RXO (RXO) Morgan Stanley‘s 12th Annual Laguna Conference 2024 summary

Strategic acquisition and integration

• Acquisition of Coyote offers minimal customer and carrier overlap, enabling significant synergy opportunities, especially in purchased transportation and expanded verticals like food and beverage.

• The combined entity will have over 150,000 carriers, but focus remains on strong, recurring carrier relationships rather than total count.

• Funding for the Coyote deal is complete, with strong demand for the equity offering and plans to close the acquisition imminently.

• Customer response to the acquisition has been overwhelmingly positive, with expectations of improved capacity and service.

• The deal is expected to double brokerage size while reducing leverage to 1.6x, positioning the company for further M&A and shareholder returns.

Market environment and industry trends

• The freight market remains soft, with load-to-truck ratios and tender rejections below levels needed for spot market tightening.

• Retail inventory positions are the cleanest in five years, suggesting potential for restocking, but peak season expectations vary by customer.

• Carrier exits continue, though at a slower pace, with larger authorities now leaving the market; 20% of brokers have exited over two years.

• Market structure is consolidating, with the top brokers expected to control a larger share over the next five years.

Productivity, technology, and operational focus

• Productivity, measured by loads per person per day, has increased 18% year-over-year, with significant headroom remaining.

• Technology investments focus on automation, cross-border functionality, and advanced pricing algorithms, leveraging unique data sets.

• The company’s proprietary data and algorithms provide a competitive edge in pricing and operational efficiency.

• Emphasis is on reducing manual tasks, enabling brokers to focus on relationships and solutions.

• Technology adoption by both employees and customers is key to maximizing productivity.