RXO (RXO) Wells Fargo 2024 Industrials Conference summary

Business overview and segment performance

• RXO generates 60% of revenue from truck brokerage, growing faster than the industry with strong gross margins; last mile and managed transportation make up the remaining 40%.

• Truck brokerage industry penetration has risen from single digits to low 20% over 10-15 years, with potential to reach 40-50%.

• RXO's brokerage business grew at a 27% CAGR from 2013-2021, three times the industry rate.

• LTL now represents 17% of volume, growing 29% YoY in Q1 and expected to grow 30% YoY in Q2.

• Last mile focuses on big and bulky items, with EBITDA per stop up significantly despite industry pressure.

Technology and operational strategy

• Technology investments target customers, carriers, and employees, emphasizing seamless API connectivity and continuous platform updates.

• RXO Drive app enables carriers to book and negotiate loads, integrating advanced pricing algorithms and AI.

• Employee productivity initiatives led to an 18% YoY increase in loads per head per day in brokerage.

• All tech investments are evaluated for return on invested capital and must drive profitable growth.

Market conditions and cycle outlook

• The industry is in a prolonged soft rate environment, with loads-to-truck ratios and tender rejections only recently rising.

• Carrier exits have accelerated in recent months, with many large and long-standing carriers leaving due to negative unit economics.

• True market inflection requires continued supply exits and a demand recovery.

• Import volumes, especially at West Coast ports, are up double digits YoY, indicating healthier retail inventory positions.

• Disconnect between import growth and over-the-road volumes is seen as a lag, with eventual impact expected.