RXO at Jefferies Conference: Strategic Growth Amid Freight Recession

On Thursday, 04 September 2025, RXO Inc (NYSE:RXO) presented its strategic vision at the Jefferies Mining and Industrials Conference 2025. The company, led by CEO Drew Wilkerson and CSO Jared Weisfeld, outlined its approach to navigating the ongoing freight recession while positioning itself for future growth. RXO emphasized its strengths in technology and market consolidation but also acknowledged the challenges posed by the current freight cycle.

Key Takeaways

• RXO is focusing on technology-driven solutions and customer relationships to prepare for an eventual market upcycle.
• The company has achieved $70 million in cash synergies from the Coyote acquisition, enhancing cost efficiencies.
• Significant productivity gains have been reported, with a 45% increase in loads per person per day over the last two years.
• RXO is committed to expanding its presence in the LTL and last mile sectors, with substantial growth potential anticipated.
• The company is open to mergers and acquisitions that align strategically and culturally, aiming for long-term value creation.

Financial Results

• SG&A efficiencies are being implemented for various market cycles.
• The Coyote acquisition has resulted in $70 million of total cash synergies, with $60 million in operating expenses and $10 million in CapEx.
• Operating expenses have been reduced by $50 million, with an additional $10 million reduction expected later this year.
• RXO aims for EBITDA margins to remain higher during downturns compared to this year.
• Q2 saw a 58% adjusted free cash flow conversion from EBITDA, marking one of the strongest quarters since the company’s spin-off.
• Capital expenditure is projected at $50 million for the next year, down from $70 million this year.

Operational Updates

• RXO invests approximately $100 million annually in technology, boosting productivity by over 45% in the past two years.
• LTL volume within the brokerage business grew by 45% year-over-year in Q2.
• The last mile segment has experienced four consecutive quarters of double-digit growth.
• The integration of Coyote’s platform into RXO Connect is nearing completion, enhancing operational efficiency.

Future Outlook

• RXO sees LTL potentially comprising over 50% of its business mix.
• Brokerage market penetration is expected to reach the 30s in the near term and the 40s longer term.
• The company anticipates significant market consolidation, with top brokers potentially owning 60-70% of the market in the coming years.
• RXO remains open to strategic M&A opportunities that create shareholder value.
• The company is cautiously optimistic about demand, noting improvements in shipper confidence due to trade policy clarity.

Q&A Highlights

• RXO aims to solve customer pain points in LTL by providing a comprehensive platform for multiple carriers.
• Digitalization is a priority, with a goal for 60-70% of loads to be managed digitally in the long term.
• AI is being utilized for scheduling, routing, and load tracking, enhancing operational efficiency.
• The company is focused on expanding its hazmat capabilities as a strategic shift.

For a detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - Jefferies Mining and Industrials Conference 2025:

Joe Halfling, Jefferies Team, Jefferies: 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 Halfling. 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 want to 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 and A.

Drew Wilkerson, Chairman and CEO, RXO: Yes. Good morning. I’m Drew Wilkerson, Chairman and CEO of RXO. RXO is a spinout of XPO Logistics. We did it in a great part of the cycle.

It was November 2022, and we’ve now been in a downturn since we’ve done the spin of a freight recession. So 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 up cycle. 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 100,000 carriers on a 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 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 120 miles of 90% of The US population.

Joe Halfling, Jefferies Team, Jefferies: That’s great. I hate to, you know, maybe start with some macro, but I’d remiss if I didn’t talk about the trucking cycle here.

Drew Wilkerson, Chairman and CEO, RXO: So I

Joe Halfling, Jefferies Team, Jefferies: thought I started with the macro. Yeah. I got it. I’m going to have to double click on it a little bit. So maybe from your seat, how are you assessing the current state of the freight cycle?

And what are the leading indicators maybe that you’re looking for? 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?

Drew Wilkerson, Chairman and CEO, RXO: Yes. I don’t think one, the last part of your question, I don’t think anybody is getting the timing or the shape of the recovery right at this point. I’ve been doing this for twenty 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 is 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 rejection. 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 stair step recovery than a sharp inflection.

And then 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%.

Joe Halfling, Jefferies Team, Jefferies: Got it. Drew, you just mentioned this is three year freight recession, one of the longest in your history being in the industry. 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 over oversupplied? Or is the demand side really the question that we’re waiting for?

Drew Wilkerson, Chairman and CEO, RXO: 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 a okay state. It is more on the demand side. If you look at demand, we’re below twenty nineteen levels. So take COVID out.

You had the COVID house. But if you look at 2019 and 2018, we’re we’re below those levels of where we were at. Capacity, if you look at seated drivers for 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 ecommerce is a huge piece of our business.

Automotive is a good size and a good portion of of our business. We do a good bill 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 homebuilding side.

Joe Halfling, Jefferies Team, Jefferies: Great. That makes a lot of sense. 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. What are you guys seeing on the ground?

What are you hearing from your customers as they’re navigating this tariff environment?

Jared Weisfeld, Chief Strategy Officer, RXO: So we talked earlier this year in terms of tariffs creating shipper uncertainty, right? And ultimately, when you look at what’s happened from April to now, I think what we said a couple of weeks ago on our earnings call was we are seeing some incremental clarity given what’s going 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 struck multiple trading deals with our largest trade partners across the globe. So that’s how I’d characterize it.

Joe Halfling, Jefferies Team, Jefferies: 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 how we should think about brokerage and scale and brokerage and being able to kind of partner with these smaller companies and help them serve in this time of uncertainty?

Drew Wilkerson, Chairman and CEO, RXO: Well, I think when you look at our model, 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. 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, 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 that’s probably the 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.

Joe Halfling, Jefferies Team, Jefferies: Got it. Also, if we could talk about your tech stack, your investment in technology. In the past, you had talked about 97% of loads created or covered digitally. How do you see technology and using technology as a competitive advantage for RXO? And how are you pushing the envelope today to kind of continue to grow that?

Jared Weisfeld, Chief Strategy Officer, RXO: Yes. So we view our investment in technology as table stakes. When you think about how much we’re spending in tech per year, I think last quarter, talked about how we’re spending about $100,000,000 per year in our investments in technology. And 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 sixteen years on average. So I think it’s that combination. But when 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, 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 have RXO Go, the mobile app across our carrier ecosystem, which leads into that 97% of loads created or covered digitally.

It’s also just not about the number of carriers that we have on the platform. As Drew mentioned, over 125,000 carriers on the platform. But what’s the engagement with those carriers, right? How often do they come back to the platform and when the carrier comes on to RXO Connect, they’re coming back 70% of the time the following week. So we’re thinking about it pretty holistically across those three cohorts.

Joe Halfling, Jefferies Team, Jefferies: Got it. Maybe piggybacking off of that, 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 convoys and the transfixes of the world. What do you think, in hindsight, has been the learnings from those digital first brokers versus what you guys and some of the bigger brokers are doing today with technology?

Drew Wilkerson, Chairman and CEO, RXO: Yeah. I mean, can’t tell you what the learnings for them was because we’re not in their boardrooms. I can tell you for us, 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 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.

Joe Halfling, Jefferies Team, Jefferies: Okay. Maybe marrying kind of the three year freight recession here and using technology to increase productivity, what are you guys doing today on the cost side to kind of manage your own costs here at the bottom of the cycle?

Jared Weisfeld, Chief Strategy Officer, RXO: Yes. So when you think about the SG and A efficiencies that we’ve had, right, the how we’re thinking about the business, I would go back to 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 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? $70,000,000 more than $70,000,000 of total cash synergies. So that’s comprised of $60,000,000 of operating expenses and $10,000,000 of CapEx. So heading into next year, you’ll see a $10,000,000 reduction in Coyote CapEx. Cumulatively, you’ll see a $20,000,000 reduction heading into next year.

And then on the cost side, in terms of operating expenses, embedded within our Q2 results included $50,000,000 of operating expenses that were already taken out, so call it $12,500,000 or so per quarter, with another $10,000,000 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. And then 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 more opportunity as it relates to cost as well. So that’s how we think about it.

Joe Halfling, Jefferies Team, Jefferies: Great. Thanks for that answer. And

Jared Weisfeld, Chief Strategy Officer, RXO: how do you

Joe Halfling, Jefferies Team, Jefferies: think about that cost structure maybe flexing in an up cycle, your ability to take on more loads per day in an up cycle with your current cost structure? How quickly can you do you need to add on more headcount? How should we think about the cost structure evolving in an up cycle?

Jared Weisfeld, Chief Strategy Officer, RXO: Yes. So we’re staffed for growth currently. And I think leveraging that technology is key to ensure that, 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 45% over the last two years in terms of loads per person per day. There will be a point where 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 the 2.7% EBITDA margins that we posted last quarter, in the brokerage business, depending on 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 pretty strong cross cycle profitability.

Joe Halfling, Jefferies Team, Jefferies: Great. In the past, I think one of the closely followed kind of metrics was this broker penetration of the broader truckload market. Where do we stand on that today in the bottom of this cycle? And where do you see that going, Drew, over the long term?

Drew Wilkerson, Chairman and CEO, RXO: Yes. So if you take a step back and look at whenever I started in the industry, I think it was at like 6% or 7% 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 fifty-fifty. 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.

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. The brokers were coming in there, 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 a 100,000 carriers. You know, the average fleet, I think, like, 90 something percent 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 we have this carrier that hauls with us x amount of times per month. We know their service. We know their relationship. 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.

Joe Halfling, Jefferies Team, Jefferies: Great. Thanks for that answer. 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. Even at the bottom of the cycle, you’re seeing growth in these two segments here.

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?

Jared Weisfeld, Chief Strategy Officer, RXO: 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 holistically, LTL for us really started four to five years ago in terms of where we are in growing that business that was low single digit percentage of our volume legacy RXO four, 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 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. 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 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.

We show that slide on historical LTL gross profit per load, and it’s very stable. So 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 on the last mile side, last mile now it’s four consecutive quarters of double digit growth, stock 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.

Joe Halfling, Jefferies Team, Jefferies: Got it. One of the things that we talk about in the brokerage space a lot is we’ve touched on this tech angle. How do you maintain a differentiation at RXO when all these competitors are trying to go after the same tech angle? What moats do you think is specific to RXO versus kind of some other competitors?

Drew Wilkerson, Chairman and CEO, RXO: Well, 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. And Jared talked about employee productivity being up over 45% on a two year stack, over 18% just from the prior year. We’re seeing the benefits of what we’ve been building for the last decade. And for us, we think about it very simply as we build tech.

Is this something that is going to help us gain market share? Is this going to something that is going to help us operate at how well we buy versus market, so impacting our gross profit per load during any given cycle and what does this do to our employee productivity over the long term when we’re building it. Now there’s been a lot out there on AI, not just in the transportation industry, but in all industries. And I think 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 the hot topic of what was going on, we were doing machine learning pricing algorithms before most were talking about it. So 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 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 partnered with people who understand the transportation industry, it does become a differentiator for the product that you ultimately build.

Joe Halfling, Jefferies Team, Jefferies: 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, can kind of keep running through some questions I’ve got.

Jared Weisfeld, Chief Strategy Officer, RXO: Just

Unidentified speaker: 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

Jared Weisfeld, Chief Strategy Officer, RXO: for them?

Drew Wilkerson, Chairman and CEO, RXO: Well, I 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. So we view ourselves as a sales channel for a lot of these LTL carriers and what they’re doing. So you know, because, 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. And so if you think of our existing customers, these are people that we have ten, fifteen 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 earlier.

Like, they’ve seen it. They know what it can do for them. So when they know, 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 percent 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 growing 40%, and we talked about it’s going to be another strong quarter for us again in the 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 over the long term, whenever I look at some companies that have built LTL out and they had a head start on us, CH Robinson, I think over 50% of their volume is LTL. Echo is a company that was public at one point. I think, like, 60 to 70% of their overall volume is on LTL.

And that creates for us stability in gross profit per load. So 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 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 it’s very, very stable as what happens on the LTL.

Great.

Joe Halfling, Jefferies Team, Jefferies: 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 the relationships that you’re driving is kind of on a smaller base?

Drew Wilkerson, Chairman and CEO, RXO: 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, was top 10, so now its top nine brokers make up around 50% of the overall brokerage market. I think that you’ll see that consolidate of top three or four owning 60%, 70% of the market over the next several years.

And 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 not as many players out there, but it’s on the managed transportation side, which again would be on the truckload and the LTL side.

Joe Halfling, Jefferies Team, Jefferies: Got it. Maybe Drew talking about the flatbed and the hazmat side. Are there verticals maybe that RXO as a brokerage provider doesn’t play in today? Do you think about growing into those future verticals? And how does M and A fit into the long term strategic framework in RXO?

Drew Wilkerson, Chairman and CEO, RXO: Yes. So we built the business off of 53 foot dry vans, 102 swing doors 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 and A side, we would absolutely take a look at it. I think, you look at Coyote, it’s the largest transaction.

I’m 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, for us, like, M and A is part of our capital allocation strategy, but it has to be the right M and A. It has to be a strategic fit. It has to be a cultural fit.

So the bar for M and A is very, very high, it’s got to be something that is going to create shareholder value over the long term.

Joe Halfling, Jefferies Team, Jefferies: 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, looking at perspective, even without a cycle turn, what are some of the cash flow dynamics that we should all make sure we’re aware of kind of going into the second half in 2026?

Jared Weisfeld, Chief Strategy Officer, RXO: 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 some harmonizing of working capital as it relates 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, the free cash flow profile of this business longer term is incredibly strong. You think about the characteristics of this business, right?

Think about our fixed costs in terms of cash outflows. We’ve got about next year, we talked about $50,000,000 of CapEx, which will come down by about $20,000,000 year over year from $70,000,000 this year. And then you think about interest expense roughly, call it, dollars 30,000,000. Anything above, call it, that $80,000,000 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, call it, dollars $7.05 on $1 just adjusted for our long term effective tax rate of 25%.

So you think about where we were doing you think about on a normalized basis what the adjusted EBITDA profile of this company looks like, call it, mid 5% to 6% type adjusted EBITDA margin and you think about that $80,000,000 of fixed outflow between CapEx and interest, all of that will drop to the bottom line in terms of on the balance sheet at $0.75 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, that’s what gets us excited about thinking about that cross cycle earnings power and the associated free cash flow generation of the business.

Joe Halfling, Jefferies Team, Jefferies: Got it. Maybe last question for me, Drew, you’re public company CEO, you got to make the quarters. How do you balance between maybe short term profit protection and in doubling down on the bottom of the cycle, investing in growth and being ready for your customers in the up cycle? You’ve been through a couple of different cycles. What strategies do you think really works here at the bottom of the cycle?

Drew Wilkerson, Chairman and CEO, RXO: Well, I think one, if you’re running the company effectively, especially in times like what we’re in right now, you want to run the company wherein you’re in a continual state of mindset improvement and looking at ways to operate the company. And 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. And so for us, like, you know, I 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 up cycle.

With all of that said, 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 or five years, what it’s going to do through a cycle. I’m probably alone in this, but I’m not a CEO who looks at our stock price on a daily basis. Jared calls me if it goes up or down too much, but for the most part, you know, I mean, like, I I learned from Brad Jacobs 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.

Joe Halfling, Jefferies Team, Jefferies: 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 from the audience. But other than that, we can kind of wrap up here.

Got one more.

Unidentified speaker: Sorry. I won’t be bashful. But the the 97% number in terms of sort of digital order entry, what is that number through the cycle? In other words, what percent of brokered freight that you’re touching is fully natively digital? No phone calls.

Right. No bill of landing paperwork, etcetera.

Drew Wilkerson, Chairman and CEO, RXO: So I wanna 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 because 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 but 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% to 70% range.

Unidentified speaker: 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?

Drew Wilkerson, Chairman and CEO, RXO: Yeah. I’ll give you two examples. I’ll 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, dryer, 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 broker side, an example that I’d give you is, you know, whenever I started whenever 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.

Unidentified speaker: Can you talk a little bit about moving into markets like hazardous, hazmat, for example? How how is that in an asset light model, any different? Is it just driving the the channel, the care the care awareness, sales process, and software updates? Like, what makes that a difficult transition?

Drew Wilkerson, Chairman and CEO, RXO: It’s not it’s not it’s not a difficult transition. I think it’s more of a focus for for us. Like, you know, the easiest way to scale up, you know, when we were at XPO was through drive and freight. And, like, you could go into large enterprise customers, and we’re 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 because 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 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.

Joe Halfling, Jefferies Team, Jefferies: Well, thank you so much, everybody.

Drew Wilkerson, Chairman and CEO, RXO: Thank you. Thanks so much.

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