recovery right at this point You know, I've been doing this for 20 years, and there's never been a freight cycle that has been down as long as what this one has been since I've been doing this. you know i've been doing this for 20 years and there's never been a freight cycle that has been down as long as what this one has been since i've been doing this Now, whenever you look at it, this is still a cyclical business, and it's still built off of supply and demand, so nothing has changed in terms of that. now whenever you look at it this is still a cyclical business and it's still built off of supply and demand so nothing has changed in terms of that Some of the key metrics that we watch on a daily basis, on a weekly basis, on a monthly basis, is what is happening with tender rejections? some of the key metrics that we watch on a daily basis on a weekly basis on a monthly basis is what is happening with tender rejections So if you think about loads that are getting tendered out from a customer, how often are they getting rejected? so if you think about loads that are getting tendered out from a customer how often are they getting rejected And typically, whenever that starts to hit double-digit range is whenever you start to see a little bit of volatility in the market. We haven't been there for the last almost three years of what that's been. So if you look at tender rejections right now, I think they're sitting around 6%. Now, that's up on a year-over-year basis, it's up on a two-year stack, so it is moving in the right direction, and right now, what you're seeing is more of a slow, stairstep recovery than a sharp inflection. And then, you know, outside of tender rejections, we also watch load-to-truck ratio. Typically, whenever that hits six to seven to one, it correlates with tender rejections hitting 10%. And typically, whenever that starts to hit double-digit range is whenever you start to see a little bit of volatility in the market. and typically whenever that starts to hit double-digit range is whenever you start to see a little bit of volatility in the market We haven't been there for the last almost three years of what that's been. we haven't been there for the last almost three years of what that's been So if you look at tender rejections right now, I think they're sitting around 6%. so if you look at tender rejections right now i think they're sitting around 6% Now, that's up on a year-over-year basis, it's up on a two-year stack, so it is moving in the right direction, and right now, what you're seeing is more of a slow, stairstep recovery than a sharp inflection. now that's up on a year-over-year basis it's up on a two-year stack so it is moving in the right direction and right now what you're seeing is more of a slow stairstep recovery than a sharp inflection And then, you know, outside of tender rejections, we also watch load-to-truck ratio. and then you know outside of tender rejections we also watch load-to-truck ratio Typically, whenever that hits six to seven to one, it correlates with tender rejections hitting 10%. typically whenever that hits six to seven to one it correlates with tender rejections hitting 10%

Speaker 2: Got it. Drew, you just mentioned this is, you know, a three-year freight recession, one of the longest in your history, being in the industry. You know, what has made this cycle so different? What has caused this downturn to be so long? And at this point in the cycle, is it still a supply issue, are we still oversupplied, or is the demand side really the question that we're waiting for? Got it. got it Drew, you just mentioned this is, you know, a three-year freight recession, one of the longest in your history, being in the industry. drew you just mentioned this is you know a three-year freight recession one of the longest in your history being in the industry You know, what has made this cycle so different? you know what has made this cycle so different What has caused this downturn to be so long? what has caused this downturn to be so long And at this point in the cycle, is it still a supply issue, are we still oversupplied, or is the demand side really the question that we're waiting for? and at this point in the cycle is it still a supply issue are we still oversupplied or is the demand side really the question that we're waiting for

Speaker 1: For two years, we told you that there was too much capacity out in the market. For the last year, we have probably been one of the only ones that have said, "We actually think capacity is in an okay state." It is more on the demand side. If you look at demand, we're below 2019 levels, so take COVID out. You had the COVID highs, but if you look at 2019 and 2018, we're below those levels of where we were at. Capacity, if you look at seated drivers that are actually operating out on the road, that's in line with what it was in 2019. So for us, we look at this more on the demand side than the supply side. For two years, we told you that there was too much capacity out in the market. for two years we told you that there was too much capacity out in the market For the last year, we have probably been one of the only ones that have said, "We actually think capacity is in an okay state." It is more on the demand side. for the last year we have probably been one of the only ones that have said "we actually think capacity is in an okay state." it is more on the demand side If you look at demand, we're below 2019 levels, so take COVID out. if you look at demand we're below 2019 levels so take covid out You had the COVID highs, but if you look at 2019 and 2018, we're below those levels of where we were at. you had the covid highs but if you look at 2019 and 2018 we're below those levels of where we were at Capacity, if you look at seated drivers that are actually operating out on the road, that's in line with what it was in 2019. capacity if you look at seated drivers that are actually operating out on the road that's in line with what it was in 2019 So for us, we look at this more on the demand side than the supply side. so for us we look at this more on the demand side than the supply side For our business, you know, when you think about what drives it, retail and e-commerce is a huge piece of our business. Automotive is a good size and a good portion of our business. We do a good bit of manufacturing and industrial and home-building supplies. And then from the Coyote acquisition, we picked up a lot of food and beverage. That was not one of our core verticals at RXO, but it was at Coyote. That business was built off of food and beverage. So when you look at what the makeup of our business is, we've probably been hit the hardest on the automotive side, as well as on the home building side. For our business, you know, when you think about what drives it, retail and e-commerce is a huge piece of our business. for our business you know when you think about what drives it retail and e-commerce is a huge piece of our business Automotive is a good size and a good portion of our business. automotive is a good size and a good portion of our business We do a good bit of manufacturing and industrial and home-building supplies. we do a good bit of manufacturing and industrial and home-building supplies And then from the Coyote acquisition, we picked up a lot of food and beverage. and then from the coyote acquisition we picked up a lot of food and beverage That was not one of our core verticals at RXO, but it was at Coyote. that was not one of our core verticals at rxo but it was at coyote That business was built off of food and beverage. that business was built off of food and beverage So when you look at what the makeup of our business is, we've probably been hit the hardest on the automotive side, as well as on the home building side. so when you look at what the makeup of our business is we've probably been hit the hardest on the automotive side as well as on the home building side

Speaker 2: Great, that makes a lot of sense. You know, I think tariffs comes up a lot also in supply chain, so maybe if you could give a rundown of maybe the impact of tariffs you're seeing on your business and the extent that you have visibility into the shifting freight flows, and trade patterns. You know, what are you guys seeing on the ground? What are you hearing from your customers as they're navigating this tariff environment? Great, that makes a lot of sense. great that makes a lot of sense You know, I think tariffs comes up a lot also in supply chain, so maybe if you could give a rundown of maybe the impact of tariffs you're seeing on your business and the extent that you have visibility into the shifting freight flows, and trade patterns. you know i think tariffs comes up a lot also in supply chain so maybe if you could give a rundown of maybe the impact of tariffs you're seeing on your business and the extent that you have visibility into the shifting freight flows and trade patterns You know, what are you guys seeing on the ground? you know what are you guys seeing on the ground What are you hearing from your customers as they're navigating this tariff environment? what are you hearing from your customers as they're navigating this tariff environment

Speaker 1: So we talked earlier this year in terms of- So we talked earlier this year in terms of- so we talked earlier this year in terms of- Tariffs creating shipper uncertainty, right? And ultimately, you know, when you look at what's happened from April to now, I think what we said a couple weeks ago on our earnings call was, you know, we are seeing some incremental clarity, given what's gone on with respect to trade policy. So I think that the confidence is starting to build on behalf of the shippers. Question is, does that eventually translate into consumer demand, industrial production? I think that's still to be determined, but I think we are seeing incremental confidence on behalf of the shippers, given the clarity we've seen on trade policy, which at this point we've, you know, struck multiple trading deals with our largest trade partners across the globe. So, that, that's how I'd characterize it. T ariffs creating shipper uncertainty, right? t ariffs creating shipper uncertainty right And ultimately, you know, when you look at what's happened from April to now, I think what we said a couple weeks ago on our earnings call was, you know, we are seeing some incremental clarity, given what's gone on with respect to trade policy. and ultimately you know when you look at what's happened from april to now i think what we said a couple weeks ago on our earnings call was you know we are seeing some incremental clarity given what's gone on with respect to trade policy So I think that the confidence is starting to build on behalf of the shippers. so i think that the confidence is starting to build on behalf of the shippers Question is, does that eventually translate into consumer demand, industrial production? question is does that eventually translate into consumer demand industrial production I think that's still to be determined, but I think we are seeing incremental confidence on behalf of the shippers, given the clarity we've seen on trade policy, which at this point we've, you know, struck multiple trading deals with our largest trade partners across the globe. i think that's still to be determined but i think we are seeing incremental confidence on behalf of the shippers given the clarity we've seen on trade policy which at this point we've you know struck multiple trading deals with our largest trade partners across the globe So, that, that's how I'd characterize it. so that that's how i'd characterize it

Speaker 2: Got it. And is there an opportunity for RXO to serve as sort of a supply chain partner in this period of uncertainty? And maybe a broader question of, you know, how we should think about brokerage and scale and being able to kind of partner with these smaller companies and, you know, help them serve in this time of uncertainty? Got it. got it And is there an opportunity for RXO to serve as sort of a supply chain partner in this period of uncertainty? and is there an opportunity for rxo to serve as sort of a supply chain partner in this period of uncertainty And maybe a broader question of, you know, how we should think about brokerage and scale and being able to kind of partner with these smaller companies and, you know, help them serve in this time of uncertainty? and maybe a broader question of you know how we should think about brokerage and scale and being able to kind of partner with these smaller companies and you know help them serve in this time of uncertainty

Speaker 1: I think when you look at our model, you know, volatility in the market is a good thing. If the market is moving up or down, that's a really good thing for our business if, and that creates opportunities to create solutions in those supply chains. If you think about the market moving up and capacity tightening, what that means is what I started out talking about with tender rejections, if we're in a good position with those customers, which we are, we have great relationships. Our top customers have been with us for sixteen years on average. The spot loads, as those tender rejections go up, come to us, and those are typically at a much higher gross profit per load. I think when you look at our model, you know, volatility in the market is a good thing. i think when you look at our model you know volatility in the market is a good thing If the market is moving up or down, that's a really good thing for our business if, and that creates opportunities to create solutions in those supply chains. if the market is moving up or down that's a really good thing for our business if and that creates opportunities to create solutions in those supply chains If you think about the market moving up and capacity tightening, what that means is what I started out talking about with tender rejections, if we're in a good position with those customers, which we are, we have great relationships. if you think about the market moving up and capacity tightening what that means is what i started out talking about with tender rejections if we're in a good position with those customers which we are we have great relationships Our top customers have been with us for sixteen years on average. our top customers have been with us for sixteen years on average The spot loads, as those tender rejections go up, come to us, and those are typically at a much higher gross profit per load. the spot loads as those tender rejections go up come to us and those are typically at a much higher gross profit per load If the market's falling, like what you saw in 2022 as the market started to fall, what that means is, at that point, you're holding the line on your contractual rates, and you're pulling down purchase transportation. Now, when you're in a steady state of a downturn, there's a little bit. That's probably the pain point for us, but anytime the market is moving up or down, that gives us the opportunity to create solutions for our customers, so we love living in a period of volatility. If the market's falling, like what you saw in 2022 as the market started to fall, what that means is, at that point, you're holding the line on your contractual rates, and you're pulling down purchase transportation. if the market's falling like what you saw in 2022 as the market started to fall what that means is at that point you're holding the line on your contractual rates and you're pulling down purchase transportation Now, when you're in a steady state of a downturn, there's a little bit. now when you're in a steady state of a downturn there's a little bit That's probably the pain point for us, but anytime the market is moving up or down, that gives us the opportunity to create solutions for our customers, so we love living in a period of volatility. that's probably the pain point for us but anytime the market is moving up or down that gives us the opportunity to create solutions for our customers so we love living in a period of volatility

Speaker 2: Got it. You know, also, maybe if we could talk about your, you know, your tech stack, your investment in technology. In the past, you had talked about 97% of loads created or covered digitally. You know, how do you see technology and using technology as a competitive advantage for RXO, and, and how are you pushing the envelope, you know, today to kind of continue to grow that? Got it. got it You know, also, maybe if we could talk about your, you know, your tech stack, your investment in technology. you know also maybe if we could talk about your you know your tech stack your investment in technology In the past, you had talked about 97% of loads created or covered digitally. in the past you had talked about 97% of loads created or covered digitally You know, how do you see technology and using technology as a competitive advantage for RXO, and, and how are you pushing the envelope, you know, today to kind of continue to grow that? you know how do you see technology and using technology as a competitive advantage for rxo and and how are you pushing the envelope you know today to kind of continue to grow that

Speaker 1: Yeah, so we view our investment as tech in technology as table stakes. When you think about how much we're spending in tech per year, I think last quarter, we talked about how we're spending about $100 million per year in our investments in technology. And, you know, the way we think about it fundamentally in terms of our investment in technology, it's the combination of technology and people. So it's not just leveraging technology. Leveraging technology is critical, and it's important, but it's also marrying that with our people in terms of. You think about the brokerage industry, the customer relationships. Our top 20 customers have been with us for 16 years on average, so I think it's that combination. Yeah, so we view our investment as tech in technology as table stakes. yeah so we view our investment as tech in technology as table stakes When you think about how much we're spending in tech per year, I think last quarter, we talked about how we're spending about $100 million per year in our investments in technology. when you think about how much we're spending in tech per year i think last quarter we talked about how we're spending about $100 million per year in our investments in technology And, you know, the way we think about it fundamentally in terms of our investment in technology, it's the combination of technology and people. and you know the way we think about it fundamentally in terms of our investment in technology it's the combination of technology and people So it's not just leveraging technology. so it's not just leveraging technology Leveraging technology is critical, and it's important, but it's also marrying that with our people in terms of. leveraging technology is critical and it's important but it's also marrying that with our people in terms of You think about the brokerage industry, the customer relationships. you think about the brokerage industry the customer relationships Our top 20 customers have been with us for 16 years on average, so I think it's that combination. our top 20 customers have been with us for 16 years on average so i think it's that combination But when you then you drill down into technology, how we think about it is holistically across how we use it internally, how we use it to help our customers, and how we use it to help our carriers. In terms of how we use it internally, we've been leveraging machine learning for over a decade. How we leverage that from a pricing algorithm standpoint, how we think about leveraging AI, agentic AI, generative AI. We think about sales enablement. How do we make our people more productive? That's mission critical, and you think about what we've seen from a productivity standpoint. Over the last two years, our productivity is up over 45%, so loads per person per day. Bringing on more volume without adding headcount in that linear fashion allows you to have really strong incremental margins over time. But when you then you drill down into technology, how we think about it is holistically across how we use it internally, how we use it to help our customers, and how we use it to help our carriers. but when you then you drill down into technology how we think about it is holistically across how we use it internally how we use it to help our customers and how we use it to help our carriers In terms of how we use it internally, we've been leveraging machine learning for over a decade. in terms of how we use it internally we've been leveraging machine learning for over a decade How we leverage that from a pricing algorithm standpoint, how we think about leveraging AI, agentic AI, generative AI. how we leverage that from a pricing algorithm standpoint how we think about leveraging ai agentic ai generative ai We think about sales enablement. we think about sales enablement How do we make our people more productive? how do we make our people more productive That's mission critical, and you think about what we've seen from a productivity standpoint. that's mission critical and you think about what we've seen from a productivity standpoint Over the last two years, our productivity is up over 45%, so loads per person per day. over the last two years our productivity is up over 45% so loads per person per day Bringing on more volume without adding headcount in that linear fashion allows you to have really strong incremental margins over time. bringing on more volume without adding headcount in that linear fashion allows you to have really strong incremental margins over time You think about how we're leveraging it from a customer side in terms of the ability to go ahead and have that connectivity with our customers, and our customers range from anywhere from Fortune 100 down to SMB. With the acquisition of Coyote, you know, SMB was about 20% of their volume, so having access to a wide variety of customers and enabling that connectivity with our tech stack is critical. And then on the carrier side, the ability to go ahead and, you know, have RXO Go, the mobile app, across our carrier ecosystem, you know, which leads into that 97% of loads created or covered digitally. You know, it's also just not about the number of carriers that we have on the platform. As Drew mentioned, you know, over 125,000 carriers on the platform. You think about how we're leveraging it from a customer side in terms of the ability to go ahead and have that connectivity with our customers, and our customers range from anywhere from Fortune 100 down to SMB. you think about how we're leveraging it from a customer side in terms of the ability to go ahead and have that connectivity with our customers and our customers range from anywhere from fortune 100 down to smb With the acquisition of Coyote, you know, SMB was about 20% of their volume, so having access to a wide variety of customers and enabling that connectivity with our tech stack is critical. with the acquisition of coyote you know smb was about 20% of their volume so having access to a wide variety of customers and enabling that connectivity with our tech stack is critical And then on the carrier side, the ability to go ahead and, you know, have RXO Go, the mobile app, across our carrier ecosystem, you know, which leads into that 97% of loads created or covered digitally. and then on the carrier side the ability to go ahead and you know have rxo go the mobile app across our carrier ecosystem you know which leads into that 97% of loads created or covered digitally You know, it's also just not about the number of carriers that we have on the platform. you know it's also just not about the number of carriers that we have on the platform As Drew mentioned, you know, over 125,000 carriers on the platform. as drew mentioned you know over 125,000 carriers on the platform What's the engagement with those carriers, right? How often do they come back to the platform? When the carrier comes on to RXO Connect, they're coming back 70% of the time the following week. We're thinking about it pretty holistically across those three cohorts. What's the engagement with those carriers, right? what's the engagement with those carriers right How often do they come back to the platform? how often do they come back to the platform When the carrier comes on to RXO Connect, they're coming back 70% of the time the following week. when the carrier comes on to rxo connect they're coming back 70% of the time the following week We're thinking about it pretty holistically across those three cohorts. we're thinking about it pretty holistically across those three cohorts

Speaker 2: Got it. Maybe piggybacking off of that, you know, talking about the digital capabilities, a couple of years ago, there was a big push for these digital-first, digital-only brokers. I'm thinking of the Convoy and the Transfix of the world. You know, what do you think in hindsight has been the learnings from those digital-first brokers versus what, you know, you guys and some of the bigger brokers are doing today with technology? Got it. got it Maybe piggybacking off of that, you know, talking about the digital capabilities, a couple of years ago, there was a big push for these digital-first, digital-only brokers. maybe piggybacking off of that you know talking about the digital capabilities a couple of years ago there was a big push for these digital-first digital-only brokers I'm thinking of the Convoy and the Transfix of the world. i'm thinking of the convoy and the transfix of the world You know, what do you think in hindsight has been the learnings from those digital-first brokers versus what, you know, you guys and some of the bigger brokers are doing today with technology? you know what do you think in hindsight has been the learnings from those digital-first brokers versus what you know you guys and some of the bigger brokers are doing today with technology

Speaker 1: Yeah, I mean, I can't tell you what the learnings for them was, 'cause we're not in their boardrooms. I can tell you for us, you know, we built the business off of strong technology and strong operators, and it was never one or the other for us, and so for us, this is still a people business. Relationships matter. I talked about our top customers being with us for sixteen years. They're not doing business with a robot. Now, they want business to be automated, but when you're talking about somebody that has a history of creating solutions, they want somebody on the other side of the table as they're having those conversations, and what they're doing. Yeah, I mean, I can't tell you what the learnings for them was, 'cause we're not in their boardrooms. yeah i mean i can't tell you what the learnings for them was 'cause we're not in their boardrooms I can tell you for us, you know, we built the business off of strong technology and strong operators, and it was never one or the other for us, and so for us, this is still a people business. i can tell you for us you know we built the business off of strong technology and strong operators and it was never one or the other for us and so for us this is still a people business Relationships matter. relationships matter I talked about our top customers being with us for sixteen years. i talked about our top customers being with us for sixteen years They're not doing business with a robot. they're not doing business with a robot Now, they want business to be automated, but when you're talking about somebody that has a history of creating solutions, they want somebody on the other side of the table as they're having those conversations, and what they're doing. now they want business to be automated but when you're talking about somebody that has a history of creating solutions they want somebody on the other side of the table as they're having those conversations and what they're doing If you look at our technology from our pricing algorithms, we've brought in some of the best technologists in the world, people who have built pricing algorithms for hotels and the airline industries. But we partnered them with great operators because they don't know the business well enough, and I think that if you look over the last decade, that's been some of our secret sauce, that it was never technology or operations. It was being able to build from the ground up with strong technology, the best technology in the industry, as well as having operators who have a lot of experience in what they're doing and seeing multiple different market cycles and the ability to move our pricing dial, not just once a quarter, not just once a month, once a day. If you look at our technology from our pricing algorithms, we've brought in some of the best technologists in the world, people who have built pricing algorithms for hotels and the airline industries. if you look at our technology from our pricing algorithms we've brought in some of the best technologists in the world people who have built pricing algorithms for hotels and the airline industries But we partnered them with great operators because they don't know the business well enough, and I think that if you look over the last decade, that's been some of our secret sauce, that it was never technology or operations. but we partnered them with great operators because they don't know the business well enough and i think that if you look over the last decade that's been some of our secret sauce that it was never technology or operations It was being able to build from the ground up with strong technology, the best technology in the industry, as well as having operators who have a lot of experience in what they're doing and seeing multiple different market cycles and the ability to move our pricing dial, not just once a quarter, not just once a month, once a day. it was being able to build from the ground up with strong technology the best technology in the industry as well as having operators who have a lot of experience in what they're doing and seeing multiple different market cycles and the ability to move our pricing dial not just once a quarter not just once a month once a day Our pricing algorithm moves every minute as far as what it should be pricing to the customer and the carrier. Our pricing algorithm moves every minute as far as what it should be pricing to the customer and the carrier. our pricing algorithm moves every minute as far as what it should be pricing to the customer and the carrier

Speaker 2: Okay, thanks. Maybe marrying kind of the three-year freight recession here and using technology to increase productivity, you know, what are you guys doing today on the cost side to kind of manage your own costs here at the bottom of the cycle? Okay, thanks. okay thanks Maybe marrying kind of the three-year freight recession here and using technology to increase productivity, you know, what are you guys doing today on the cost side to kind of manage your own costs here at the bottom of the cycle? maybe marrying kind of the three-year freight recession here and using technology to increase productivity you know what are you guys doing today on the cost side to kind of manage your own costs here at the bottom of the cycle

Speaker 3: Yeah, so when you think about the SG&A efficiencies that we've had, right? How we're thinking about the business, I think I would go back to, you know, Drew's opening remarks, right? We are thinking about how to go ahead and prime the business for incremental operating leverage. How do we make sure that, you know, for the next downturn, that we're troughing at higher EBITDA margins than we were this year, right? So going ahead and putting in an efficient cost structure that makes sense across all market cycles, right? So you think about the cost actions that we've taken. We've talked about on the Coyote side with respect to the acquisition, right? More than $70 million of total cash synergies. So that's comprised of $60 million of operating expenses and $10 million of CapEx. Yeah, so when you think about the SG&A efficiencies that we've had, right? yeah so when you think about the sg&a efficiencies that we've had right How we're thinking about the business, I think I would go back to, you know, Drew's opening remarks, right? how we're thinking about the business i think i would go back to you know drew's opening remarks right We are thinking about how to go ahead and prime the business for incremental operating leverage. we are thinking about how to go ahead and prime the business for incremental operating leverage How do we make sure that, you know, for the next downturn, that we're troughing at higher EBITDA margins than we were this year, right? how do we make sure that you know for the next downturn that we're troughing at higher ebitda margins than we were this year right So going ahead and putting in an efficient cost structure that makes sense across all market cycles, right? so going ahead and putting in an efficient cost structure that makes sense across all market cycles right So you think about the cost actions that we've taken. so you think about the cost actions that we've taken We've talked about on the Coyote side with respect to the acquisition, right? we've talked about on the coyote side with respect to the acquisition right More than $70 million of total cash synergies. more than $70 million of total cash synergies So that's comprised of $60 million of operating expenses and $10 million of CapEx. so that's comprised of $60 million of operating expenses and $10 million of capex So heading into next year, you'll see a $10 million reduction in Coyote CapEx. Cumulatively, you'll see a $20 million reduction heading into next year. And then on the cost side, in terms of operating expenses, you know, embedded within our Q2 results included $50 million of operating expenses that were already taken out, so call it $12.5 million or so per quarter, with another $10 million coming out later this year, associated with the rest of the tech integration as we combine the platforms, decommissioning Coyote's legacy platform, Bazooka, and putting everything onto RXO Connect, which will be substantially complete here by the end of the month. So we made a ton of progress with the integration. But I think it's also not just that, it's also... So heading into next year, you'll see a $10 million reduction in Coyote CapEx. so heading into next year you'll see a $10 million reduction in coyote capex Cumulatively, you'll see a $20 million reduction heading into next year. cumulatively you'll see a $20 million reduction heading into next year And then on the cost side, in terms of operating expenses, you know, embedded within our Q2 results included $50 million of operating expenses that were already taken out, so call it $12.5 million or so per quarter, with another $10 million coming out later this year, associated with the rest of the tech integration as we combine the platforms, decommissioning Coyote's legacy platform, Bazooka, and putting everything onto RXO Connect, which will be substantially complete here by the end of the month. and then on the cost side in terms of operating expenses you know embedded within our q2 results included $50 million of operating expenses that were already taken out so call it $12.5 million or so per quarter with another $10 million coming out later this year associated with the rest of the tech integration as we combine the platforms decommissioning coyote's legacy platform bazooka and putting everything onto rxo connect which will be substantially complete here by the end of the month So we made a ton of progress with the integration. so we made a ton of progress with the integration But I think it's also not just that, it's also... but i think it's also not just that it's also You think about just this continuous mindset of continuous improvement, right? How do we go ahead and make sure that we're always optimizing the cost structure? You think about the ability to go ahead and leverage technology that Drew and I just talked about, and continue to do that in a way that is efficient from a cost structure standpoint. I think there is still significant more opportunity as it relates to cost, as well. So that's how we think about it. You think about just this continuous mindset of continuous improvement, right? you think about just this continuous mindset of continuous improvement right How do we go ahead and make sure that we're always optimizing the cost structure? how do we go ahead and make sure that we're always optimizing the cost structure You think about the ability to go ahead and leverage technology that Drew and I just talked about, and continue to do that in a way that is efficient from a cost structure standpoint. you think about the ability to go ahead and leverage technology that drew and i just talked about and continue to do that in a way that is efficient from a cost structure standpoint I think there is still significant more opportunity as it relates to cost, as well. i think there is still significant more opportunity as it relates to cost as well So that's how we think about it. so that's how we think about it

Speaker 2: Great, thanks for that answer. And how do you think about that cost structure, maybe, you know, flexing in an up cycle? You know, your ability to take on more loads per day in an up cycle with your current cost structure, you know, how quickly can you, do you need to add on more headcount? You know, how should we think about the cost structure evolving in an up cycle? Great, thanks for that answer. great thanks for that answer And how do you think about that cost structure, maybe, you know, flexing in an up cycle? and how do you think about that cost structure maybe you know flexing in an up cycle You know, your ability to take on more loads per day in an up cycle with your current cost structure, you know, how quickly can you, do you need to add on more headcount? you know your ability to take on more loads per day in an up cycle with your current cost structure you know how quickly can you do you need to add on more headcount You know, how should we think about the cost structure evolving in an up cycle? you know how should we think about the cost structure evolving in an up cycle

Speaker 3: Yeah, so we're staffed for growth currently, and I think leveraging that technology is key to ensure that, you know, one, we're staffed for growth, but then when the up cycle does come, how do we go ahead and make sure our people continue to be productive and be more productive in leveraging that tech? And we talked about productivity being up, you know, 45% over the last two years in terms of loads per person per day. You know, there will be a point where, you know, depending on the strength of that up cycle, will we have to add more labor? For sure, but do we do it in a way that is efficient, so you've got that relationship that makes sense in terms of contribution margins, where you're adding headcount at a lower rate relative to volume growth? And this business is all about incrementals. Yeah, so we're staffed for growth currently, and I think leveraging that technology is key to ensure that, you know, one, we're staffed for growth, but then when the up cycle does come, how do we go ahead and make sure our people continue to be productive and be more productive in leveraging that tech? yeah so we're staffed for growth currently and i think leveraging that technology is key to ensure that you know one we're staffed for growth but then when the up cycle does come how do we go ahead and make sure our people continue to be productive and be more productive in leveraging that tech And we talked about productivity being up, you know, 45% over the last two years in terms of loads per person per day. and we talked about productivity being up you know 45% over the last two years in terms of loads per person per day You know, there will be a point where, you know, depending on the strength of that up cycle, will we have to add more labor? you know there will be a point where you know depending on the strength of that up cycle will we have to add more labor For sure, but do we do it in a way that is efficient, so you've got that relationship that makes sense in terms of contribution margins, where you're adding headcount at a lower rate relative to volume growth? for sure but do we do it in a way that is efficient so you've got that relationship that makes sense in terms of contribution margins where you're adding headcount at a lower rate relative to volume growth And this business is all about incrementals. and this business is all about incrementals If you think about, you know, the 2.7% EBITDA margins that we posted last quarter, you know, in the brokerage business, depending on, you know, whether it's attributable to volume or price, you could have incremental margins that can be in excess of 75%, right, in terms of that flow-through from gross profit to EBITDA. So making sure that you've got that right cost structure and you're optimizing for incremental contribution margins, I think allows for, you know, pretty strong cross-cycle profitability. If you think about, you know, the 2.7% EBITDA margins that we posted last quarter, you know, in the brokerage business, depending on, you know, whether it's attributable to volume or price, you could have incremental margins that can be in excess of 75%, right, in terms of that flow-through from gross profit to EBITDA. if you think about you know the 2.7% ebitda margins that we posted last quarter you know in the brokerage business depending on you know whether it's attributable to volume or price you could have incremental margins that can be in excess of 75% right in terms of that flow-through from gross profit to ebitda So making sure that you've got that right cost structure and you're optimizing for incremental contribution margins, I think allows for, you know, pretty strong cross-cycle profitability. so making sure that you've got that right cost structure and you're optimizing for incremental contribution margins i think allows for you know pretty strong cross-cycle profitability

Speaker 2: Great. You know, in the past, I think one of the closely followed kind of metrics was this broker penetration of the broader truckload market. You know, where do we stand on that today, you know, in the bottom of this cycle, and where do you see that going, Drew, over the long term? Great. great You know, in the past, I think one of the closely followed kind of metrics was this broker penetration of the broader truckload market. you know in the past i think one of the closely followed kind of metrics was this broker penetration of the broader truckload market You know, where do we stand on that today, you know, in the bottom of this cycle, and where do you see that going, Drew, over the long term? you know where do we stand on that today you know in the bottom of this cycle and where do you see that going drew over the long term

Speaker 1: Yeah, so if you take a step back and look at whenever I started in the industry, I think it was at like six or seven% of brokerage penetration into the overall for-hire trucking market. Today, it's sitting in the low 20s. I think that you'll see it get into the 30s in the near term, over the next few years, and I think longer term, you'll see it getting to the 40%. If you look at the forwarding business, it was ahead of where the brokerage business started, and it's now sitting at roughly 50-50. Asset-based carriers still drive the market. They still set where pricing is going, but I do think that you'll see brokers continuing to take share, and there's a couple of reasons for that. Yeah, so if you take a step back and look at whenever I started in the industry, I think it was at like six or seven% of brokerage penetration into the overall for-hire trucking market. yeah so if you take a step back and look at whenever i started in the industry i think it was at like six or seven% of brokerage penetration into the overall for-hire trucking market Today, it's sitting in the low 20s. today it's sitting in the low 20s I think that you'll see it get into the 30s in the near term, over the next few years, and I think longer term, you'll see it getting to the 40%. i think that you'll see it get into the 30s in the near term over the next few years and i think longer term you'll see it getting to the 40% If you look at the forwarding business, it was ahead of where the brokerage business started, and it's now sitting at roughly 50-50. if you look at the forwarding business it was ahead of where the brokerage business started and it's now sitting at roughly 50-50 Asset-based carriers still drive the market. asset-based carriers still drive the market They still set where pricing is going, but I do think that you'll see brokers continuing to take share, and there's a couple of reasons for that. they still set where pricing is going but i do think that you'll see brokers continuing to take share and there's a couple of reasons for that You know, whenever I started in the industry, brokers did some of what I've talked about at the beginning. It was typically whenever an asset-based carrier was falling off a load, they were rejecting a tender, that brokers were coming in there, and they were picking it up. Now, if you're a customer, you can look at it and say, "Hey, I've got access to over 100,000 carriers." You know, the average fleet, I think like 90-something% of the overall for-hire trucking carriers have less than six trucks. You know, so if you think of large enterprise customers, which is what our business was built on, they're not signing up a six-truck carrier. You know, whenever I started in the industry, brokers did some of what I've talked about at the beginning. you know whenever i started in the industry brokers did some of what i've talked about at the beginning It was typically whenever an asset-based carrier was falling off a load, they were rejecting a tender, that brokers were coming in there, and they were picking it up. it was typically whenever an asset-based carrier was falling off a load they were rejecting a tender that brokers were coming in there and they were picking it up Now, if you're a customer, you can look at it and say, "Hey, I've got access to over 100,000 carriers." You know, the average fleet, I think like 90-something% of the overall for-hire trucking carriers have less than six trucks. now if you're a customer you can look at it and say "hey i've got access to over 100,000 carriers." you know the average fleet i think like 90-something% of the overall for-hire trucking carriers have less than six trucks You know, so if you think of large enterprise customers, which is what our business was built on, they're not signing up a six-truck carrier. you know so if you think of large enterprise customers which is what our business was built on they're not signing up a six-truck carrier But what they will allow is for somebody like an RXO to be an aggregator of capacity for them, to be able to go on their platform, to be able to say, "Hey, we have this carrier that hauls with us X amount of times per month. We know their service. We know the relationship." So when you think about that, we're able to flex capacity up and down more than what an asset-based carrier can do in any given market. But what they will allow is for somebody like an RXO to be an aggregator of capacity for them, to be able to go on their platform, to be able to say, "Hey, we have this carrier that hauls with us X amount of times per month. but what they will allow is for somebody like an rxo to be an aggregator of capacity for them to be able to go on their platform to be able to say "hey we have this carrier that hauls with us x amount of times per month We know their service. we know their service We know the relationship." So when you think about that, we're able to flex capacity up and down more than what an asset-based carrier can do in any given market. we know the relationship." so when you think about that we're able to flex capacity up and down more than what an asset-based carrier can do in any given market

Speaker 2: Great, thanks for that answer. And I'll throw some, maybe some recent stats on you in terms of where you're seeing some growth, but in the 2Q, 45% growth in LTL volumes, 17% growth in stops on the final mile side. You know, even at the bottom of the cycle, you're seeing growth in these two segments here. You know, how are you maybe leveraging the Coyote side to drive continued kind of growth into those segments, and where do you see yourself going in these two growth segments? Great, thanks for that answer. great thanks for that answer And I'll throw some, maybe some recent stats on you in terms of where you're seeing some growth, but in the 2Q, 45% growth in LTL volumes, 17% growth in stops on the final mile side. and i'll throw some maybe some recent stats on you in terms of where you're seeing some growth but in the 2q 45% growth in ltl volumes 17% growth in stops on the final mile side You know, even at the bottom of the cycle, you're seeing growth in these two segments here. you know even at the bottom of the cycle you're seeing growth in these two segments here You know, how are you maybe leveraging the Coyote side to drive continued kind of growth into those segments, and where do you see yourself going in these two growth segments? you know how are you maybe leveraging the coyote side to drive continued kind of growth into those segments and where do you see yourself going in these two growth segments

Speaker 3: Sure. So let's break that down first between LTL and then last mile. So, last quarter, we grew LTL volume within our brokerage business by 45% year over year. We talked about earlier this year that we onboarded several large customers on the LTL business, and that ramped throughout Q1, so Q2 had the full quarter impact of that growth. But if you think about it holistically, LTL, you know, for us, really started four to five years ago in terms of where we are in growing that business. That was, you know, low single-digit % of our volume, legacy RXO, four or five years ago. And at the time of the acquisition of Coyote, it was about 20%. So that business has experienced tremendous growth. Sure. sure So let's break that down first between LTL and then last mile. so let's break that down first between ltl and then last mile So, last quarter, we grew LTL volume within our brokerage business by 45% year over year. so last quarter we grew ltl volume within our brokerage business by 45% year over year We talked about earlier this year that we onboarded several large customers on the LTL business, and that ramped throughout Q1, so Q2 had the full quarter impact of that growth. we talked about earlier this year that we onboarded several large customers on the ltl business and that ramped throughout q1 so q2 had the full quarter impact of that growth But if you think about it holistically, LTL, you know, for us, really started four to five years ago in terms of where we are in growing that business. but if you think about it holistically ltl you know for us really started four to five years ago in terms of where we are in growing that business That was, you know, low single-digit % of our volume, legacy RXO, four or five years ago. that was you know low single-digit % of our volume legacy rxo four or five years ago And at the time of the acquisition of Coyote, it was about 20%. and at the time of the acquisition of coyote it was about 20% So that business has experienced tremendous growth. so that business has experienced tremendous growth Legacy Coyote also had an LTL business, which is also about 20% of their volume, and that business is now 32% of our truckload volume. So you think of our brokerage volume. So you think about, you know, that massive growth that we've had. I think it's also important to break down the differences between Legacy RXO and Legacy Coyote LTL, where Legacy RXO was built on large enterprise-type customers, in many cases where we've been servicing that truckload freight very well, and they come to us because LTL has been a pain point for them. So how do we go ahead and leverage our larger scale on behalf of our customers? And they then go ahead and outsource LTL to us. So that's been a big growth driver for us. Legacy Coyote also had an LTL business, which is also about 20% of their volume, and that business is now 32% of our truckload volume. legacy coyote also had an ltl business which is also about 20% of their volume and that business is now 32% of our truckload volume So you think of our brokerage volume. so you think of our brokerage volume So you think about, you know, that massive growth that we've had. so you think about you know that massive growth that we've had I think it's also important to break down the differences between Legacy RXO and Legacy Coyote LTL, where Legacy RXO was built on large enterprise-type customers, in many cases where we've been servicing that truckload freight very well, and they come to us because LTL has been a pain point for them. i think it's also important to break down the differences between legacy rxo and legacy coyote ltl where legacy rxo was built on large enterprise-type customers in many cases where we've been servicing that truckload freight very well and they come to us because ltl has been a pain point for them So how do we go ahead and leverage our larger scale on behalf of our customers? so how do we go ahead and leverage our larger scale on behalf of our customers And they then go ahead and outsource LTL to us. and they then go ahead and outsource ltl to us So that's been a big growth driver for us. so that's been a big growth driver for us And on the Coyote side, it's been more transactional and maybe a bit more SMB oriented. So really nice combination in terms of diversity associated with the two different LTL businesses. Longer term, we said this on our earnings call last month. We think LTL has the ability to get to, you know, 50% plus of our mix, and that business has very strong gross margins, higher than the truckload gross margin percentage. Lower gross profit per load, but higher gross margin percentage, and it's much more stable. We talk about every earnings call, you know. We show that slide on historical LTL gross profit per load, and it's very stable. And on the Coyote side, it's been more transactional and maybe a bit more SMB oriented. and on the coyote side it's been more transactional and maybe a bit more smb oriented So really nice combination in terms of diversity associated with the two different LTL businesses. so really nice combination in terms of diversity associated with the two different ltl businesses Longer term, we said this on our earnings call last month. longer term we said this on our earnings call last month We think LTL has the ability to get to, you know, 50% plus of our mix, and that business has very strong gross margins, higher than the truckload gross margin percentage. we think ltl has the ability to get to you know 50% plus of our mix and that business has very strong gross margins higher than the truckload gross margin percentage Lower gross profit per load, but higher gross margin percentage, and it's much more stable. lower gross profit per load but higher gross margin percentage and it's much more stable We talk about every earnings call, you know. we talk about every earnings call you know We show that slide on historical LTL gross profit per load, and it's very stable. we show that slide on historical ltl gross profit per load and it's very stable I think adding that as part of our growth pillar as it relates to just incremental pillars of volume that have more stable EBITDA. That's certainly part of our strategy. And then you think about the last mile side. Last mile now, it's four consecutive quarters of double-digit growth. Stop growth was up 17% year over year, and what are we doing? We're seeing continued share gains with our existing customers. We're onboarding new customers, and in some cases, we've also had Legacy Coyote customers onboard into our last mile business. So, that growth will decelerate into the back half of the year, as we've talked about, because we are benefiting from some of those onboardings that occurred last year. I think adding that as part of our growth pillar as it relates to just incremental pillars of volume that have more stable EBITDA. i think adding that as part of our growth pillar as it relates to just incremental pillars of volume that have more stable ebitda That's certainly part of our strategy. that's certainly part of our strategy And then you think about the last mile side. and then you think about the last mile side Last mile now, it's four consecutive quarters of double-digit growth. last mile now it's four consecutive quarters of double-digit growth Stop growth was up 17% year over year, and what are we doing? stop growth was up 17% year over year and what are we doing We're seeing continued share gains with our existing customers. we're seeing continued share gains with our existing customers We're onboarding new customers, and in some cases, we've also had Legacy Coyote customers onboard into our last mile business. we're onboarding new customers and in some cases we've also had legacy coyote customers onboard into our last mile business So, that growth will decelerate into the back half of the year, as we've talked about, because we are benefiting from some of those onboardings that occurred last year. so that growth will decelerate into the back half of the year as we've talked about because we are benefiting from some of those onboardings that occurred last year But you think about how weak the big and bulky market has been for the last three, four years. We are significantly outpacing the growth in that market, and the team continues to execute incredibly well within last mile. But you think about how weak the big and bulky market has been for the last three, four years. but you think about how weak the big and bulky market has been for the last three four years We are significantly outpacing the growth in that market, and the team continues to execute incredibly well within last mile. we are significantly outpacing the growth in that market and the team continues to execute incredibly well within last mile

Speaker 2: Got it. You know, one of the things that we talk about in the brokerage space a lot is, you know, we've touched on this tech angle. You know, how do you maintain a differentiation at RXO, you know, when all these competitors are trying to go after the same, you know, tech angle? What moats do you think is specific to RXO, you know, versus kinda some other competitors? Got it. got it You know, one of the things that we talk about in the brokerage space a lot is, you know, we've touched on this tech angle. you know one of the things that we talk about in the brokerage space a lot is you know we've touched on this tech angle You know, how do you maintain a differentiation at RXO, you know, when all these competitors are trying to go after the same, you know, tech angle? you know how do you maintain a differentiation at rxo you know when all these competitors are trying to go after the same you know tech angle What moats do you think is specific to RXO, you know, versus kinda some other competitors? what moats do you think is specific to rxo you know versus kinda some other competitors

Speaker 1: I, I would start by saying, like, when you look at anything that is customer-facing, anything that is carrier-facing, anything that is for our employees, that's homegrown, and so that is unique to RXO. You know, Jared talked about employee productivity being up, you know, over 45% on a two-year stack, over 18% just from the prior year. You know, we're seeing the benefits of what we've been building for the last decade. You know, for us, we think about it very simply as we build tech: Is this something that is gonna help us gain market share? Is this going to something that is gonna help us operate at how well we buy versus market, so impacting our gross profit per load during any given cycle? What does this do to our employee productivity over the long term when we're building it? I, I would start by saying, like, when you look at anything that is customer-facing, anything that is carrier-facing, anything that is for our employees, that's homegrown, and so that is unique to RXO. i i would start by saying like when you look at anything that is customer-facing anything that is carrier-facing anything that is for our employees that's homegrown and so that is unique to rxo You know, Jared talked about employee productivity being up, you know, over 45% on a two-year stack, over 18% just from the prior year. you know jared talked about employee productivity being up you know over 45% on a two-year stack over 18% just from the prior year You know, we're seeing the benefits of what we've been building for the last decade. you know we're seeing the benefits of what we've been building for the last decade You know, for us, we think about it very simply as we build tech: Is this something that is gonna help us gain market share? you know for us we think about it very simply as we build tech is this something that is gonna help us gain market share Is this going to something that is gonna help us operate at how well we buy versus market, so impacting our gross profit per load during any given cycle? is this going to something that is gonna help us operate at how well we buy versus market so impacting our gross profit per load during any given cycle What does this do to our employee productivity over the long term when we're building it? what does this do to our employee productivity over the long term when we're building it Now, you know, there's been a lot out there on AI, not just in the transportation industry, but in all industries. And I think, you know, when you look at it for us, you probably won't see us put out as many press releases as what some in our industry, as well as some outside of our industry, are doing, because it is a secret sauce for us of what we've been building on the customer, the carrier, and the employee side, and we think over the long term, it's what will allow us to outperform. If you look prior to the AI becoming, you know, the hot topic of what was going on, we were doing machine learning pricing algorithms before most were talking about it. Now, you know, there's been a lot out there on AI, not just in the transportation industry, but in all industries. now you know there's been a lot out there on ai not just in the transportation industry but in all industries And I think, you know, when you look at it for us, you probably won't see us put out as many press releases as what some in our industry, as well as some outside of our industry, are doing, because it is a secret sauce for us of what we've been building on the customer, the carrier, and the employee side, and we think over the long term, it's what will allow us to outperform. and i think you know when you look at it for us you probably won't see us put out as many press releases as what some in our industry as well as some outside of our industry are doing because it is a secret sauce for us of what we've been building on the customer the carrier and the employee side and we think over the long term it's what will allow us to outperform If you look prior to the AI becoming, you know, the hot topic of what was going on, we were doing machine learning pricing algorithms before most were talking about it. if you look prior to the ai becoming you know the hot topic of what was going on we were doing machine learning pricing algorithms before most were talking about it I think for us, technology, as I said at the beginning, has always been in the foundation of what we're doing, and we're partnering it with great operators. And so when you're building technology with the people who know how to do the code, they know how to build the technology, and you're partnering with people who understand the transportation industry, it does become a differentiator for the product that you ultimately build. I think for us, technology, as I said at the beginning, has always been in the foundation of what we're doing, and we're partnering it with great operators. i think for us technology as i said at the beginning has always been in the foundation of what we're doing and we're partnering it with great operators And so when you're building technology with the people who know how to do the code, they know how to build the technology, and you're partnering with people who understand the transportation industry, it does become a differentiator for the product that you ultimately build. and so when you're building technology with the people who know how to do the code they know how to build the technology and you're partnering with people who understand the transportation industry it does become a differentiator for the product that you ultimately build

Speaker 2: Great, thank you. We're about ten minutes left. I wanted to open it up to the floor, maybe if there are any questions from the audience. If not, I can kinda keep running through some questions I've got. Great, thank you. great thank you We're about ten minutes left. we're about ten minutes left I wanted to open it up to the floor, maybe if there are any questions from the audience. i wanted to open it up to the floor maybe if there are any questions from the audience If not, I can kinda keep running through some questions I've got. if not i can kinda keep running through some questions i've got

Speaker 3: Second is why LTL has grown. Just maybe spend another minute on why LTL has grown so quickly for you. You said that you're solving pain points for customers, but there's plenty of excess capacity from the asset-based LTL carrier, so what is the pain point that you're solving for them? Second is why LTL has grown. second is why ltl has grown Just maybe spend another minute on why LTL has grown so quickly for you. just maybe spend another minute on why ltl has grown so quickly for you You said that you're solving pain points for customers, but there's plenty of excess capacity from the asset-based LTL carrier, so what is the pain point that you're solving for them? you said that you're solving pain points for customers but there's plenty of excess capacity from the asset-based ltl carrier so what is the pain point that you're solving for them

Speaker 1: I think first, don't think about us as taking share from asset-based carriers, right? Like, it is more redistributing that freight out to other asset-based carriers. We view ourselves as a sales channel for a lot of these LTL carriers and what they're doing. You know, 'cause again, like, we're an asset-light company, so it has to end up back on the truck. For us, it's about making sure that for the customer, we're putting it with the right truck, with the right carrier for the lane. When you look at our share gains, it starts with our existing customers, as Jared mentioned earlier. If you think of our existing customers, these are people that we have 10-, 15-year relationships with, and they've been doing truckload business. That's how we built the business. I think first, don't think about us as taking share from asset-based carriers, right? i think first don't think about us as taking share from asset-based carriers right Like, it is more redistributing that freight out to other asset-based carriers. like it is more redistributing that freight out to other asset-based carriers We view ourselves as a sales channel for a lot of these LTL carriers and what they're doing. we view ourselves as a sales channel for a lot of these ltl carriers and what they're doing You know, 'cause again, like, we're an asset-light company, so it has to end up back on the truck. you know 'cause again like we're an asset-light company so it has to end up back on the truck For us, it's about making sure that for the customer, we're putting it with the right truck, with the right carrier for the lane. for us it's about making sure that for the customer we're putting it with the right truck with the right carrier for the lane When you look at our share gains, it starts with our existing customers, as Jared mentioned earlier. when you look at our share gains it starts with our existing customers as jared mentioned earlier If you think of our existing customers, these are people that we have 10-, 15-year relationships with, and they've been doing truckload business. if you think of our existing customers these are people that we have 10- 15-year relationships with and they've been doing truckload business That's how we built the business. that's how we built the business They know our technology platform, to your point, or earlier. Like, they've seen it. They know what it can do for them. So when they know, "Hey, we're comfortable with the platform, we're comfortable with the people," and then I start to think about LTL, and I think about claims, lost shipments, damages. I'm on three or four platforms from different national providers. I can get on one platform. I can still work with, you know, three, four, five national providers, plus I'm going to get to work with some of the regionals to make sure I'm getting the right truck on the right load. It becomes less of a pain point for the customer, because for these customers, LTL, a lot of times, in terms of revenue, makes up, like, low to mid-single digits % of the overall freight under management that they're putting out there. They know our technology platform, to your point, or earlier. they know our technology platform to your point or earlier Like, they've seen it. like they've seen it They know what it can do for them. they know what it can do for them So when they know, "Hey, we're comfortable with the platform, we're comfortable with the people," and then I start to think about LTL, and I think about claims, lost shipments, damages. so when they know "hey we're comfortable with the platform we're comfortable with the people," and then i start to think about ltl and i think about claims lost shipments damages I'm on three or four platforms from different national providers. i'm on three or four platforms from different national providers I can get on one platform. i can get on one platform I can still work with, you know, three, four, five national providers, plus I'm going to get to work with some of the regionals to make sure I'm getting the right truck on the right load. i can still work with you know three four five national providers plus i'm going to get to work with some of the regionals to make sure i'm getting the right truck on the right load It becomes less of a pain point for the customer, because for these customers, LTL, a lot of times, in terms of revenue, makes up, like, low to mid-single digits % of the overall freight under management that they're putting out there. it becomes less of a pain point for the customer because for these customers ltl a lot of times in terms of revenue makes up like low to mid-single digits % of the overall freight under management that they're putting out there But in terms of time, it takes a lot more time whenever you think about the things I mentioned earlier, of claims, lost shipments, and damages. So for us, the LTL growth, I think, will be lumpy at times, because you're onboarding large customers, and so, like, you've seen that grow, growing 40%. We've talked about it's gonna be another strong quarter for us again in LTL growth this quarter. But these are large customers who are coming on, and you don't actually know the timing of how they all hit at the same time. But we think, you know, over the long term, you know, whenever I look at some companies that have built LTL out, and they had a head start on us, C.H. Robinson, I think over 50% of their volume is LTL. But in terms of time, it takes a lot more time whenever you think about the things I mentioned earlier, of claims, lost shipments, and damages. but in terms of time it takes a lot more time whenever you think about the things i mentioned earlier of claims lost shipments and damages So for us, the LTL growth, I think, will be lumpy at times, because you're onboarding large customers, and so, like, you've seen that grow, growing 40%. so for us the ltl growth i think will be lumpy at times because you're onboarding large customers and so like you've seen that grow growing 40% We've talked about it's gonna be another strong quarter for us again in LTL growth this quarter. we've talked about it's gonna be another strong quarter for us again in ltl growth this quarter But these are large customers who are coming on, and you don't actually know the timing of how they all hit at the same time. but these are large customers who are coming on and you don't actually know the timing of how they all hit at the same time But we think, you know, over the long term, you know, whenever I look at some companies that have built LTL out, and they had a head start on us, C.H. but we think you know over the long term you know whenever i look at some companies that have built ltl out and they had a head start on us c.h Robinson, I think over 50% of their volume is LTL. robinson i think over 50% of their volume is ltl Echo is a company that was public at one point. I think, like, 60%-70% of their overall volume is on LTL, and that creates, for us, stability and gross profit per load. In the truckload gross profit per load, it moves a lot with what's going on in the market, but if you look at our earnings deck, there's a chart that shows you gross profit per load on LTL, and, like, you see a little bit of movement, but it's not like the truckload that's moving up and down, like the peaks and the valleys. It's very, very stable as far as what happens on the LTL. Echo is a company that was public at one point. echo is a company that was public at one point I think, like, 60%-70% of their overall volume is on LTL, and that creates, for us, stability and gross profit per load. i think like 60%-70% of their overall volume is on ltl and that creates for us stability and gross profit per load In the truckload gross profit per load, it moves a lot with what's going on in the market, but if you look at our earnings deck, there's a chart that shows you gross profit per load on LTL, and, like, you see a little bit of movement, but it's not like the truckload that's moving up and down, like the peaks and the valleys. in the truckload gross profit per load it moves a lot with what's going on in the market but if you look at our earnings deck there's a chart that shows you gross profit per load on ltl and like you see a little bit of movement but it's not like the truckload that's moving up and down like the peaks and the valleys It's very, very stable as far as what happens on the LTL. it's very very stable as far as what happens on the ltl

Speaker 2: Great. Maybe a quick follow-up on that. Just given the consolidated nature of LTL, is there an argument for LTL brokerage to also be more consolidated? Just because, you know, the relationships that you're driving is kind of on a smaller base. Great. great Maybe a quick follow-up on that. maybe a quick follow-up on that Just given the consolidated nature of LTL, is there an argument for LTL brokerage to also be more consolidated? just given the consolidated nature of ltl is there an argument for ltl brokerage to also be more consolidated Just because, you know, the relationships that you're driving is kind of on a smaller base. just because you know the relationships that you're driving is kind of on a smaller base

Speaker 1: I think it's two things. I think, yes, there's. Not just in LTL, but I think in brokerage in general, there's opportunity for consolidation in the market, and I think that you'll continue to see consolidation in the market. I think right now, the top, after the Coyote acquisition, it was top 10, so now it's top nine brokers make up around 50% of the overall brokerage market. I think that you'll see that consolidate, the top three or four owning 60%, 70% of the market over the next several years. And you, when you look at it, technology, being able to service customers at scale, that happens at the top with these large customers. I think it's two things. i think it's two things I think, yes, there's. i think yes there's Not just in LTL, but I think in brokerage in general, there's opportunity for consolidation in the market, and I think that you'll continue to see consolidation in the market. not just in ltl but i think in brokerage in general there's opportunity for consolidation in the market and i think that you'll continue to see consolidation in the market I think right now, the top, after the Coyote acquisition, it was top 10, so now it's top nine brokers make up around 50% of the overall brokerage market. i think right now the top after the coyote acquisition it was top 10 so now it's top nine brokers make up around 50% of the overall brokerage market I think that you'll see that consolidate, the top three or four owning 60%, 70% of the market over the next several years. i think that you'll see that consolidate the top three or four owning 60% 70% of the market over the next several years And you, when you look at it, technology, being able to service customers at scale, that happens at the top with these large customers. and you when you look at it technology being able to service customers at scale that happens at the top with these large customers So I don't think it's something specific to LTL. I think it's something specific to brokerage, and if you think about other modes like refrigerated, flatbed, cross-border, hazmat, there's a lot of opportunity out there. The other place that you see opportunity for consolidation, where there's not as many players out there, but is on the managed transportation side, which, again, would be on the truckload and the LTL side. So I don't think it's something specific to LTL. so i don't think it's something specific to ltl I think it's something specific to brokerage, and if you think about other modes like refrigerated, flatbed, cross-border, hazmat, there's a lot of opportunity out there. i think it's something specific to brokerage and if you think about other modes like refrigerated flatbed cross-border hazmat there's a lot of opportunity out there The other place that you see opportunity for consolidation, where there's not as many players out there, but is on the managed transportation side, which, again, would be on the truckload and the LTL side. the other place that you see opportunity for consolidation where there's not as many players out there but is on the managed transportation side which again would be on the truckload and the ltl side

Speaker 2: Got it. Maybe, Drew, talking about the flatbed and the hazmat side, you know, are there verticals maybe that RXO, as a brokerage provider, doesn't play in today? How do you think about growing into those future verticals, and how does M&A fit into the long-term strategic framework at RXO? Got it. got it Maybe, Drew, talking about the flatbed and the hazmat side, you know, are there verticals maybe that RXO, as a brokerage provider, doesn't play in today? maybe drew talking about the flatbed and the hazmat side you know are there verticals maybe that rxo as a brokerage provider doesn't play in today How do you think about growing into those future verticals, and how does M&A fit into the long-term strategic framework at RXO? how do you think about growing into those future verticals and how does m&a fit into the long-term strategic framework at rxo

Speaker 1: Yeah. So we built the business off of 53-foot dry vans. You know, one or two swing doors, you know, is what it was built off of. If you look at refrigerated, flatbed, cross-border, hazmat, LTL, these are all strategic initiatives for us that we will and are growing organically. If there's something out there that makes sense on the M&A side, we would absolutely take a look at it. I think, you know, you look at Coyote, it's the largest transaction. I'm fairly certain I'm right on this. It's the largest transaction from one asset-light company to another asset-light company, and, you know, for us, like, M&A is part of our capital allocation strategy, but it has to be the right M&A. It has to be a strategic fit. It has to be a cultural fit. Yeah. yeah So we built the business off of 53-foot dry vans. so we built the business off of 53-foot dry vans You know, one or two swing doors, you know, is what it was built off of. you know one or two swing doors you know is what it was built off of If you look at refrigerated, flatbed, cross-border, hazmat, LTL, these are all strategic initiatives for us that we will and are growing organically. if you look at refrigerated flatbed cross-border hazmat ltl these are all strategic initiatives for us that we will and are growing organically If there's something out there that makes sense on the M&A side, we would absolutely take a look at it. if there's something out there that makes sense on the m&a side we would absolutely take a look at it I think, you know, you look at Coyote, it's the largest transaction. i think you know you look at coyote it's the largest transaction I'm fairly certain I'm right on this. i'm fairly certain i'm right on this It's the largest transaction from one asset-light company to another asset-light company, and, you know, for us, like, M&A is part of our capital allocation strategy, but it has to be the right M&A. it's the largest transaction from one asset-light company to another asset-light company and you know for us like m&a is part of our capital allocation strategy but it has to be the right m&a It has to be a strategic fit. it has to be a strategic fit It has to be a cultural fit. it has to be a cultural fit So the bar for M&A is very, very high, and it's got to be something that is gonna create shareholder value over the long term. So the bar for M&A is very, very high, and it's got to be something that is gonna create shareholder value over the long term. so the bar for m&a is very very high and it's got to be something that is gonna create shareholder value over the long term

Speaker 2: Got it. Jared, you kind of mentioned this with some of the cost takeouts and the productivity gains, but maybe double-clicking that on a different angle, you know, looking at the cash flow perspective. Even without a cycle turn, what are some of the cash flow dynamics that we should all make sure we're aware of, you know, kind of going into the second half in 2026? Got it. got it Jared, you kind of mentioned this with some of the cost takeouts and the productivity gains, but maybe double-clicking that on a different angle, you know, looking at the cash flow perspective. jared you kind of mentioned this with some of the cost takeouts and the productivity gains but maybe double-clicking that on a different angle you know looking at the cash flow perspective Even without a cycle turn, what are some of the cash flow dynamics that we should all make sure we're aware of, you know, kind of going into the second half in 2026? even without a cycle turn what are some of the cash flow dynamics that we should all make sure we're aware of you know kind of going into the second half in 2026

Speaker 3: Yeah, so when you think about free cash flow, Q2 was one of our strongest quarters that we've had since spin, putting up a 58% adjusted free cash flow conversion from EBITDA, and we signaled that Q3 would be another strong adjusted free cash flow quarter. We did benefit from, you know, some harmonizing of working capital as it relate to the Coyote acquisition, but I think the longer-term view on this, and I think this goes to the root of your question, is, you know, the free cash flow profile of this business longer term is incredibly strong. You think about, you know, the characteristics of this business, right? Think about our fixed costs in terms of cash outflows. We've got about, you know... Yeah, so when you think about free cash flow, Q2 was one of our strongest quarters that we've had since spin, putting up a 58% adjusted free cash flow conversion from EBITDA, and we signaled that Q3 would be another strong adjusted free cash flow quarter. yeah so when you think about free cash flow q2 was one of our strongest quarters that we've had since spin putting up a 58% adjusted free cash flow conversion from ebitda and we signaled that q3 would be another strong adjusted free cash flow quarter We did benefit from, you know, some harmonizing of working capital as it relate to the Coyote acquisition, but I think the longer-term view on this, and I think this goes to the root of your question, is, you know, the free cash flow profile of this business longer term is incredibly strong. we did benefit from you know some harmonizing of working capital as it relate to the coyote acquisition but i think the longer-term view on this and i think this goes to the root of your question is you know the free cash flow profile of this business longer term is incredibly strong You think about, you know, the characteristics of this business, right? you think about you know the characteristics of this business right Think about our fixed costs in terms of cash outflows. think about our fixed costs in terms of cash outflows We've got about, you know... we've got about you know Next year, we talked about $50 million of CapEx, which will come down by about $20 million year over year from $70 million this year. And then you think about interest expense, roughly, call it, $30 million. Anything above, call it, that $80 million threshold, right, from an adjusted EBITDA basis, on a normalized year, obviously, this year we still have some restructuring and, integration charges related to Coyote, but we'll hit the, balance sheet at, you know, call it, $0.75 on the dollar, just adjusted for our long-term effective tax rate of 25%. Next year, we talked about $50 million of CapEx, which will come down by about $20 million year over year from $70 million this year. next year we talked about $50 million of capex which will come down by about $20 million year over year from $70 million this year And then you think about interest expense, roughly, call it, $30 million. and then you think about interest expense roughly call it $30 million Anything above, call it, that $80 million threshold, right, from an adjusted EBITDA basis, on a normalized year, obviously, this year we still have some restructuring and, integration charges related to Coyote, but we'll hit the, balance sheet at, you know, call it, $0.75 on the dollar, just adjusted for our long-term effective tax rate of 25%. anything above call it that $80 million threshold right from an adjusted ebitda basis on a normalized year obviously this year we still have some restructuring and integration charges related to coyote but we'll hit the balance sheet at you know call it $0.75 on the dollar just adjusted for our long-term effective tax rate of 25% So you think about, you know, You know, you think about, on a normalized basis, what the adjusted EBITDA profile of this company looks like, call it, you know, mid, you know, 5-6% type adjusted EBITDA margins, and you think about that $80 million of fixed outflow between CapEx and interest, right? All of that will drop to the bottom line in terms of on the balance sheet with re- at 75 cents on the dollar. So you think about the cumulative free cash flow generation of this business and the capabilities that we have, further enhanced by all the cost takeouts that you mentioned that we talked about, you know, that's what gets us excited about thinking about that cross-cycle earnings power and the associated free cash flow generation of the business. So you think about, you know, You know, you think about, on a normalized basis, what the adjusted EBITDA profile of this company looks like, call it, you know, mid, you know, 5-6% type adjusted EBITDA margins, and you think about that $80 million of fixed outflow between CapEx and interest, right? so you think about you know you know you think about on a normalized basis what the adjusted ebitda profile of this company looks like call it you know mid you know 5-6% type adjusted ebitda margins and you think about that $80 million of fixed outflow between capex and interest right All of that will drop to the bottom line in terms of on the balance sheet with re- at 75 cents on the dollar. all of that will drop to the bottom line in terms of on the balance sheet with re- at 75 cents on the dollar So you think about the cumulative free cash flow generation of this business and the capabilities that we have, further enhanced by all the cost takeouts that you mentioned that we talked about, you know, that's what gets us excited about thinking about that cross-cycle earnings power and the associated free cash flow generation of the business. so you think about the cumulative free cash flow generation of this business and the capabilities that we have further enhanced by all the cost takeouts that you mentioned that we talked about you know that's what gets us excited about thinking about that cross-cycle earnings power and the associated free cash flow generation of the business

Speaker 2: Got it. Maybe last question from me. Drew, you're a public company CEO, you've got to make the quarters. How do you balance between, you know, maybe short-term profit protect, protection, and in doubling down on the bottom of the cycle, investing in growth, and being ready for, you know, and for your customers in the upcycle? You've been through a couple different cycles. You know, what strategies do you think, you know, really work here at the bottom of the cycle? Got it. got it Maybe last question from me. maybe last question from me Drew, you're a public company CEO, you've got to make the quarters. drew you're a public company ceo you've got to make the quarters How do you balance between, you know, maybe short-term profit protect, protection, and in doubling down on the bottom of the cycle, investing in growth, and being ready for, you know, and for your customers in the upcycle? how do you balance between you know maybe short-term profit protect protection and in doubling down on the bottom of the cycle investing in growth and being ready for you know and for your customers in the upcycle You've been through a couple different cycles. you've been through a couple different cycles You know, what strategies do you think, you know, really work here at the bottom of the cycle? you know what strategies do you think you know really work here at the bottom of the cycle

Speaker 1: I think if you're running the company effectively, especially in times like what we're in right now, you wanna run the company wherein you're in a continual state of mindset improvement, and looking at ways to operate the company. I said this in the opening, and I laugh when I said it, but I was serious: it's times like these that help you build a stronger base and a stronger foundation as a company. So for us, like, you know, I was serious, like, spinning off at the bottom of the cycle is a great opportunity for us to create the foundation for who RXO is, and prepare ourselves for the upcycle. With all of that said, you know, while we have to report out quarterly, that's not how we look at the business. I think if you're running the company effectively, especially in times like what we're in right now, you wanna run the company wherein you're in a continual state of mindset improvement, and looking at ways to operate the company. i think if you're running the company effectively especially in times like what we're in right now you wanna run the company wherein you're in a continual state of mindset improvement and looking at ways to operate the company I said this in the opening, and I laugh when I said it, but I was serious: it's times like these that help you build a stronger base and a stronger foundation as a company. i said this in the opening and i laugh when i said it but i was serious it's times like these that help you build a stronger base and a stronger foundation as a company So for us, like, you know, I was serious, like, spinning off at the bottom of the cycle is a great opportunity for us to create the foundation for who RXO is, and prepare ourselves for the upcycle. so for us like you know i was serious like spinning off at the bottom of the cycle is a great opportunity for us to create the foundation for who rxo is and prepare ourselves for the upcycle With all of that said, you know, while we have to report out quarterly, that's not how we look at the business. with all of that said you know while we have to report out quarterly that's not how we look at the business We look at the business of what it's going to do over the next three, four, five years, what it's going to do through a cycle. You know, I'm probably alone in this, but I'm not a CEO who looks at our stock price on a daily basis. You know, Jared calls me if it goes up or down too much, but you know, for the most part, you know, I mean, like, I learned from Brad Jacobs a year ago-years ago, the only time that the stock price matters is when you buy and when you sell, and I'm not selling any stock right now. We look at the business of what it's going to do over the next three, four, five years, what it's going to do through a cycle. we look at the business of what it's going to do over the next three four five years what it's going to do through a cycle You know, I'm probably alone in this, but I'm not a CEO who looks at our stock price on a daily basis. you know i'm probably alone in this but i'm not a ceo who looks at our stock price on a daily basis You know, Jared calls me if it goes up or down too much, but you know, for the most part, you know, I mean, like, I learned from Brad Jacobs a year ago-years ago, the only time that the stock price matters is when you buy and when you sell, and I'm not selling any stock right now. you know jared calls me if it goes up or down too much but you know for the most part you know i mean like i learned from brad jacobs a year ago-years ago the only time that the stock price matters is when you buy and when you sell and i'm not selling any stock right now

Speaker 2: Great. That was a great answer. You have a couple minutes left here. I wanted to maybe open it up for any last-minute questions from the audience, but other than that, we can kind of wrap up here. Got one more. Great. great That was a great answer. that was a great answer You have a couple minutes left here. you have a couple minutes left here I wanted to maybe open it up for any last-minute questions from the audience, but other than that, we can kind of wrap up here. i wanted to maybe open it up for any last-minute questions from the audience but other than that we can kind of wrap up here Got one more. got one more Sorry, I won't be bashful, but the 97% number in terms of sort of digital order entry, what is that number through the cycle? In other words, what % of brokered freight that you're touching is fully natively digital? No phone calls- Sorry, I won't be bashful, but the 97% number in terms of sort of digital order entry, what is that number through the cycle? sorry i won't be bashful but the 97% number in terms of sort of digital order entry what is that number through the cycle In other words, what % of brokered freight that you're touching is fully natively digital? in other words what % of brokered freight that you're touching is fully natively digital No phone calls- no phone calls-

Speaker 1: Right. Right. right No bill of lading paperwork, et cetera. No bill of lading paperwork, et cetera. no bill of lading paperwork et cetera So, I wanna be clear, the 97% was created or covered, and that was at Legacy RXO, so created is on the customer side, covered is on the carrier side. We haven't put out something that said, "created and covered," but what we talked about at Legacy RXO is, we were much farther ahead on the customer side than what we were on the carrier side, so if you think about the customer side, it was very easy to automate with large enterprise customers and getting them onto the technology platform. With smaller carriers, and you're talking about some drivers that are owner-operators, that are still operating off of their flip phone, it's a little bit more difficult to get them to come in at the same rate. So, I wanna be clear, the 97% was created or covered, and that was at Legacy RXO, so created is on the customer side, covered is on the carrier side. so i wanna be clear the 97% was created or covered and that was at legacy rxo so created is on the customer side covered is on the carrier side We haven't put out something that said, "created and covered," but what we talked about at Legacy RXO is, we were much farther ahead on the customer side than what we were on the carrier side, so if you think about the customer side, it was very easy to automate with large enterprise customers and getting them onto the technology platform. we haven't put out something that said "created and covered," but what we talked about at legacy rxo is we were much farther ahead on the customer side than what we were on the carrier side so if you think about the customer side it was very easy to automate with large enterprise customers and getting them onto the technology platform With smaller carriers, and you're talking about some drivers that are owner-operators, that are still operating off of their flip phone, it's a little bit more difficult to get them to come in at the same rate. with smaller carriers and you're talking about some drivers that are owner-operators that are still operating off of their flip phone it's a little bit more difficult to get them to come in at the same rate But with that said, Coyote was actually ahead of RXO on the carrier side of how they were operating, 'cause they were working with larger carriers and private fleets. So I expect that 97% number came down a little bit. I don't have the number right in front of me, but it came down a little bit post-Coyote acquisition of created and covered. But I think longer term, you know, the goal would be to look at how do we have created and covered in the 60%-70% range? But with that said, Coyote was actually ahead of RXO on the carrier side of how they were operating, 'cause they were working with larger carriers and private fleets. but with that said coyote was actually ahead of rxo on the carrier side of how they were operating 'cause they were working with larger carriers and private fleets So I expect that 97% number came down a little bit. so i expect that 97% number came down a little bit I don't have the number right in front of me, but it came down a little bit post-Coyote acquisition of created and covered. i don't have the number right in front of me but it came down a little bit post-coyote acquisition of created and covered But I think longer term, you know, the goal would be to look at how do we have created and covered in the 60%-70% range? but i think longer term you know the goal would be to look at how do we have created and covered in the 60%-70% range Yeah. Can you maybe give an example of how AI is increasingly helping your customers, maybe more specifically in the last, like, few months, something that's transitioning or something that's kicking in that you're providing for a customer that's accretive to you and accretive to your customer? Yeah. yeah Can you maybe give an example of how AI is increasingly helping your customers, maybe more specifically in the last, like, few months, something that's transitioning or something that's kicking in that you're providing for a customer that's accretive to you and accretive to your customer? can you maybe give an example of how ai is increasingly helping your customers maybe more specifically in the last like few months something that's transitioning or something that's kicking in that you're providing for a customer that's accretive to you and accretive to your customer Yeah. I'll give you two examples. I'll start on the last mile side of the business. Whenever you're thinking about going into somebody's home and scheduling delivery appointments and keeping them updated throughout the day, you're talking about people who, a lot of times, if they're having a washer or dryer or refrigerator delivered to their home, they've taken off of work. So, like, making sure that we're doing what we're saying we're doing, the scheduling, the routing, all of that is being done on the AI side. On the brokerage side, an example that I'd give you is, you know, whenever I started, and I started at the desk level, talking to carriers and customers. As I became more efficient at my job and I became better, I got an assistant. Yeah. yeah I'll give you two examples. i'll give you two examples I'll start on the last mile side of the business. i'll start on the last mile side of the business Whenever you're thinking about going into somebody's home and scheduling delivery appointments and keeping them updated throughout the day, you're talking about people who, a lot of times, if they're having a washer or dryer or refrigerator delivered to their home, they've taken off of work. whenever you're thinking about going into somebody's home and scheduling delivery appointments and keeping them updated throughout the day you're talking about people who a lot of times if they're having a washer or dryer or refrigerator delivered to their home they've taken off of work So, like, making sure that we're doing what we're saying we're doing, the scheduling, the routing, all of that is being done on the AI side. so like making sure that we're doing what we're saying we're doing the scheduling the routing all of that is being done on the ai side On the brokerage side, an example that I'd give you is, you know, whenever I started, and I started at the desk level, talking to carriers and customers. on the brokerage side an example that i'd give you is you know whenever i started and i started at the desk level talking to carriers and customers As I became more efficient at my job and I became better, I got an assistant. as i became more efficient at my job and i became better i got an assistant Now, that assistant is actually a robot, and so, like, to be able to go in there and how we're tracking and tracing loads, what we're doing on the call center side, what we're doing from the pricing side, all of that is running through AI now for us. Now, that assistant is actually a robot, and so, like, to be able to go in there and how we're tracking and tracing loads, what we're doing on the call center side, what we're doing from the pricing side, all of that is running through AI now for us. now that assistant is actually a robot and so like to be able to go in there and how we're tracking and tracing loads what we're doing on the call center side what we're doing from the pricing side all of that is running through ai now for us Can you talk a little bit about moving into markets like hazardous, hazmat, for example? How is that in an asset-light model any different? Is it just driving the channel, the carrier awareness, sales process, and software updates? Like, what makes that a difficult transition? Can you talk a little bit about moving into markets like hazardous, hazmat, for example? can you talk a little bit about moving into markets like hazardous hazmat for example How is that in an asset-light model any different? how is that in an asset-light model any different Is it just driving the channel, the carrier awareness, sales process, and software updates? is it just driving the channel the carrier awareness sales process and software updates Like, what makes that a difficult transition? like what makes that a difficult transition It's not a difficult transition. I think it's more of a focus for us. Like, you know, the easiest way to scale up, you know, when we were at XPO, was through dry van freight, and, like, you could go into large enterprise customers, and we were able to build a base. So I think it's more of the shift in focus than it is on anything. And not a shift in focus, 'cause we're still focused on the truckload side, but it's more of, "Hey, we have these capabilities. We have the capacity. We have carriers who have hazmat authorities." And so it's making sure that you're lining up the right capacity for the customer whenever you're going out there. But it's not something that is, you need technological advances to be able to do. It's not a difficult transition. it's not a difficult transition I think it's more of a focus for us. i think it's more of a focus for us Like, you know, the easiest way to scale up, you know, when we were at XPO, was through dry van freight, and, like, you could go into large enterprise customers, and we were able to build a base. like you know the easiest way to scale up you know when we were at xpo was through dry van freight and like you could go into large enterprise customers and we were able to build a base So I think it's more of the shift in focus than it is on anything. so i think it's more of the shift in focus than it is on anything And not a shift in focus, 'cause we're still focused on the truckload side, but it's more of, "Hey, we have these capabilities. and not a shift in focus 'cause we're still focused on the truckload side but it's more of "hey we have these capabilities We have the capacity. we have the capacity We have carriers who have hazmat authorities." And so it's making sure that you're lining up the right capacity for the customer whenever you're going out there. we have carriers who have hazmat authorities." and so it's making sure that you're lining up the right capacity for the customer whenever you're going out there But it's not something that is, you need technological advances to be able to do. but it's not something that is you need technological advances to be able to do It's something we could have done in the beginning, but we wanted to be able to build the base and the foundation first. It's also higher gross profit per load, as I'm sure you could imagine. Much higher. It's something we could have done in the beginning, but we wanted to be able to build the base and the foundation first. it's something we could have done in the beginning but we wanted to be able to build the base and the foundation first It's also higher gross profit per load, as I'm sure you could imagine. it's also higher gross profit per load as i'm sure you could imagine Much higher. much higher

Speaker 2: Great. Well, thank you so much, everybody. Great. great Well, thank you so much, everybody. well thank you so much everybody

Speaker 1: Thank you. Thank you. thank you

Speaker 2: Thanks so much. Thanks so much. thanks so much