RXO (RXO) Morgan Stanley's 14th Annual Laguna Conference summary

Market update and business momentum

• Truckload volume expected to grow low to mid-single-digits year-over-year in Q3, outpacing a weak freight market and indicating ongoing market share gains.

• Gross profit per load in truckload rose over 10% month-on-month from July to August, driven by a healthy spot market, higher contract rates, and effective capacity procurement.

• Integration of Coyote Logistics has expanded scale and access to carriers, especially private fleets, enhancing competitive positioning.

• Despite industry-wide demand softness, volume is growing, with strong performance in sectors like food and beverage and industrial manufacturing.

• Last mile business faces headwinds from a soft housing market, but share gains and core brokerage strength are offsetting these challenges.

Supply side dynamics and industry outlook

• Industry is experiencing a supply-driven recovery, with significant capacity exiting the market, leading to inflationary rate environments.

• Large brokers are expected to accelerate share gains into 2027 as shippers consolidate freight with trusted partners amid tightening insurance and compliance requirements.

• No material changes were needed post-Montgomery due to robust existing vetting and insurance processes, positioning well for future regulatory shifts.

• Multi-year recovery is anticipated, with cycles expected to lengthen as the market adjusts to a more disciplined supply environment.

• Higher diesel prices are a pass-through and not a headwind, while insurance cost increases are expected to be less impactful due to strong compliance and coverage.

Technology and operational efficiency

• AI spot quote agent is fully deployed, improving gross profit per load and truckload volume, and enabling significant operating leverage.

• Technology investments focus on volume, margin, productivity, and service, with ongoing iteration and expansion across business lines.

• Automation is increasing, but the strategy emphasizes a human-in-the-loop approach to maintain strong customer relationships.

• Brokerage headcount has decreased mid-teens percent year-over-year, reflecting productivity gains from technology.

• Managed transportation and last mile businesses are scaling, with managed transportation surpassing $4 billion in freight under management and last mile holding the number one market share.