Financial Data and Key Metrics Changes - RXO, Inc. reported total revenue of $1.7 billion for Q4 2024, with a gross margin of 15.5% and adjusted EBITDA of $42 million, aligning with guidance [31][28][17] - Adjusted earnings per share for the quarter was $0.06, with an adjusted EBITDA margin of 2.5% [31][28] - Brokerage volume declined by 6% year over year but increased by 10% sequentially from Q3 [17][52] - Less than truckload (LTL) volume increased by 1%, while full truckload volume decreased by 8% year over year [17][53] Business Line Data and Key Metrics Changes - Brokerage revenue was $1.3 billion, representing 75% of total revenue, with a gross margin of 13.2% [33][31] - Complementary services revenue was $431 million, accounting for 25% of total revenue, with a gross margin of 21.1% [34][31] - Last mile business generated $290 million, with stops growing by 15% year over year [35][19] - Managed transportation revenue was $141 million, down 8% year over year due to lower automotive volume [35] Market Data and Key Metrics Changes - The overall freight market remains soft, with a muted peak season as anticipated [20][22] - National load-to-truck ratio and industry tender rejections reached their highest levels in over two years, indicating tightening market conditions [21][66] - Contract rates are increasing year over year for the first time in two and a half years, signaling a potential shift towards an inflationary rate environment [23][28] Company Strategy and Development Direction - The integration of Coyote Logistics is ahead of schedule, with expected annualized cost synergies now estimated at least $50 million, double the initial estimate [6][40] - The company is focused on enhancing its technology platform and cross-selling opportunities to drive future growth [26][59] - RXO, Inc. aims to improve its earnings power and free cash flow through structural changes and operational efficiencies [27][28] Management's Comments on Operating Environment and Future Outlook - Management noted that while the freight environment is currently soft, there are signs of improvement, with expectations for combined brokerage volume to grow year-over-year for the full year [24][28] - The company remains confident in its ability to navigate the current market conditions and capitalize on future growth opportunities [25][28] - Management emphasized the importance of maintaining strong relationships with customers and leveraging the expanded service offerings post-Coyote acquisition [116] Other Important Information - Adjusted free cash flow for Q4 was $6 million, representing a 14% conversion from adjusted EBITDA [36] - The company ended the quarter with $35 million in cash, higher than previously guided [37] - The liquidity position is noted as the strongest in the company's history, with a $600 million revolver undrawn at quarter-end [38] Q&A Session Summary Question: Can you define the core RXO, Inc. EBITDA shifts over the past year? - Management discussed seasonal impacts and market backdrop, noting that the integration of Coyote has contributed to shifts in expectations [82][84] Question: What is the outlook for the brokerage market? - Management expressed confidence in the brokerage market's growth, projecting that brokers will capture a larger share over the next five years [90][91] Question: What is the confidence level in volume growth for 2025? - Management indicated strong early returns and customer feedback, supporting confidence in year-over-year volume growth [96][97] Question: How are tariffs affecting business? - Management is closely monitoring tariffs, noting potential short-term tailwinds from inventory pull-forward but longer-term headwinds if tariffs persist [99][100] Question: Can you elaborate on the CapEx spend? - Management clarified that the CapEx guidance includes strategic real estate spend and anticipated reductions in future years [101][104] Question: What has changed regarding synergy estimates? - Management highlighted that synergies have increased due to real estate consolidation and procurement efficiencies [112][114] Question: How is the integration of Coyote progressing? - Management reported strong cultural fit and collaboration, contributing to successful integration and retention of key talent [115][116]

Fourth Quarter 2024 Results February 5, 2025 Non-GAAP financial measures and forward-looking statements Non-GAAP financial measures We provide reconciliations of the non-GAAP financial measures contained in this presentation to the most directly comparable measure under GAAP, which are set forth in the financial tables attached to this presentation. The non-GAAP financial measures in this presentation include: adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"); free ...

Core Insights - RXO reported revenue of $1.67 billion for the quarter ended December 2024, reflecting a year-over-year increase of 70.5% [1] - The earnings per share (EPS) remained unchanged at $0.06 compared to the same quarter last year, with no EPS surprise against the consensus estimate [1] - The reported revenue exceeded the Zacks Consensus Estimate of $1.65 billion by 0.73% [1] Revenue Breakdown - Revenue from truck brokerage was $1.27 billion, slightly below the average estimate of $1.28 billion [4] - Revenue from complementary services reached $431 million, surpassing the average estimate of $408.06 million [4] - Managed transportation revenue was $141 million, lower than the average estimate of $151.72 million [4] - Last mile revenue was $290 million, exceeding the average estimate of $264.50 million [4] Gross Margin Analysis - Gross margin for complementary services was $91 million, slightly above the average estimate of $89.18 million [4] - Gross margin for truck brokerage was $167 million, also above the average estimate of $164.55 million [4] Stock Performance - RXO shares have returned -0.2% over the past month, while the Zacks S&P 500 composite increased by 1.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market [3]

Group 1: Earnings Performance - RXO reported quarterly earnings of $0.06 per share, matching the Zacks Consensus Estimate, and consistent with earnings from the previous year [1] - The company posted revenues of $1.67 billion for the quarter ended December 2024, exceeding the Zacks Consensus Estimate by 0.73%, and up from $978 million year-over-year [2] - RXO has surpassed consensus EPS estimates two times and revenue estimates two times over the last four quarters [1][2] Group 2: Stock Performance and Outlook - RXO shares have increased approximately 6% since the beginning of the year, outperforming the S&P 500's gain of 2.7% [3] - The future performance of RXO's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is $0.01 on revenues of $1.57 billion, and $0.43 on revenues of $6.9 billion for the current fiscal year [7] Group 3: Industry Context - The Transportation - Services industry, to which RXO belongs, is currently ranked in the bottom 27% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact RXO's stock performance [5]

Revenue Performance - RXO's revenue for Q4 2024 was $1.7 billion, a 70.7% increase from $1.0 billion in Q4 2023[3] - Total revenue for Q4 2024 was $1,667 million, a 70.5% increase from $978 million in Q4 2023[29] - Total revenue for the year ended December 31, 2024, was $4,550 million, up from $3,927 million in 2023, reflecting a year-over-year growth of 15.8%[33] Profitability and Loss - The company reported a GAAP net loss of $20 million in Q4 2024, compared to a net income of $2 million in Q4 2023[4] - Net loss for the year ended December 31, 2024, was $285 million, compared to a net income of $4 million in 2023[27] - Adjusted diluted earnings per share for Q4 2024 were $0.06, compared to $0.06 in Q4 2023[5] - Adjusted diluted earnings per share for the year was $0.12, down from $0.30 in 2023[31] EBITDA and Margins - Adjusted EBITDA for Q4 2024 was $42 million, up from $31 million in Q4 2023, with an adjusted EBITDA margin of 2.5%[5] - Adjusted EBITDA for the year was $118 million, with an adjusted EBITDA margin of 2.6%, down from $132 million and 3.4% in 2023[30] - Gross margin for Q4 2024 was 15.5%, down from 18.0% in Q4 2023[3] - Gross margin as a percentage of revenue decreased to 15.5% in Q4 2024 from 18.0% in Q4 2023[33] Revenue Streams - Truck brokerage revenue reached $1,267 million in Q4 2024, up 107.9% from $610 million in Q4 2023[29] - Complementary services revenue for Q4 2024 was $431 million, slightly up from $411 million in Q4 2023, showing a growth of 4.9%[33] Cost and Expenses - Cost of transportation and services for Q4 2024 was $1,357 million, up from $743 million in Q4 2023, marking an increase of 82.3%[33] - The company reported a total cost of transportation and services for the year of $3,565 million, compared to $2,967 million in 2023, an increase of 20.1%[33] Growth Indicators - Brokerage volume increased by 10% sequentially in Q4 2024, although it declined by 6% year-over-year[6] - Last Mile stops grew by 15% year-over-year, indicating strong growth in complementary services[7] - Managed Transportation's sales pipeline reached nearly $2 billion in freight under management[7] Future Outlook - The company expects Q1 2025 adjusted EBITDA to be between $20 million and $30 million[8] - RXO is raising its estimate for annualized cost synergies from the Coyote Logistics acquisition to at least $50 million[2] Balance Sheet Highlights - Cash and cash equivalents increased to $35 million at the end of Q4 2024, up from $5 million at the end of Q4 2023[27] - Total assets grew to $3,418 million in 2024, compared to $1,825 million in 2023, reflecting significant growth[25] - Total current liabilities increased to $1,066 million in 2024, up from $682 million in 2023[25] - The company reported a significant increase in accounts receivable, net of allowances, rising to $1,228 million in 2024 from $743 million in 2023[25] One-Time Charges - The company incurred a one-time charge of $216 million related to a deemed non-pro rata distribution in connection with a private placement common stock issuance[31] Operating Expenses - Direct operating expenses for complementary services decreased to $50 million in Q4 2024 from $56 million in Q4 2023, a reduction of 10.7%[33] - The gross margin for truck brokerage in Q4 2024 was $167 million, compared to $90 million in Q4 2023, representing an increase of 85.6%[33] - The gross margin for complementary services in Q4 2024 was $91 million, up from $86 million in Q4 2023, reflecting a growth of 5.8%[33]

Core Viewpoint - Wall Street anticipates flat earnings for RXO in the upcoming quarter, with revenues expected to increase significantly, which could influence stock price movements based on actual results compared to estimates [1][2]. Earnings Expectations - RXO is projected to report earnings of $0.06 per share, unchanged from the previous year, while revenues are expected to reach $1.65 billion, reflecting a 69.2% increase year-over-year [3]. Estimate Revisions - The consensus EPS estimate has been revised down by 50% over the last 30 days, indicating a reassessment by analysts regarding the company's earnings prospects [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that the Most Accurate Estimate for RXO is higher than the consensus estimate, resulting in a positive Earnings ESP of +2.13%, indicating a likelihood of beating the consensus EPS estimate [10][11]. Historical Performance - RXO has a history of beating consensus EPS estimates, having exceeded expectations in three out of the last four quarters, with a notable surprise of +25% in the last reported quarter [12][13]. Investment Considerations - While RXO shows potential as an earnings-beat candidate, investors are advised to consider other influencing factors beyond earnings results when making investment decisions [14][16].

Group 1 - RXO, Inc. has seen significant activity in the options market, particularly with the February 21, 2025 $10.00 Call option exhibiting high implied volatility, indicating potential for a major price movement [1] - Implied volatility reflects market expectations for future stock movement, suggesting that investors anticipate a significant event that could lead to a rally or sell-off [2] - RXO currently holds a Zacks Rank 3 (Hold) in the Transportation - Services industry, which is in the bottom 25% of the Zacks Industry Rank, with recent earnings estimates being downgraded from 11 cents to 5 cents per share [3] Group 2 - The high implied volatility for RXO may indicate a developing trading opportunity, as options traders often seek to sell premium on such options to capture decay, hoping the stock does not move as much as expected by expiration [4]

Company Performance and Strategy - The company completed the transformative acquisition of Coyote Logistics in Q3 2024, which significantly enhances RXO's long-term earning power [5] - The integration of Coyote Logistics is ahead of schedule, and early wins from the combined business are already being observed [5] Leadership and Participants - The Q3 2024 earnings conference call was led by Drew Wilkerson, CEO, alongside Jamie Harris, CFO, and Jared Weisfeld, Chief Strategy Officer [5] - Key participants in the call included analysts from Citigroup, Oppenheimer, Barclays, Jefferies, Bank of America, Stifel, Wolfe, and Raymond James [1]

Financial Data and Key Metrics Changes - RXO generated $1.04 billion in revenue for Q3 2024, with a gross margin of 17.3% and adjusted EBITDA of $33 million, reflecting a margin of 3.2% [25][26] - Legacy RXO's revenue was $935 million, down 4% year-over-year, while adjusted EBITDA was $31 million, up from $26 million in Q3 2023, resulting in an adjusted EBITDA margin increase of 60 basis points year-over-year [26][27] - The company expects adjusted EBITDA for Q4 2024 to be between $40 million and $45 million, indicating a sequential increase from Q3 [38][59] Business Line Data and Key Metrics Changes - Combined brokerage revenue was $655 million, representing 61% of total revenue, with a brokerage gross margin of 13.7% [28] - Legacy RXO's brokerage revenue was $550 million, down 7% year-over-year, with a gross margin of 13.8%, down 130 basis points year-over-year [29] - Last Mile stops grew by 11% year-over-year, with a gross margin for complementary services increasing by 150 basis points to 21.5% [19][30] Market Data and Key Metrics Changes - The national load-to-truck ratio declined, while industry tender rejections increased slightly, indicating soft demand conditions [20] - Port volumes remained strong but did not translate into over-the-road volume strength, with the freight market conditions remaining soft [21][22] - The company noted a tightening market in October, with increased buy rates impacting gross margins [99] Company Strategy and Development Direction - The acquisition of Coyote Logistics is expected to significantly increase RXO's long-term earnings power, with an updated synergy estimate of at least $40 million [6][35] - The integration of technology platforms is ahead of schedule, with a roadmap established for further integration [14][36] - RXO aims to leverage its scale and complementary services to drive organic growth and improve profitability [24][63] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the soft freight market but expressed confidence in RXO's positioning to capitalize on future opportunities as the market recovers [22][60] - The company is closely monitoring macroeconomic conditions and anticipates a muted peak season for Q4 2024 [21][37] - Management highlighted strong employee morale and positive customer feedback as key factors in successful integration and future growth [11][72] Other Important Information - The company ended the quarter with $55 million in cash, primarily due to equity financing for the acquisition, but expects a reduced cash balance in Q4 [33] - RXO's liquidity position is noted as the strongest in the company's history, with a gross leverage of 1.6 times trailing 12-month pro forma adjusted EBITDA [34] Q&A Session Summary Question: Details on the increased synergy target of $40 million - Management explained that the increase is due to faster-than-expected technology integration and vendor overlap, which allows for greater purchasing scale [66][68] Question: Concerns about customer and employee retention during integration - Management emphasized the importance of retaining top talent and maintaining strong customer relationships, noting positive feedback from customers [70][72] Question: Fourth quarter outlook and contributions from Coyote - Management provided insights on the expected contributions from both RXO and Coyote, highlighting challenges in the automotive sector impacting guidance [76][78] Question: Seasonality expectations for the fourth quarter - Management discussed the unique seasonality over the past few years and the impact of tightening market conditions on gross margins [80] Question: Insights on customer expectations in the retail and industrial sectors - Management noted improved inventory positions among large retailers and ongoing challenges in the industrial sector due to interest rate impacts [95]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________ Form 10-Q ___________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2024 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number: 001-41514 ___________________ ...