RXO - Earnings call 3 2023

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Operator

Welcome to the RXO Q3 2023 Earnings Conference Call and Webcast. My name is Synthu, and I will be your operator for today's call. Please note that this conference is being recorded.

During this call, the company will make certain forward-looking statements within the meaning of federal securities laws, which by their nature, involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those in the forward-looking statements.

A discussion of factors that could cause actual results to differ materially is contained in the company's SEC filings as well as in its earnings release.

statements a Relations the website that section important regarding to in earnings for the refer reconciliations information Investor and discussing the on forward-looking company should uses copy financial its company's of release additional of when You non-GAAP disclosures results. measures and the company's

may now turn to I call will Drew Wilkerson. begin. over the Mr. Wilkerson, you

Drew Wilkerson

and me Chief for fuel and quarter today of everyone. Officer, continued in us set Good Thanks joining for soft the a Officer, exactly growth freight today's long-term Jamie call. performance part before up Financial morning, I'm Harris; success. Charlotte in and cycle Weisfeld. With seen Strategy to are Jared and know RXO's this need pleased continues Chief SPXXX our to freight we earnings what what with and market. be actions was third the We've take to

while In the brokerage we brokerage Brokerage accelerated gross our third share quarter, grew XX% year-over-year. maintaining margins. strong volume by gains market

truckload year-over-year. time, For by less grew grew out and performance truckload you. between for less truckload XX% than Full broken the and than year-over-year truckload by volume significantly. we've XX% brokerage grew volume first volume Both

We continue mostly LTL and freight, full contractual customers which and those service our to exceptionally well, is truckload customers award us highly automated.

and to business reaches it will scale, our full add growth. be continued expect LTL for source LTL in growth of meaningful When We a continued earnings business. our a platform will

total per new monthly of all loads day volume, during day records. month addition, quarterly September and In the set per loads

as to year-over-year inflects. loads volume positions we This driver even Securing volume, faster in grew that per on and have last grew the to growth us. was growth market The speaks most us year-over-year, when verticals important significant spot and basis brokerage of contractual result loads project major progressed. day volume XX% achieved our the the month grew every quarter year-over-year the trust than contractual win which All customers quarter. XX% more a

brokerage year-over-year again the more grow volume will to a trends in expect walk quarter on fourth shortly. Jared We detail volumes you through in our basis.

gains buy to XX.X% our when The per Our saw in revenue eased and to load per We revenue sell AI-enabled our in year-over-year the second Brokerage quarter. improve quarter. margin share continue the leveraged at be third technology we rates decline cutting-edge the was rates. our compared market in profitable. strong decline in the load gross to quarter

also XX% in contribute new still growth year another were business we loads XX% We investments and services. we in that Last that The load our up pricing for strategic basis take secured XX grow improve our services. expect the our Mile, to EBITDA to In our Mile complementary quarter, in Last profitability margin fuel covered will points cutting-edge earlier XXXX. from this we've year-over-year and Transportation digitally, quarter saw of in or XXXX. quarter technology took helped of achieved for AI-enabled momentum in third Within created our to XXXX. The of We year-over-year helped the actions of continue Managed results. third to synergy expansion made additional complementary business action wins onboard

trends, additional well business, very in team and capitalizing investing our and and story. The services including is executing near growing core powerful truckload expanding is on

the XXXX per of for industry X:X the marked this about third details load gross to the than the experienced in metrics year. X:X performance we believe approximately load-to-truck improved third of part the for at the you in some improved. that and less quarter. Early more each look how this and market we progressed. quarter freight year gross quarter EBITDA point We as The the earlier margin. This third cycle. at also from out. low for of is month ratio give end played July the RXO brokerage point typical quarter, squeeze me Many The adjusted third the was increased on Let a quarter the profit for low the

tender to X% although slow rejections and continued, at carrier Industry-wide exits also a higher moved pace. approximately

also to year's better are that retail from We into a continue our this customers hear and season. much heading in holiday inventories e-commerce position

consumer I'm demand softening. and bid October, improvements we was volume rate see rise brokerage where a rates the quarter. increased grew industry and the and some holidays increased uncertainty at including the us still did we're year-over-year, third but the seeing, about growth slower the Many heading in in of prices. brings to While optimistic interest faces activity challenges the into the some fuel month That volume around

However, recovery about XX%. the in profit pace Even to flat we the roughly you will playbook compared the October though year. of gross despite with continue gross the brokerage of our resilient of the load with is September remained to talked softening all strong a run market, was and margin per in uncertain, month we've the

continued the we'll to added and ensure new long the quickly customers. and react we on to team market First, focused to important, close and customers expanded we can most quarter, introduced to ever-changing third term stay continue services We'll the the dynamics. we In and our to continue growth, to to provide our members technology fuel new brokerage remain customers investments. support people our strategic to make

customers, they investments with of these of the increased part stickiness strategy. an and our our important are All

So Jared both and in hear Jamie more about talk them later you'll the call.

because wallet has results logistics departments. increase transportation that and their to largest for Many delivered their of team of the RXO shippers a share we have with continue

people, services service array technology, and the a supported a financial Our the exceptional is strong position. broad of best best by

in invest strategy cycle, industry. the across to uncommon Our of our is all freight and that's parts

our a opportunity playbook. impact the delivers to negatively improves. run robust cycle investing term. similar winning was the a long it returns we short-term the for we during us outsized This over market this not While us the position COVID sales in for This down We growth strategy invested as aggressively see during time when force. profitability, when down cycle is first this

continue to On will believe XXXX. anticipate enable be talk EBITDA provide leverage a $XXX us end the the at minutes. in will for about to million we taking Jamie playbook We ago and side, operating us cost a achieve few target between out Doing for the so you the when in significant will We more actions market long-term disciplined. inflects. $XXX this we'll the million Investor by of year Day. laid our delivering we're

position in strategy, than proven cycle team, an exit leadership have and relationships. a close soft freight stronger to entered the it. winning great We technology customer we even experienced RXO a is

Now results I'll our who turn Jamie? detail. it will Jamie, financial over more to discuss in

James Harris

everyone. margin third was points quarter, XXX to compared in $X XXXX. of performance In to of Thank down you, and Drew, of cycle. revenue we $X.X basis billion year-over-year, in XX.X% billion stage quarter good Gross the generated this trade for the morning solid third the

was profit primarily declines EBITDA to metrics million the our adjusted in in XXXX. quarter brokerage moderation lower the gross million per third points. And XXX was and of $XX were the $XX these compared freight due rates adjusted basis to The quarter in X.X%, margin Our load. in down EBITDA

on us for to the for structure line, shortly. growth, We our substantial $X when annualized investing interest position expense operating was the continue drive Below optimize million. savings to while year-to-date well our our I'll leverage cycle margin quarter cost cost touch influx.

Our of small forecast function discrete in was items. in of adjusted tax of XX% the addition income an a effective annual lower tax rate amount quarter updated taxable a of to

approximately is rate XX%. tax which approximately includes per effective adjusted quarter benefits. year-to-date the Our tax diluted Adjusted of share $X.XX discrete for was $X.XX, earnings

adjusted You can a X on find earnings EPS of bridge Slide presentation. to the

lines Moving our to of business.

Brokerage by margin down brokerage remained while industry. XXX strong at basis We points points only continue sequentially. year-over-year. down We the gross outperform XX% to basis brokerage XX year-over-year, grew volume XX.X%,

XX basis XX%, Complementary year-over-year. services points margin gross of improved by

the biggest to Our Last pricing X discuss we Slide Please as initiatives Mile cash turn flow. driver. were

including Our related free timing lower months periods. X taxes to levels, over trailing Pay prior flow cash adoption tax outflows, increased profitability of Quick cash adjusted carriers cash million by impacted to was $XX and certain related the by

With respect on capital retention allows a cash strong generates increases partners this access and to our get their service to for RXO. carrier return faster Quick Pay, payments, to carrier

to increased business, carrier and adoption are of Quick an accordingly. across our Pay investing drive opportunity we have We

adjusted While we with cycle. our be initiative are good Pay a Normalizing a base will cash carrier items, free pleased cash win-win XX%, adoption the approximately and is capital increased Quick net a Pay for point in tax period which with return strategic trailing Quick a use over on our carriers was at flow conversion for X-month good this RXO. the of Pay freight with adoption working is the increased of our Quick and investment.

across adjusted adjusted rate annual over XX% an cycles. market EBITDA cash long with the remain We XX% and comfortable term between of conversion

ease we As accelerated an the growth as last of in quarter, mentioned working result turns capital. cycle will

anticipate to use depending continue X% impact dollar. each of on X% pace incremental We to This of to the conversion cash can short-term revenue recovery. approximately

a to in million. the The with bridge on included Let's move to period the sheet. $XX amount restructuring also We the headwind cash outflows largest were X-month the cash X-month quarter balance. in of X. spin-related cash We've million cash ended on Slide our $XXX on and cash balance of

We expect in restructuring to significantly charges decline XXXX. spin-related and continue to

of was to continue obligations RSU outflow and also to cash settle $X in We which tax period. million withholding minimize the solution, an

a on X-month cash view. now Let's discuss

in balance million. collections, million considering As earlier approximately you'll third collected $XX than quarter, $XXX these the normalized second we starting of the for the receivables recall, expected. approximately was quarter we When earlier cash

Pay, In and withholdings. for addition Quick million of we approximately approximately to $X capital cash the tax million RSU for of for used working use $X restructuring

$X out return. rate annualized the million, annualized savings a run charges Turning with of achieved to We approximately million. of savings $XX rate year-to-date and in $XX We've strong took costs million run of now quarter additional associated approximately cost. restructuring achieved

will While masked and lower cycle costs reduction in the the now relative per brokerage create dynamics expect turns. current estimate. savings the have profit gross they to trade operating and cycle We by when load, restructuring leverage our spin-related the significant been prior

costs $XX $XX to million to XXXX expect restructuring we million compared previously. spin-related Specifically, million and $XX approximately of

Additionally, approximately now anticipate cash than and of $XX associated estimate. lower million spin-related we prior restructuring actions these our $X outflows million, with

higher XX due than Slide is net end prior year with remains at healthy on of at adjusted EBITDA. X, see EBITDA. cycling sheet can last balance you our trailing to leverage the As quarter approximately X.Xx our This X.Xx months quarter

available to our liquidity is remained of with of While our long-term above our Xx, of end quarter. target robust $XXX leverage X the million liquidity at position the

We comparison expect agreement accordion the exercised quarter capital feature cycle net million. higher $XXX year-end. through leverage to debt and simultaneously repaid will structure. all credit revolving review will and I'd November, our loan to in under credit also agreement. million. million fourth to obligations we increased at the more our net liquidity our debt like positions move unchanged. a early again of tough total $XXX from In outstanding forma, We that these actions savings increase, revolver yield Pro commitments and term than Gross our under interest annual existing will remain $X

same flexibility the liquidity lower maintained more We've with a at cost.

expect, the you as initially at a quarter, balance you'd fourth the a of result cash will the As lower of end see prepayment.

partners sheet invest work and financial strength. can Our strong market balance our across and cycles, all customers actions with to these and want highlight perform that

can of the in to expected to position our $XX project $XX $XX our slightly and are some estate us on $XX modeling of expenditures for due in XX real brokerage $XX million to growth million business. of estimate be XXXX down from timing. to You This includes updated additional Capital between million find in Slide This our changes investments million. prior is million assumptions deck. strategic

at to million, $XX to is between interest million. Stock-based the be prior earlier. pro million expected $XX is structure which is our prior mentioned is fourth with optimization expected our net expense savings range. and be to between million capital amortization lower the expense and slightly estimate. forma than quarter This end million $XX Interest associated expense I and includes and the expected the is for Depreciation $XX approximately of low compensation $XX be benefit

expect to of effective rate full continue approximately XX%. XXXX We tax a year adjusted

share also You our of should potential average of with count Overall, current we're diluted include the million repurchases. impact pleased shares. given freight This does model cycle, state approximately execution. the an with share not XXX any associated

on sheet, a RXO disciplined remaining have balance We cycle we're well, operating for in positioning while the strategically investing flexing. cost and strong

Strategy Chief about to talk like who over I'd Weisfeld, our Now turn to outlook. will it Officer, Jared more

Jared Weisfeld

Jamie, good everyone. Thanks, morning, and

by We gains, continued technology. enabled by market continued to the our brokerage growing quarter, share market year-over-year the outperform in substantial profitable third and volume people with XX%

throughout month by by LTL volumes volume year-over-year. our and XX% every quarter. Loads year-over-year specifically, truckload per day the grew core More we grew grew XX%

and because our of continue customers strong now us volumes. Our relationships. brokerage award full truckload of represents service XX% LTL LTL approximately to loads

growth in major From a saw vertical category. every perspective, we

e-commerce and grew quarter, volumes in growth but existing year-over-year retail growing strongly. in the across awarded Specifically, customers with the volumes second X% whole Beverage versus quarter. XX% we Food the business accelerated also us category. saw The also vertical by Several significantly and new

While and single digits by year-over-year, vertical from Industrial quarter's decelerated Manufacturing the grew rate. low growth last

our profitability a again points brokerage From XX.X% of perspective, strong in enabled we the technology. margin basis down by just delivered quarter, gross XX sequentially,

Drew earlier, July was month very a RXO. difficult As for discussed

performance progressed. our improved However, as the quarter

quarter. the discuss every performance single this throughout key I'll shortly. into us detail month improved brokerage indicators more positioning the RXO quarter, in fourth well

quarter covered versus XXXX. were strong quarter the the in XX% including created pricing loads in of third In XX% XX% carrier algorithms. a Seven-day the several compared was new launched in features retention third to third the our quarter, the of of XXXX. quarter, We Connect XX% or RXO in of digitally quarter enhanced

Additionally, for automated creation. we new solutions processing leveraged order language natural

improve We AI specific the also made productivity. employee investments quarter in to generative

third quarter, contractual up volume up prior XX% and contract volume our the sequentially of XXX business, from year-over-year, up quarter The In the accelerating was growth when compared basis XXX XX% the points basis XXXX. points of third in quarter. XX% represented to

a market react spot contractual of customer be relationships, the We have beneficiary emerge, our business market RXO of turns, but seen not will and prime the and volume. when yet because deep quickly spot our

RXO across trends, I market business emphasize Drew want to referenced discussing in the investments the and our service earlier. that and strategic to continues people, Jamie invest Before our offerings technology.

laying and inflection. for the are foundation We building are market long term the for the

Taken $XX strategic $XX to million. approximately together, we estimate our investments XXXX million will total

playbook investing we've before, investments term. this for we the are countercyclically While impact these run near-term profitability, long and

view. have we the conviction communicated we we of in were cycle. now quarter, further that believed that the approaching Last bottom We

profit we the I'll view Slide current you to our point Specifically, low believe XX brokerage of presentation. through like I'd for the XX that gross load on refer and marked the year. per July's cycle, the expand to of freight

When per load view items, on approximately changes basis, get of mix better with for of those to start declines in load. fuel with in per revenue it's consolidated To loan percentage per the Let's length impacts year-over-year important on consider market a and our a year-over-year mid-teens basis, haul, price down prices. normalizing a line of revenue was pricing.

margin see can algorithms technology market you cycle all freight in than better chart, our the proprietary pricing leveraging As procure on at we generate different and by gross rates. capacity across strong the parts to

to Moving Slide XX.

slow levers. market P&L at improved as rates margin to RXO-specific as quarter carrier RXO's rejection walk continued, load-to-truck gross progressed, quarter albeit discuss continue the exits conditions and pace. brokerage down tender given margin increased, trends. a recent higher Let's the moved brokerage improved freight gross The and progressed ratio national and the

next an at market the exit months. accelerated to X carriers X pace expect to We over the

significant resulting in per our our profit took the buy-side also technology, leveraging We improvement of month in load actions, gross every quarter. further

gross the month than XX% Specifically, greater per low. when July's compared improved September profit load to our of in by

quarter, visible lowest average. in in profit per chart down QX of July's put this The load load Let's earlier go underlying perspective, in with volume profit was XX we brought profit XXXX the for basis. the load us just RXO's at profit well load growth, to intra-quarter our squeeze that decline it since look XXXX. the brokerage isn't inflection. per a discussed on significant given gross per gross the of July's moderated RXO's and Slide To since positioning QX per quarterly improvement gross the continued business gross quarterly

between headwinds like the that growth improved at freight as sell despite like profitability significantly severe quarter, margin. month experienced significant to most This cost this delivers the transportation in July, impacted review EBITDA. cycle, our now with increased leverage. is The adjusted a did of gross in margins compressing Early on QX operating When squeeze the I'd third without year, they and volume in near-term and of corresponding cycle those exited model the relationship as July, we gross reversed we the difficult the month rates. volume point in a were the of increase typical growth. from headwinds

expect on assuming to customers, some a in and quarter, year. I'd color in on we of the puts and which look seasonal we're muted expecting now our what like forward all peak more We the lines you from season. in typically takes we're Based give business we're see fourth our fourth quarter. a this hearing the uptick

if growth a and develops. respond for peak can staffed stronger quickly are We season

sales pipeline X-year quarter. again confidence a on Our brokerage us This the and fourth in gives up grow that XXX% stack. brokerage on volume basis is a robust remains will year-over-year we

volumes moderate basis, the brokerage October third see we year-over-year when a increased While to still year-over-year did growth on volume quarter. compared

We QX will we're and to trends quarter. the in are quarter. assuming expect a QX. year-over-year in than fourth grow, to per had when per tougher also off encouraging, load quarter but compared It's and at a that Brokerage September we a pace third declines coming revenue the strong are another very note volumes fourth year-over-year comp load important revenue moderation slower brokerage

per Moving profit to gross load. brokerage

roughly of XX%. October gross volume grow RXO we adjusted expect September, together, gross quarter. all sequentially growth profit per was September versus fourth it strong year-over-year moderated flat company-wide the levels in into Putting to with resilient, While RXO's EBITDA with load margin

XX% by average, the RXO the to third the last adjusted X years, fourth Over quarter quarter. grown on from has EBITDA approximately

margins. contribution RXO rate adjusted in strong with roughly line to EBITDA expect grow company-wide company-wide with We growth that

with the fourth continuing cost the margin. gross when quarter. strategically We're the gain inflects. historically, and seasonally first We're to profitably brokerage earnings growth investing declines adjusted our playbook reminder, deliver quarter strong of structure, while optimizing the seasonally quarter from market into to market have EBITDA strong share weak a business in another our a rapid As typically

Our calendar fourth July gross year with profit per load for improved momentum. entering in the quarter XXXX, and bottomed we're

a operating soft are to and strategic the be for still pace We're of term. we the well moves to of the macro the cycle us right making but long broader in recovery freight the environment, will position the part subject

I'll turn over Q&A. the With operator for that, it to

Operator

first America. question [Operator Instructions] from Our from Hoexter of Ken Bank comes

Ken Hoexter

right? So your mini growth Maybe there, some Great. just slowing about about talk you talked in bids. increased outlook October,

lends is -- bottom? third stop confidence guess I I'll about what quarter the you confidence the Just talked there. EBITDA that that well,

you confidence Just bottom what really the flattish? the gives be that that October that seems a bit given we're seeing backdrop more to

Drew Wilkerson

Ken, this is Drew. Yes,

the The is first out that thing profit we've that I'd gross seen per in load. improvement point

look profit it by October. you than into If improved more load per from continued gross July, XX% and

what reason the on the seen So optimism biggest for gross per is profit we've load.

the third of thing back run is, manager largest typically Mile Last a business automotive that change the ground had load, One was what of the there. profit second we're the gross factors. shipments is, look The outside then built doesn't a the second takes seasonally QX, customers. in largely at was to to per of QX you as expedite ton from quarter And cost but the off we X country, impacting other step and

out tailwind was for we of a us come plants that back headwind online, as the came us. that while be of more So will QX, a as for

Ken Hoexter

that if do that a end customer that follow-up. how impact at talked you -- look and Maybe don't bankruptcy if you're consumer, kind you're set rates, I about the maybe the they're really of are that talk is shifting? benefit thoughts you're this if backdrop Great. backdrop. maybe being seeing there guess any higher the of you if I on of to up And confident or face given lower can about rebound. I Convoy, seeing some the of know loads just because inventories sort just there that's economic economic

Drew Wilkerson

Yes.

season. points So separate on peak in market, one the disruption One there. two on

that expect season. peak on have a muted will are The us they do season. customers telling is season peak first a have we some But point peak that we

customers. to handle staffed still and occurs the growth that for inflection we're prepared if for So those

on point overall less disruption brokerage X% the market, the competitor went that in was second The of business the of the than market. out

chaos some So it some capacity, and to Anytime there's we've in us and us inflects, the experience to of business. of for but times to noise a And going spot did them. in their got come that doing market a delivering bids to business. are loads, it create noise, to as well. for come solutions expect, many wasn't lot on we a in disruption that's that thing or create going projects And our huge good our the disruption on for and play customers as market, they're

Operator

from Company. comes Christopher question next Benchmark Kuhn from Our

Christopher Kuhn

to spot of flat issues up your you that comes One goes is or where of here margin if just spot bit? from is is. the gross from the up grow that here it slightly a price stays kind continue little Can

Drew Wilkerson

We at not for are floating increase running much been accelerate, costs cause market. some over if what the next an that spot when months, do to we at or And and carriers for you and that you think rates loads We see where seeing spot do there actually in overall time. demand have around would think from below continue rates, X you'll inflection longer. that a spot near not operating X the carrier can we're believe the see look bottom at that

our ourselves make the margin, relationships the the We'll stay part in this to floating foundation. things bottom, been our always build has and of earnings market along hone and of show when and if prepare continue power to a strategy we'll cycle We'll inflection the model our inflects. our But we'll the with we'll and the during grow customers. the fair that for

Operator

from comes from Stephanie The next Jefferies. question Moore

Stephanie Benjamin Moore

the to from in what you've the on But of some Maybe your path point? to question -- kind XXXX the bid tough early inflection just how might hearing October. when appreciate you're this just are given But is your just where far, related customers, cycle realizing expectations I'm particularly occur. how far? thoughts cycle maybe given that so answer. an we this color so are your frames to for at trending Maybe and a and I

Drew Wilkerson

customers, Yes. And Thank those lot we're hearing different next the and you, pick typically do they of things expect from to with different we those Stephanie. We're X conversations up months. just as customers. starting a over

Some seeing year-over-year increases slight of these a we're on were basis. customers actually to and going

It them was are when slightly of down. bid and the depends at when that in with they were on into time. Some point they and put going on what place market were

The we go. our biggest with head XXXX into relationships is grow to thing business, going starts as got technology though, we're to the got best going industry. going we've loads the we're the projects inflect we've spot the when for created to base, we're as And place for customers in continue have on, to the when solutions the our service, be first hold that model, them great market foundation, come the build to customers. strong start, We've and

Operator

question Scott from next from Oppenheimer. comes Schneeberger The

Scott Schneeberger

be more the of mode be what -- triggers, make quarter in see right ratio. color Could -- it just the right talk can what you that the a historical where it the be what some into put -- you on would into year? load-to-truck would importantly, change next over you're fourth be it behavior what And levels would you versus now, you would perspective gave Drew, think now? -- you

Drew Wilkerson

Yes.

a years, below for right hasn't there load-to-truck it So that Scott. And when any I've stayed X:X it roughly where for at ratio you XX sustained X:X, around amount has been is gone this sitting time overall. now, of time. look doing And

it went You below X:X it saw -- X went quickly this that earlier year, X.X:X. whenever to

their not what trucking continue costs below them not expect that operate So company. especially hang carriers long the I small a for I to here do it think down run to to do because --

for look invested this when now, business. always confident We at us, That's And that long investments quarter-to-quarter. slowing We're in continue, down. term. targets making that we're not we we've business looking achieve we us the from laid to at And we're anticipate So talking over we've it are will of EBITDA about don't $XXX something you're going in the to right $XXX that. million million. -- the out help the

Scott Schneeberger

the team just into, losing exits are sneaking fourth another across weaknesses and members. some new Yes. your Maybe of did in and curious on end market? mention quarter, what And elaborate are new and team where there? of you areas carrier where you're adding I'm adding one you're acceleration strength members winning and you

Drew Wilkerson

let I'll part, then the I'll take the take second Jared part. and first

first people, freight where it's we're all also of time. with adding trained We've come learn on a we're takes but customers. The customers. and the part those up on existing differentiators customers, RXO the to great people got some learn on new be and lot have relationships And bringing industry, the for

So relationships talking in continue the building invest to customers carriers we people are and who are with that who with. the people to we're partnering

Jared Weisfeld

e-com RXO which specifically And at health the year-over-year last Scott, about, existing quarter. only not to Drew it's and substantially talked XX% given year-over-year, Jared. accelerated customer was expanding business quarter overall From a levels vertical basis that perspective, attributable up in also the a all grew customers. Retail on of vertical our from main pretty inventory verticals but

slow year-on-year. showed Beverage Manufacturing to relative did and it and down year. did grow prior year-on-year, still Industrial growth Food but Additionally, nice

Operator

Jordan comes Sachs. next The question from Goldman Alliger from

Jordan Alliger

softening other October and or up softening? in I folks trends as demand I'm assess of are competitive -- volume harder? business go the it pressures that, some you you be could brokers year-over-year. trying stick around after that's think Or curious, mentioned an to would more underlying amped

Drew Wilkerson

was fourth and year-over-year it's to across I to market all verticals. and a want an of strike, still to softening take do saw, in across clear, see just the It It basis growing that volumes Obviously, we all did But on really with we it impact automotive. be market. and verticals. broad-based we this quarter was continue in limited a share are more demand but was UAW broad-based it wasn't the

Jordan Alliger

XXXX. then still I And early Okay. know on it's

it'd you maybe earlier, mean EBITDA in move mentioned seasonal times there be a quarter, that? way sort usual do about things you normal less could Or of I later? patterns sequential through all the as I EBITDA though, think have we we to more expect on think be fourth XXXX? could it think is seasonality I equal, where mean growth.

Drew Wilkerson

Jordan, XXXX too for now. I call that think many there's still right to unknowns

call sure As today, rates going is do. normal not prices what here to factors we Fed able be are fuel going do. sure where are to we're big And to interest not not seasonality. sure We're sit going. those to are what X We're the out

So to happen not where can call a XXXX we what's at we're point in going yet.

Operator

from Oglenski Our from Barclays. question Brandon comes next

Brandon Oglenski

guys the perspective. in is being you help quarter you did just guidance, or off that's I Drew, fourth necessarily down Jared know coming what can maybe from but about down that. I step talk maybe the think an normal set the us normal model, seasonality, EBITDA not a to July. And especially you to that operating think leverage follow-up in required was here then to demonstrate bottom the I the be given EBITDA? XQ longer-term going really guess in What's

what do we incrementally from to need So here? see

Jared Weisfeld

if Sure. can I'll chime in can -- and start Drew well. I as

been XX% variance. X-year the bridge QX, you if down, the rate growth appropriate from back variability EBITDA But So about sequentially, the years. sort about right, to QX about QX. anywhere has roughly X to to There's the which average lot has Jared. X think double down a of it's to been that into adjusted expect been to last QX. it, it, to range that of there's Brandon, to QX, X historical Heading so achieve to been I in we on digits. from over range mean talked of a digits call lot from that's terms look of QX last years, over QX a you're from, X how we low mid-single call growth historical

we incremental a touched remarks. about in of terms the margins, prepared contribution In bit this

QX that contribution margins We annualized longer expect really, XXXX. we strong QX invest, And company-wide when continuing to of to forward. in $XX with not from achieved in EBITDA But million margins in growth That's the $XX of going on that we've And million sequential achieve you we're what strategically think actions. contribution going at strong drive an investments approximately to about and savings term, are $XX doing -- year-to-date, opportunity roughly only to that's strategic million cost basis. size we QX. to we're here going really taking also business,

Brandon Oglenski

that, I at a looking million. I I'm run level I mean, cash presentation. then, the position the you have a your now since And in business? about that is the chart Or did guess you Jamie, $X talking to Okay. net appreciate proper on Jared. then? leverage, draw revolver

James Harris

Yes.

-- let's call up, points negative increased revolver. paid million term the of So on capital of have XXX our XXX, a our debt, on a excess cash, had We structure we structure, it, on cash. on is use We interest. our capital interest what basis. of updated $X our off cash basis somewhat a We'll pretax Brandon, we arbitrage an year when did picked savings of we liquidity took that inefficient really, redid

feel the the we at a end day, so liquidity. kept savings, same nice like, And of a the interest we pickup, exact pickup big had in

we'll with dip net level of that of We leverage flow use. to XX%. same. We of XX% from the see We've revolver normal cash occurs. cash, number we about time good feel from believe Our continue intra-quarter flow talked still as very was cyclicality to a strong business. a time the to that's the into running to the business But standpoint cash like a

fact, about XX% of year-to-date conversion. been In it's

capital in think place -- the that early we November. comfortable feel in we So with we very optimized structure put

Operator

Group question Research. from Wolfe Scott from next comes The

Scott Group

how about, -- figure the we I'm spot whenever an seeing And squeeze. are think what spike, being look Or So Do I July contract versus curious, normal? just do that you you we've overall, where seen to Typically, then is spread now? that between rates does are trying already get brokers, eventually you kind guess rate do we're out for you bottom. -- incremental eventually what rate you your guys is when is -- and market that of squeeze I'm right think the there hopefully, incremental comes with an spikes? spot talking squeeze? And

Drew Wilkerson

at July. rates in the this still you When squeeze Yes. the cycle. below Scott, point where squeeze, a spot point at definitely contract are saw a we about in talk you're rates

broader July squeezed, think week to market. I cycle, in is squeeze the a and X last the thing Whenever you come anywhere points the of get bad a turning something can see don't that a think in not for different to good at the It's I squeeze in shift X the thing months. as was you that's from start that that that market. the experienced business. we can to that the a

down, that's that think start you're you I was come show earnings offset load the more spot more the but gross business. up other whenever when produce related go per season. the than of see load loads on to spot But profit see and is profit to going the the power in. side the of to And per squeeze behind come will gross and contract the

Scott Group

then fell know but margins I versus when ask X% Any gross net point, about how about then rest operating brokerage margin a business? the operating margin, I And lot to get at we can of on to this quarter. net go? the want some in should is margins net on doing ultimately, the think cycle the the of operating up how color And we talk where

Jared Weisfeld

Scott, couple it's Jared. things A that point. of on

much a of think the in the of with in to on think at One, an move quarter you QX operating Drew doesn't QX. in earlier QX basis. Last adjusted from free base I'd talked weaker to sequential about you're net out, highlight when of terms and the the But calling we I terms flow fixed look things. cash couple typically is the margins, a EBITDA from So cost in what business -- QX adjusted that for movement in that what seasonality about Mile generally decline

the move. in in point margins then And decremental profit the gross that also those per sequential low July. load remember was impacted So

the really full coming of of So the felt starting season. run the for rate produce point squeeze impact quarter out the

factors of call with the in earlier as some strike. associated UAW I So respect about two transportation as we the well those out managed to impact that talked

think, all all boiling combining largely move talking factors, -- about. the I those I explains you're So that think

about quarter, low on the of expecting. from -- the In of can margins brokerage margins earlier from that that specifically about I taking from here, contribution I'll margins what Last cost gross pretty excess the point of optimizations bottom XX%. certainly in brokerage the cycle, the incremental hit talked strong we're terms incremental in the contribution we're terms be talked in we of

standpoint. we're about thinking contribution business margin from how So the a that's

Operator

comes next Jason TD question Our from from Seidl Cowen.

Jason Seidl

capacity of X to to fair. couple next same come the called be thing material You months. of level probably for people in the out quarters Most last over X to have for would marketplace at the the called a more

now that going out of the capacity start is giving to you confidence what's So the finally coming market? TL

Drew Wilkerson

said biggest... Jason, over Yes, I months. to next X X the the And

Jason Seidl

about Sorry that.

Drew Wilkerson

to it trucking The worries. thing small on are run company, now. right below No that biggest costs spot now, a right is rates carriers what

during that not sustain do up we it's where longer think COVID they that build than So much now. at sheet can balance the right

Jason Seidl

talked of What of Okay. some of Fair enough. sort saying little And going with drawdown. inventory sort about a that about bit are your customers restock you you're they done saying the the forward?

Jared Weisfeld

the a e-commerce Jared. Jason, the acceleration which prior was trends vertical, standpoint, QX, saw that as From in in it's of specifically we and quarter continuation well. saw in encouraging we a retail the restock

but at expanding of that of the RXO, of also the share market vertical. health gains and indicative of Some wallet broader share was

think earlier, some like more view. things So peak, customers, said going on a mixed have we different are some that hearing are we're from different that to Drew

are I that. is for important to for prepared think what's us ensure that we

growth. for staffed are We

And encouraging we out, retail rest We or vertical the we'll of not and we'll e-com with see did quarter. the the right see the investments. But respect to whether during trends a quarter as have plays have peak. the

Operator

from comes The question UBS. from Tom Wadewitz next

Thomas Wadewitz

a I wanted first. to fine just point of -- kind

-- low up, Or Or about but it kind you really said think for of that? October, on Is is. plus? XX% like it. talked is You Can bit any a quantify there a is digits just is in truckload give You how I October? single fine-tuning in didn't to little slowing there it us can understand the XQ. you load give more XX% slowing up of much growth

Drew Wilkerson

call Yes. overall let's up, digits. digits, Truckload was was it, volume volume up double and mid-single

Thomas Wadewitz

had Great. If this. look I think -- Okay. questions at the on you some I Yes.

go just I XXXX. overhang on it process which for good It's me of seems like rates understand right, think spot to significant the up, Scott asked going of I And business. is ultimately about transition kind it. that to eventually a are

You've got on XX% contract.

gross you the Or skew that go risk rates maybe if kind pretty so prior then don't rates cycle that's a of period percent? bit normal spot more a on you'll get do able that's margin will contract And fair of adjust a do we if think contract. is to be -- you know quickly there -- I we heavy the to up, have where squeezed than cycles? would hey, say,

Drew Wilkerson

I shift quickly. thing would first the and is can that everyone this Tom, business you and shift remind

matter So by mix I of for told basis this you've squeeze spot this contract more from like Scott, be seen quarter-over-quarter. and X,XXX business points the to weeks, can a shift shift than

on the well bit side squeeze, good long, So capacity of depending that last and would depending a little as thing, that of the as squeeze the on the a be of to have while market demand. exit other is doesn't a in there this

Thomas Wadewitz

quick just I one one. if And more could, Okay.

Convoy, there brokers attrition, kind the I are you high profile, think of that's but On leaving. were bunch other about of asked midsized a

about And a like stronger attrition. attrition? on go brokers normally just as you help help think to that's think broker carrier significant How Or that enough -- the bigger factor noise? focus cycle? through I you brokers yourself you do the is the whether help

Drew Wilkerson

carriers disruption it's that if asset-based there's that's time exiting doing a business. any Tom, in for thing or doesn't broker a that. carrier guide, matter an good a is our routing It the it's if

it is would been mini there, has followed which noise And the has I has market, us not some time. created long exiting of you noise bids. the created but call for that capacity with that some ton a a obviously, So

with our that we've great relationships customers. got know You

for and about talking as that's and they're question that prior people going are is again, that were soon too. what as all for time be with right go whenever do going us the to we been And us. the them time time spot to have and have going loads, to to average. customers there disruptions, they're And have largest come same Our XX years the to to going thing over they that's for delivered on they're

Operator

question next from comes Our from Wells Poliniak Alison Fargo.

James Monigan

for Alison. on James

mean or of we another point around we see in might the Like place it that's seems kind exits? accelerate. spot leg to there from pressure -- sort and mechanism where those it here? bottom could expectations could been see up really improvement rate -- be for Just a carriers is of sort follow and of be some like encouraged I exits move what's of sort the of to to to tough a accelerate of sort a to wanted way there market. and Like that it? this an is where of elongation around of hang if level has there on the to essentially the Or sort need improvement

Drew Wilkerson

the I think to them. already the cost X over the it below hanging what running carriers X last seen is you've operating been months, when of takes have tough what

and and time So else And that income potential can do for go us, now have the to we hang tough. they believe that you gets out tougher for seen the earn it something actually themselves.

James Monigan

of LTL what sense that possibly months? it. And and you of Got like next the see to you revenue of you the percentage growing sort then of XX side could of the any it, over do mentioned sort

Jared Weisfeld

Jared. It's

year-over-year So for we it's really the grew going stable scale, continues on XX% in earning opportunity When the business stream a nice about business that of our to us XX% provide nice provide current and It is it's quarter. that total to prepared volume, to remarks mentioned at the grow. it and for grow. a

from we stopping. continue the exceptional customer freight that and that to We customers relationships rewarded based don't LTL the get see largest on TL service our we have, and

James Monigan

sense any of or give revenue you percent profit? of of Can percent

Jared Weisfeld

that we about it to and a from But quarter, increase. of We're the that to expect was XX% revenue. volume standpoint, percentage as continue in percentage of a not talking

Operator

next from question Bruce Stifel. Our comes from Chan

J. Bruce Chan

digitally it, fulfillment? When there. cycle about think onboard investing do a the more you here headcount you manual the think loads been maybe When additions last fulfilled touch and spot about just question to then even Drew, a maintain you've versus you business? And as put aggressively up comes you year. nice is headcount, the adding levels required can accelerate those as we talked cycle about digital very related Or recovery, more to of back? that's need move there in

Drew Wilkerson

you. Thank Yes.

we're So when XX% or covered. the digital, look created at at you

we that We our slow have to made and not expect significant progress down. do customers, with

side, And we to On got expect do XX of go. months. X white to lot carrier we accelerate still a the that to over space the next

headcount. overnight terms staffed on if in We're for business to that's we're in question We've second investing XX% the we stay appropriately the in Your growth need of early that seen of like and before the headcount. it. XX% before, the growing said position were market we during us When do you've as turns, on volume. we we'll parts We that did able COVID now. right of be to volume a basis. XX% when handle year-over-year And

that we when and the to time the got the way will that's our come volume comes. handle know we've team that or relationships customer it prepared So

J. Bruce Chan

I that. contract materially you spot Okay. then difference? the appreciate is business the business, the And those create easier there versus differences Or versus about going an is not to when in it appreciable contract to digitally the think for question, spot? first back loads just

Drew Wilkerson

to That for easier you're on Well, contract on spot. on a a is them the that. be it load created side, customer than -- on right

Operator

next Our comes from question Ossenbeck JPMorgan. Brian from

Brian Ossenbeck

up on the turn. But not similar, ended the the but to the longer? strength maybe or conversations we've happens when how whole get the come some contract give just the some peers part visibility think does spot Maybe the running and for they the imagine up I mix, depends in really market this of and level big loads spillover spot guess getting for that then the of wondering up shippers of some because turn can lower confidence to provide you Drew, turn. to expect and timing rather confidence living in freight, I you some gives the I to that or something back seen past, market just your what of terms around confidence of the thought us ended quite

Drew Wilkerson

space it don't we first flat, radio. of the is do when a in Fortune know now has you're of Brian, the that But whenever white is we're right look create got the you our talking lot there's do know our know business timing to disruption, to and we business do this Fortune shape what at We single happened coming the When We in don't we over that as there's markets customers the we're solutions. before. XXX is market XXX, what know we XXX. We've Yes. recovery. day. We've seen the they're right, of every this to with. customers that us and of with that XX opportunities in, with the

very Our good pipeline in is position.

and our confident spot that come visibility only understand picking to blocking but of not showing of get and We've because customers we them piece rewarded and got of great business. will up business, the us on the we'll of be service the loads. we're we piece So delivering on the back and contract complete tackling the time the

Brian Ossenbeck

Okay.

out to feel renewals is going about the in take first a market worry still about some quite next expect more and and crack So dynamic. go? lower people I the one And take them you terms this get into fourth initial mentioned side? Is and might the that stretch for guess to when the to rate people are rates year? -- earlier, but I just know of other this year, quarter indications on things of you mini it what what you normal? are where Do think to Do happens the next cadence quarter. changed, fourth obviously, like bids -- at shippers have and the of expect in of done you that Most with and sort

Drew Wilkerson

Yes.

season So I next line. quarter in starting what customers. earlier, the rates first we're through some coming conversations said latter in now, of and QX then typically in the right the as those of bid right the And with of is year. seeing And we're are part

are some slightly above, below. are them of Some slightly of them

for giving crack fair and them taking have talking people who number market price, a are of what service, want about I So another shippers provide is at a think done. which always who who dependable, that when is we've it, you're who years shippers good are had partnerships what

spot the that we'll we'll go them fair when out we're up, inflects start rejections tender market when that's there, market and be But the that confident the give of us, the out. come creep loads For we'll price. you see beneficiary to

Brian Ossenbeck

timing the be the renewals, a it's think in And even of maybe been faster? Do to bit slower, what be you could is similar that going just little to past? that the

Drew Wilkerson

think QX QX. I will parts be it the of and early

Operator

Majors comes question from Susquehanna. Bascome from last Our

Bascome Majors

speak post to leverage the that you not just to with cyclical line Can quarter Jamie, and debt little breathing closer put looks yourself with a to bit end like draws whether kind expect bit ratio paydown, back the you the or it you've gotten a covenant. of room of that? on credit X.Xx you

James Harris

Yes.

gives more already. change work calculation we us over covenant. picture our we we capital million saved But Derivative did, million cash $X -- same It of even the big again, the it the had adequate headroom So liquidity. is kept headroom. interest, $X benefit, of the did

have -- we some are more that couple covenants. will feel we'll have about We good a through, but more to our very we cycles where cycle on

outflow draws, of is terms of cash intra-quarter cyclicality In revolver we'll time-to-time flow not always cash perfect. that and from use

optimization same occasionally. do into have go been. liquidity the we is exactly again, as really we would it our work about But revolver expect So feel to did. we good the And the

Bascome Majors

integration, year? come on tail What how on next X it would. thoughts transaction, to that? sequentially like you costs, off have of the restructuring down the seen are Does long you that tail guys the on promised close early And much that we have

James Harris

down. go will it Yes,

As significantly already you down gone said, has it year. this

'XX, the be continue decelerate it and you the will integration There two, P&L will transaction If separate significantly. will be into down some to rapidly. but

for earlier, restructure savings. as million. $XX the annualized side, million $XX of we Jared On $XX have, We spent cost that mentioned million, approximately

back So go can of long on lot marketing structure the we to you a trying flow-through. of really position when to on investment again, that if a term, ourselves we're And significant. the leverage cost return is if flex,

an in significantly because have we But go we're So annualized go have good it savings, of do 'XX. going type the a we return. to if opportunity for restructure it's down to that see

Bascome Majors

guide to can And same. if and next put better no I could come better your the have you months half earlier I about is call And of few be EBITDA, $XX reasonable of consensus it, eager but a it's lift $XX really where I with book second this picture look or what asked the there quarter $XXX $XXX I A of of year in expect million in in what and but than expect the million. If something people surprised next year, the the you X sell-side close are, expectation to too-high be run next to that's seasonal be but million, you certainly I a just any million, lastly, if were for pleasantly year than more in, wouldn't having disappointed had around in be could you something. big this, $XXX of I'll think if at $XXX hope for here. look same fourth by folks and seat the range rate $XXX year, is be rather for at million more by roughly expectation wide, to, maybe sort

Jared Weisfeld

Jared. it's Bascome,

you into it us for up I an and in expecting annual covered You've for to XX% Drew soft don't guidance. QX muted we We adjusted give seasonality and a growth roughly sequential think being some in being terms give despite season. Heading a XXXX, of into market summed perfectly EBITDA despite expectation positive color a peak wanted earlier. while,

about business emerges, right? investments making are to prepared for over think staff that we're So heading of season the the peak near is in strategic the the long a XXXX, terms into we growth extent term We in term, now. how

to on No confident $XXX of outperformance million margins. we us best-in-class the $XXX Day, commitments throws on are We the matter Investor a are over that volume market with gave focused sustained EBITDA. adjusted growth the period, XX-month at we what million delivering at

Operator

the session. closing the to remarks. question-and-answer reached for have We floor I'll back Wilkerson our hand of Drew end

Drew Wilkerson

the with a and performed Thank soft we've environment well that RSO volume and positions brokerage margins. for growth winning future experience you, third the freight We've gross growth. freight cycle, Synthu. of this got RXO stage In a strategy in quarter, strong with XX% got

time, have weeks, close our with we a continue on focus our and customers a We sheet providing the We're offerings balance invest people, our in strong our At staying service disciplined same to and you technology. cost. and today. them with the I have all unique a solutions and holiday coming that help in look solve Thank freight their of to great many all I your season. for seeing forward toughest challenges. you you hope time

Operator

Thank gentlemen, your disconnect and concludes participating thank lines. you, for ladies for We and you your this please ask you conference call today.

RXO (RXO) 7 Nov 232023 Q3 Earnings call transcript