RXO at Oppenheimer Conference: Strategic Growth Amid Challenges

On Thursday, 08 May 2025, RXO Inc (NYSE:RXO) presented at the Oppenheimer 20th Annual Industrial Growth Conference, offering a strategic overview that highlighted both opportunities and challenges. Despite operating in a soft rate environment, RXO emphasized its tech-enabled truck brokerage platform and diversified services, including managed transportation and last mile delivery, while tackling headwinds in the automotive sector.

Key Takeaways

• RXO focuses on technology and adaptability to market cycles, aiming for stability and future growth.
• The acquisition of Coyote Logistics is central to RXO’s strategy, offering significant cross-selling opportunities.
• RXO raised its synergy estimates to $70 million in cash synergies from the Coyote acquisition.
• The company expects low-to-mid single-digit growth in contract rates for the rest of the year.
• RXO’s asset-light model and strong return on invested capital are key strengths.

Financial Results

• RXO has achieved over $50 million in annualized synergies from the Coyote acquisition.
• The company estimates $60 million in operating expense synergies and $10 million in capital expenditure synergies.
• Gross profit per load is more than 20% behind the multiyear average.
• The automotive sector presents a $10 million year-over-year headwind on a quarterly basis.
• Capital expenditure outlook for 2025 has been reduced to $65-75 million, with 2026 expected at $45-55 million.
• LTL business grew 25% year-over-year, while automotive brokerage declined by 25%.

Operational Updates

• RXO has identified over 700 cross-selling opportunities with the legacy Coyote customer base.
• Significant momentum in onboarding legacy Coyote customers in managed transportation and last mile services.
• All legacy Coyote carrier representatives have been migrated to RXO’s Freight Optimizer technology as of May 1.
• Cross-border brokerage volume, primarily automotive, represents about 6% of overall volume.
• Last mile delivery stops increased by 24% year-over-year in Q1.
• RXO manages over $3 billion in freight.

Future Outlook

• RXO sees a strong pipeline in managed transportation with $1.5 billion in potential new business.
• Focus on expanding the LTL business due to stable gross profit per load.
• Expects low to mid-single-digit increases in contract rates for the remainder of the year.
• Anticipates positive impacts from potential tariff-induced near-shoring due to its intra-U.S. shipment focus.

Q&A Highlights

• The load-to-truck ratio, a capacity indicator, is currently around 5-6 to 1, with potential rate increases if demand tightens.
• Automotive expedite shipments, crucial for plant operations, are down 25% year-over-year.
• Coyote Logistics customers are already integrated into RXO’s last mile segment.
• Contract rates are expected to see low to mid-single-digit increases.

For more detailed insights, please refer to the full transcript below.

Full transcript - Oppenheimer 20th Annual Industrial Growth Conference:

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Good morning, everyone. Thanks for joining us today. I’m Scott Schnaberga, the senior business and industrial services analyst at Oppenheimer. It’s our pleasure to have RXO here to speak on the company’s investment story. We have, with us from the company, CEO Drew Wilkerson and chief strategy officer Jared Weisfeld.

RXO is a leading tech enabled transportation brokerage platform with truck brokerage, the cornerstone asset. We’ll be using a fireside chat format. I’ll ask management some high level questions upfront, get an overview of the business. Later in the session, I’ll facilitate questions from the audience. So throughout, feel free to to send them in to me.

Let’s go ahead and get started. Gentlemen, to set the tone, please provide an overview of the services RXO provides and the primary end markets it serves. Thanks.

Drew Wilkerson, CEO, RXO: Yeah. Scott, thank you for having us this morning. And if you look at RXO, there’s three lines of business. As you mentioned, we’re led by our tech enabled truck brokerage business. It’s been one of the fastest growing truck brokerages over the last decade.

Our business is well diversified. We do business in retail and industrial manufacturing, as well as automotive, home building supplies, so there’s a diversified portfolio. One of the things that we have done over the last year is we did a transformative acquisition of Coyote Logistics from UPS. And off of that, we were able to increase our exposure into food and beverage from what we’re doing there. We also have two complementary lines of business.

The first is managed transportation. When you think about managed transportation, it fits hand in glove with truck brokerage. That’s where a customer outsources all of their business to us or a large portion of their business to us. And at that point, if our brokerage has good service, they’re providing market rates, they’re creating solutions for the customers, Manus Trans gets to act as a customer to our truck brokerage and our other lines of business. The last line of business is our last mile line of business.

We’re the leader in the space of home deliveries of big and bulky goods, and we have been forever. When you look at that space, we’ve got a network that puts us within roughly 120 miles of 90% of The U. S. Population. So if you think of large companies that are doing home deliveries, they start their conversation with RXO because of our size, because of our scale, because of our technology, the history we’ve got creating solutions.

And that’s a business, if you even look just last quarter, in the first quarter we announced yesterday, that they grew stops by 24% on a year over year basis.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Excellent. Thanks, Drew. Let’s talk, truck brokerage specifically to start. The industry’s historically increased its penetration within the for hire truckload market. Please discuss the secular trend and the underlying drivers of it.

Drew Wilkerson, CEO, RXO: Yeah. I I think it starts with flexibility, Scott. You know, whenever I started, brokers were typically just a backup carrier. And I I started in the industry almost twenty years ago. They were a backup carrier and they were a stop guy for whenever routing guides broke down.

Now what you’ve seen take place is brokers have become a strategic partner for some of the largest companies in the world. And it’s because the flexibility that you’re able to offer with capacity and the dependability that you’re able to offer with, from a capacity standpoint. When you look at what we’re able to do for a customer, whenever a customer’s needs go up, because large brokers who have scale, who have access to more than a 100,000 carriers are able to flex capacity up to meet the customer’s demand. If the customer’s demand falls, you’re able to pull capacity back and reallocate it somewhere else. So you’re able to keep tapping into capacity.

I think one of the reasons why you’ve seen brokers grow so significantly is when you look at the large brokers, think about the investments in technology that have been there. And for companies like RXO, where we use our technology to go in and talk to customers about, you know, what type of lanes are shipping? Are they shipping them on the right days? Is there different ways that we could be routing their freight? Could we be doing consolidations between LTL and truckload?

How do you provide the best solution for the customer and use technology? And then the last thing that I’ll highlight is, you know, typically asset based carriers have held drop trailers very close to the vest. But you’ve seen companies like RHO for more than a decade invest in drop trailer business, and that’s something that has been good steady business that helps us look and feel like an asset based carrier just with a lot more capacity than what they’ve got.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Got it. Thanks. So RXO, it’s become the third largest truck in North America. This was upon acquiring Coyote back in September. Please discuss both the revenue and the cost opportunities identified operationally and financially.

Drew Wilkerson, CEO, RXO: Darren, you wanna take that or you want me to?

Jared Weisfeld, Chief Strategy Officer, RXO: Sure. Happy to. So, Scott, when you think about the, the revenue opportunities, you know, cross selling as it relates to the acquisition of Coyote, we’re we’re really excited about, the opportunities there. We’re actually already seeing some benefits. So with the legacy Coyote customer base, you know, we’ve identified, to date over 700 opportunities as it relates to cross selling opportunities.

Some of these small to medium business in terms of leveraging some of the existing services that RXO had that legacy did not, especially within complimentary services. But where we’ve seen some significant momentum is, on the managed transportation and, and last mile side of the business in terms of our complimentary services, where some of legacy Coyote customers have already been onboarded in terms of those areas of business. And that’s not something that we were necessarily counting on this early in on the transaction. So really excited there, and I think there’s a lot of opportunity as it relates to future cross selling and future revenue opportunities. On the cost side, we’ve now raised our synergy estimate three times since the acquisition, and we’re now at a total of $70,000,000 of cash synergies.

And that’s broken down between $60,000,000 of operating expense synergies and $10,000,000 of capital expenditure synergies. And, I would use the words more than for each. So we think there’s more than $70,000,000 of cash synergies, to come, and we’ve executed quickly on them. Already have ticket access to achieve, more than $50,000,000 on an annualized basis. So, extremely pleased with, how quickly we’ve moved on both the revenue and cost side.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Well, it sounds good. Gus, could you please provide an overview of where we are presently in the in the truck brokerage cycle, and and and any look ahead, indications for where, where it could be going? Thanks.

Drew Wilkerson, CEO, RXO: Yeah. When you look at we’re still on a soft rate environment. We’ve been in a soft rate environment for almost three years now. It’s the longest downturn that I’ve seen in my career of of doing this. But we don’t we we we don’t look at and say, hey, we’re just going to go out there and we’re going to control what we can control with the environment.

We’re looking at how can we build a more stable business for the next downturn? How can we be prepared for the upturn whenever it comes? And so when you look at being able to do a transformative acquisition for us at the bottom of the cycle, there’s not a better time in the market to be able to prepare yourself for the upturn, to diversify your book of business, to be able to expand your carrier network, because our carrier networks between the two groups didn’t have a lot of carrier overlap. So for us, we look at it and where we’re at in the cycle and what can we do. And now as you think about preparing for the next down cycle, two strategic pillars that we’ve got is we want to continue to grow out our freight under management and managed transportation.

We’ve already talked about how much synergy that provides to the rest of the company. And if you look at that, that’s something that we’ve talked about in the past that we’ve got a very, very strong pipeline. We’ve had some big wins in managed transportation and as those are onboarded, they will fill out to the rest of the company. The second one is an LTL. You know, if you look this quarter, we grew LTL by 25% on a year over year basis.

And we’re doing that because large companies are coming to us and they’re saying, we understand your services on technology. We understand what you’re able to do for us on full truckload. LTL is a small piece of our overall transportation spend, but it’s a big part of our headaches on a daily basis whenever I think about claims, lost shipments, damages, tracking loads, working with multiple carriers, working with multiple platforms. How can you pull this together for us? And we’ve been able to do that with a high rate of success for these large companies and think we’re in the very early innings of doing it.

The one thing that you like about LTL is typically, it’s got a very stable gross profit per load. You may see it move a little bit, but that trend line stays about on average through a cycle. So when you talk about building stable EBITDA for the next downturn, growing managed transportation and growing our LTL business are two strategic pillars for us.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Thanks, Drew. Let’s talk now, please, about the potential magnitude for EBITDA growth at our so upon a rebound in the truck brokerage cycle, as you mentioned, it’s been a very prolonged downturn. There’s a lot of leverage in the model, though. Can you speak to what can occur, upon a rebound?

Jared Weisfeld, Chief Strategy Officer, RXO: Sure. So when you look at where we are right now, Scott, as Drew mentioned, we’re still operating within a within a soft environment. Right? It’s been, one of the longest downturns, if not the longest downturn on record. So everything we’re doing in terms of optimizing the cost structure is, is in the name of preparing the operating model for future operating leverage upon that rebound.

I mentioned earlier the, you know, quick actions that we’ve taken on, the Coyote side in terms of synergies with more than $50,000,000 of actions to date in terms of annualized cost synergies in addition to the $10,000,000 of CapEx synergies. I think it’s really important to note that a vast majority of those costs are structural in nature in terms of removed from the p and l. So you think about that future operating margin leverage and the ability to go ahead and, have those, incremental profits drop to the bottom line. Right? We’re gonna have a more efficient p and l.

So, you know, gross profit per load in our truck brokerage business is a very important metric. That’s still more than 20% behind our multiyear average. And when you start to see an improvement in gross profit per load and if it’s attributable to price, in some cases, it can drop from gross profit down to EBITDA 70 to 80%. So really, really strong flow through, when it’s a combination on volume and price, a little bit lower. I think also important, you know, we talked about this quarter that we reported yesterday.

Year over year, there’s a $10,000,000 headwind, on a quarterly basis associated with automotive. So mix plays a really important element as it relates to year on year changes. We are the largest provider in The United States for managed expedite, and that is also levered to the automotive market. So we had a $10,000,000 year on year headwind with almost an 80% flow through to EBITDA. So you think about the market recovery when all of that recovers.

You know, long way of saying, you sort of you think about scale that Drew talked about earlier down that we’re the number three brokerage in North America. You know, when we’re at normalized cross cycle earnings, right, we should be at least a mid site mid single digit EBITDA type margin business. And then you think about the stability of LTL, you think about the ability to add more freight under management, the ability to go ahead and continue to enjoy the benefits that we’re seeing on gaining share within last mile with healthier margins. There’s a lot of torque as it relates to, earnings from where we are.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Oh, thanks, Jared. How are you all contemplating the near and long term impacts, from tariff news? I know it’s pretty unpredictable right now, but what are some considerations for you?

Drew Wilkerson, CEO, RXO: I think if you see that there’s a air pocket is what people are calling it right now that comes in, from the cancellations that you’ve seen on containers and the blank sailings that that have occurred over the last thirty days. If that if that persists, the first thing that you do is you pull down purchase transportation. Capacity will loosen up based off of the demand that’s there. So you’ll you’ll pull down purchase transportation and have the ability to expand margins at that part in the cycle. If you think about this longer term and you do see more businesses shift to The U.

S, you see more businesses shift to North America, that’s a phenomenal thing for our business. Our business is predominantly driven by intra U. S. Shipments. We’ve got a little bit of cross border on both the Northern and the Southern border.

But if you think about industrial manufacturing, automotive, all of that coming toward is near shored within The US, that’s a dream scenario for us.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: RXOs expanded cross border capabilities. Please discuss the company’s strategic positioning, potential to garner incremental new business, and how meaningful this business can become over time.

Drew Wilkerson, CEO, RXO: We built this business on automotive. Jared touched on this earlier. And if you think of automotive shipments going across both the northern and the southern border and brokerage, you know, is is roughly 6% of our overall volume of business that goes cross border, And it’s been growing over the last couple of years. We’ve built the lanes and the capacity off of automotive, but we’ve been able to take that into other verticals like industrial manufacturing, home building are two that we’ve been able to expand, especially on the southern border of opportunities. We’ve got a facility in Laredo that allows us to put things through and we can cross stock for customers at that point and still get it there to them in the same amount of time.

We’re doing customs brokerage on the Southern border as well, which again makes us a one stop shop for customers as they’re coming in to do business in that area. So for us, we think that we have the model to be able to grow this significantly with the market.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Thanks, Drew. Got a little bit well, we got some time left. Just a reminder to the audience, please feel free to send in some questions. I have a a few more in the in the prepared chat, but, but just a reminder now. Let’s go next, guys, to technology.

That’s been a primary focus since we started covering this business over ten years ago when it was still under XPO’s umbrella. We witnessed early days of of RXOs Freight Optimizer technology, remains a backbone of the organization. From an RXOs led the digital evolution in the industries, garnered an early mover advantage. Please speak to, RXOs opportunity and potential to maintain its digital differentiation and perhaps some of the things you’re doing with technology as you integrate Coyote.

Jared Weisfeld, Chief Strategy Officer, RXO: Yeah. Absolutely, Scott. And I think that’s a that’s a great segue as you think about just the integration of Coyote and how it’s accelerating our technology road map. So as you mentioned, you know, we’ve we’ve led the industry in AI and machine learning over a decade ago, and Arcs has been benefiting from having all of that data into our systems, getting smarter every day, and having that early start has been really helpful. You think about the freight under management within our managed transportation business, over $3,000,000,000 of freight under management combined now with the largest scale of RXO plus Coyote.

That’s a lot of data that we get to work with. So, you know, as part of the, after we closed the acquisition and we, you know, we we got more details on their tech road map and, you know, one of the added benefits was that, you know, their tech road map actually, our tech road map and some of the technology that they had aligned whereby if you think about the mix of carriers that legacy Coyote had as an example, larger carriers, private fleets, legacy Arcto, more owner operators, smaller fleets. So they had a really nice technology on some of their digital coverage capabilities on the carrier side. And, you know, we’ve been very eyes wide open in terms of best of both worlds type approach with the integration, and we are taking and we have taken a lot of the legacy Coyote tech and integrated it into what you described Freight Optimizer, our proprietary technology man transportation management system. And I wanna hit on this.

We hit this hit this, yesterday after earnings, but last week was one of the most significant technology milestones of the integration. We have now migrated all legacy Coyote carrier reps onto Freight Optimizer. And this is really important because now Legacy Coyote can cover, can go ahead and cover Legacy RXO freight and vice versa. So what we’ve done was Legacy Coyote’s, existing TMS was called Bazooka. That’s in the process of getting sunset as the year progresses, and carrier reps are now already on Freight Optimizer.

And we’re seeing some early wins, and I think importantly, by getting them onto, Freight Optimizer that is closely linked to and there was a necessary step to unlocking the synergy potential associated with cost of purchase transportation. When you think about the rationale of the deal and the investment thesis of the acquisition, one of it was linked to we’ve got this huge pool of transportation dollars across the across the businesses, $4,000,000,000 last year, over 4,000,000,000. If we can buy better relative to market as an organization, there can be significant drop through as it relates to the p and l, and the team moves incredibly quickly. They did an unbelievable job, and, and that was complete as of May 1.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Excellent. Thanks, Jared. Let’s let’s talk let’s move away from brokerage. Talk about RXOs, other complimentary services. Yeah.

There’s main transportation, freight forwarding, and and last mile logistics. Wanna talk about their contribution to the RXO portfolio, maybe some quantification of mix, but also a little bit of backdrop on on what each what each is and and how it fits within the portfolio? Thanks.

Drew Wilkerson, CEO, RXO: Yeah. So let let let’s start with Last Mile. If you look at Last Mile, you know, it’s more than a billion dollars in revenue, and it’s doing around 11,000,000 home deliveries a year. And I mentioned earlier, for big and bulky goods, if you think washer and dryer, refrigerators, stoves, going in and out of a home, being able to do the installation, we’re the leader in that space and we have been forever. We also are doing furniture, fitness equipment within that, and looking at some other verticals right now as we speak to be able to continue to grow and diversify it.

And so for us, when you think about large companies who are doing home deliveries, they start their conversation with RXO because for with most of them, we’ve got a long standing history. Our top customers have been with us for over fifteen years on average. So we’ve got a history of creating results for them. And the most important thing to the customer is we are the last experience that their end consumer has. So we are the brand representation for them as we’re going into somebody’s home.

And for a customer, that experience is so important and we do it really, really well. And we protect the customers with how well the service is there. The second thing that I would say is for us, is when you think of who you’re talking to at a customer on last mile, the level of decision makers change because of that end consumer experience. We’re talking to the CEOs, the chief supply chain officers, the CFOs in the room, and it allows us to create layers of relationship. There’s not as much operational synergies at this point with Last Mile and our other lines of business, but the sales and commercial synergies are real.

And so for us, whenever you’re in there and you’re in there to talk about brand representation, there’s not a moment that passes that we don’t talk about the other services that we can provide to our customers in there. So it is very good for us from a cross sell ability into our other lines of business. That business has got a lot of momentum. We talked about it growing 24% on a year over year basis in terms of stops. That was because existing customers are awarding us new markets, markets that we didn’t operate in before and we’re bringing on new customers.

The other line of business is managed transportation. We talked earlier about how customers outsource a portion or all of their business to us. And we’ve been growing that business significantly with adding on new customers. If you look right now, it’s a little bit more than $3,000,000,000 of overall freight under management that we’re managing for on behalf of our customers. Our pipeline is robust right now.

It’s sitting at around a billion and a half dollars. And we’ve got a lot of things that will close out through the end of the year and be able to help us as we go close the year and go into 2026. So for maintenance transportation, when you think about being able to take all of the data, help customers make better decisions, use our engineers, use our RxO Connect platform to help customers optimize their freight better, give them complete visibility of what is going on. It has been a win for us to be able to go in there for customers and something that, again, I think that when you look at not all of our lines of business, we’ve got a long runway for growth. We’re in the early innings of where we are and just continuing to build out a larger, more scaled platform and scale in this business matters.

When you think about being able to take all of your cost and spread them out across more shipments, what that does is that lowers your cost to serve. And for every dollar that we’re able to lower our cost to serve in truck brokerage, it’s more than a million dollars of EBITDA on an annualized basis to us.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Excellent. Thanks, Drew. Great answer. Very comprehensive. Let’s, for those in the audience, again, please feel free to send in questions.

This will be, as far as the, the formal fireside chat. My last question is gonna be, RxO gentleman operates an asset light business model. Please discuss the return on invested capital profile. Thanks.

Jared Weisfeld, Chief Strategy Officer, RXO: Yeah. Absolutely. And I I think that speaks to the speaks to the, the strategic nature of the, of the business model, Scott. If you look historically, our brokerage business has generated, you know, 40% plus, return on invested capital. I mean, let’s let’s put that in context.

We just doubled the size of our truck brokerage business with the acquisition of Coyote as the now the number three player in North America. We gave you some color yesterday after earnings that, you know, next year’s capital expenditure profile will be about 45 to $55,000,000. Think about the capital expenditure profile of legacy RXO pre Coyote was about $50,000,000. Right? So flattish to up slightly CapEx in the context of doubling the size of our brokerage business.

That is a incredible return on invested capital, and I think it speaks to the power of scale, the power of the unit economics, and what that means as it relates to future return on invested capital. So it’s an incredibly it’s it’s a it’s a business that is highly scalable, and, and I think speaks to the free cash flow characteristics of the business long term.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Great. Thanks, Jared. And just following up on the yeah. You mentioned you had an update on CapEx yesterday on the earnings call. Could you just talk through that a little bit?

Obviously, we’ve had a prolonged cycle with downturn, and you’ve been been looking at areas of management. But could you speak to the, the the capital expenditures and Sure. What the strategic focus is there? Thanks.

Jared Weisfeld, Chief Strategy Officer, RXO: Yeah. Absolutely. So the prior CapEx outlook for 2020, ’5 was 75 to $85,000,000, and we reduced that by about $10,000,000, at the midpoint, to 65 to $75,000,000 for 2025. And the reality is we’re always looking to be more efficient in spend, and we found the ability to, continue to do that and, you know, with no impact So think about the ability to go ahead and continue to invest in high ROIC type projects.

You know, about two thirds of our cap CapEx any given year generally is tech related. One call out for 2025 is that it includes a couple of things. One, it includes $10,000,000 or so of Legacy Coyote tech related spend associated with the integration, etcetera. That’ll drop off heading into 2026. Also includes 10 to $15,000,000 of strategic real estate spend, which we talked about the quarter prior where we have investments as it relates to in Charlotte, North Carolina for our where we’ve got multiple brokerage offices that it was time to go ahead and and spend strategic CapEx in the area.

So between those two, those will come down pretty significantly heading into 2026, and those will be tailwinds to the CapEx and free cash flow profile where 2026 CapEx will be about 45 to $55,000,000.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Excellent. Thanks. Alright. Let’s go to to the audience questions. Again, we folks, we have a little more than five minutes left.

I’m gonna jump in here. Load to truck ratio, could you please talk about it as a predictive indicator?

Drew Wilkerson, CEO, RXO: Load to truck ratio tells it really tells you about what’s going on with capacity overall. And, you know, I think right now it’s sitting around five to six to one. Typically for us, whenever we start getting spot loads is whenever it gets in that close to double digits and, you know, high single digits. You know, when you think of it starting to hit 8%, you start seeing spot loads come into your network at that point. And your spot loads, what you’ll see happen is your contractual gross profit per load in a tighter market will go down, but the spot load gross profit per load will go up and it more than offsets what’s happening in the contractual side.

The other the other it wasn’t what the question was, but I I do wanna give another indicator to watch. And it is tender rejections. And tender rejections is what you wanna see hit double digits to hit that same spot market tightness of capacity that we’re talking about.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Great. Thanks, Drew. Another one. Automotive expedite. Please explain what you do and how big is automotive as a percent mix of the business.

And and then there’s another part of just, compare and contrast now versus a year ago.

Drew Wilkerson, CEO, RXO: Yeah. So if you look, our automotive business is in brokerage is down 25% on a year over year basis. Jared talked about it, automotive as a whole to the company being a $10,000,000 margin headwind for us, right now. So when you look at the business, it’s down significantly on a year over year basis. The business is made up of expedite shipments.

So if you think of something that is going into a plant right as it comes up or right before it goes down or is keeping a plant from going down, they’re just in time shipments. So the stakes of this are high. Service has to be 100%. And because of that, typically it carries a higher gross profit per load to our brokerage business. Automotive in our brokerage business can be anywhere from high single digits to low double digit percent of our overall volume.

And again, as some of our more lucrative contracts because the stakes are so high with what we’re doing on the automotive side. So, right now, it’s a headwind for us, but we also know the the automotive market is cyclical. And as it comes back, it’s gonna be a it’s gonna be a really good tailwind for us.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Oh, thanks, Drew. Oh, and I think it just the mix, I guess, that was a part of it too. Automotive mix, not necessarily the year over year, but mix, automotive. I guess if you could just speak to maybe industrial and other, as far as the mix of the overall business and maybe how that’s transformed over time?

Drew Wilkerson, CEO, RXO: Yeah. Automotive has always been in that what what I said earlier, so in brokerage, it’s always been in the high single digits, low double digits percent of our overall volume. You know, it’s something that it goes up and down depending on what you’re seeing in the expedite market. But when you look at our managed transportation business, a lot of the FUM does freight under management, does come from the automotive sector where we are the leader in ground expedite shipments.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Thanks. We kind of covered this earlier when we’re talking complimentary services, but a question on cross selling. What is the opportunity? What has been your progress and experience particularly with Coyote now?

Drew Wilkerson, CEO, RXO: The cool thing with with Coyote is some of their largest customers right now are already customers, and this was from their brokerage, already now customers in the last mile segment. And so that’s been great to see. And I’m not talking about where they come over and as a $5,000,000 customer in last mile. I’m talking about customers that have come over and they’re giving you $25,000,000 20 million dollars of freight that last mile typically is a bigger chunk of business than small wins. That has been great to see.

The other place that we’re seeing in Coyote is still in the pipeline, but they had relationships with a lot of large customers, but they didn’t have the ability to really be able to sell managed transportation. They didn’t have the platform to be able to sell that. And so now, from a lot of customers that they’ve had deep relationships with, they’ve given great service to for a long time, we’ve got the platform to be able to go in there and talk about managed transportation. And a lot of those are in the pipeline that we discussed earlier.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Great. Thanks. And, I think this is gonna let me just check. I think this is our last. Yep.

Okay. Good. And we’re coming up on time. So last one’s on price, guys. Truck brokerage contract rates, please discuss the renewal cycle and your confidence in your in what you expect to see this year.

Any other comment on rates for yeah. Basically, rates for the year.

Drew Wilkerson, CEO, RXO: So we we said coming into the year that we expected rates to be up low to mid single digits. If you look at q q one, they were up 4%. When you look at the awards that we’ve got, when you look at the conversations that we’ve got with customers, we’re confident in that low to mid single digit outlook for contract rates, excluding line haul, excluding fuel, for the remainder of the year. I think the probably the more of the unknown with with the rest of the years, what happens with overall demand. And, you know, if demand tightens, you could see rates go up significantly because of the the the spot rate side.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Great. Well, thanks, guys. We’re coming up on time, and that’s everything that I have in the queue. So I think we should go ahead and wrap it there. But excellent job.

Audience, thank you for, your attentiveness and the questions. And and Drew and Jared really appreciate the time and the insight.

Drew Wilkerson, CEO, RXO: Thank you, Pavel, and Scott.

Jared Weisfeld, Chief Strategy Officer, RXO: Thanks, Scott.

Scott Schnaberga, Senior Business and Industrial Services Analyst, Oppenheimer: Thanks, guys. Thanks all.

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