RXO

• Market Environment and Structural Changes

  • A structural, supply-driven industry recovery is underway following new federal regulatory enforcement for carrier safety that began in fall 2025, which has removed significant excess capacity from the market. Industry-wide tender rejection rates reached 18% in June 2026, a four-year high, even with continued soft overall demand. Any sustained improvement in broad demand is expected to drive sharp upward inflection in freight rates and profitability.
  • Shippers are increasingly turning to trusted, large-scale partners with robust carrier vetting, strong insurance coverage, and the bandwidth to handle rejected tender and spot freight, creating market share opportunities for RxO.

• Profitability and Market Share Gains

  • RxO achieved profitable market share gains in Q2 2026 ahead of schedule, with truckload volume growth outperforming the broader market. Sequential monthly truckload volume growth was achieved every month in the first half of 2026. The company gained share in both Last Mile (big and bulky delivery) and Brokerage amid industry capacity tightening.

• Technology and AI Innovation

  • Significant progress was made rolling out agentic AI tools across the business, driving improvements in volume, margin, productivity, and customer/carrier service. Adoption of the new spot quote AI agent increased the volume of spot quotes processed via email by 5x in Q2, directly contributing to the strong spot mix result. An improved AI-powered freight matching tool drove a 25% sequential increase in digital carrier offers, improving capacity access amid tight market conditions. AI tools are also being deployed to speed onboarding for new Managed Transportation customers and improve delivery workflows for Last Mile.

• Carrier Vetting and Cargo Security

  • RxO maintains a best-in-class, multi-layered carrier vetting and cargo security program that has won industry awards from CargoNet and Freightways. The program requires carriers to have active operating authority for at least 90 days, excludes conditional authority carriers, requires direct vetting by a dedicated compliance team separate from sales, and uses AI-powered real-time identity and reliability verification, plus aggregated tracking data to eliminate blind spots. The company's safety and claims records are significantly better than the industry average.

• Third quarter 2026 adjusted EBITDA is guided to a range of $35 million to $45 million, with brokerage growth expected to offset headwinds in Last Mile. Management noted there is a clear path to achieve the high end of this range, with the midpoint assuming a ~10% sequential decline in truckload gross profit per load from July levels through quarter end.
• Brokerage is expected to deliver continued year-over-year growth: truckload volume is projected to grow low-to-mid single digits year-over-year (accelerating from Q2's growth rate), and LTL volume is also projected to grow low-to-mid single digits year-over-year, with further acceleration expected in Q4 2026. Another sequential improvement in truckload gross profit per load is expected for Q3, driven by higher spot mix and phased-in higher contract rates. As of July 2026, spot mix had already increased further to 50% of truckload volume, with July truckload gross profit per load up ~40% from January 2026 levels.
• Managed Transportation automotive managed expedite volume is expected to grow year-over-year again in Q3 2026, and the sales pipeline for new freight under management remains robust.
• Last Mile is expected to face incremental sequential headwinds of $3 million to $5 million in Q3 2026, on top of typical seasonal decline following Q2 (the seasonally strongest quarter for the segment), driven by weaker customer demand and higher carrier costs.
• Long-term, management expects normalized EBITDA margins of at least mid-single digits (around 5%), with upside from AI-driven productivity gains and demand recovery. Over the course of a full up-cycle, margins can expand to high single digits to low double digits. Long-term adjusted free cash flow conversion is expected to be 40% to 60% across market cycles, with strong free cash flow conversion expected in Q3 2026 as working capital tied up in Q2 growth normalizes.

Total company revenue for Q2 2026 was $1.8 billion, with total adjusted EBITDA of $40 million, exceeding the high end of prior guidance. The Brokerage segment generated $1.3 billion in revenue, up 32% year-over-year, and contributed 73% of total company revenue. Brokerage gross margin was 10.7%, with 2% year-over-year overall volume growth, 2% year-over-year full truckload volume growth, and 3% year-over-year less-than-truckload (LTL) volume growth. Spot mix reached 42% of truckload volume, up 900 basis points sequentially, driving an 11% sequential increase in truckload gross profit per load. The Complementary Services segment generated $488 million in revenue, up 7% year-over-year, and contributed 27% of total company revenue, with a gross margin of 21.1% (up 130 basis points sequentially). Within Complementary Services, Managed Transportation generated $144 million in revenue (up 1% year-over-year), with $100 million in new freight under management awarded in Q2, and managed expedite volume up nearly 30% year-over-year. Last Mile generated $344 million in revenue (up 9% year-over-year), with 3% year-over-year growth in delivery stops driven by market share gains despite soft housing market demand.

• Soft demand in consumer and housing markets continues to pressure overall freight volumes and Last Mile profitability, with incremental demand weakness and higher carrier costs expected for Last Mile in Q3 2026.
• The upcoming end-of-year casualty insurance renewal is expected to face a much more selective and pricing-disciplined market, with most industry peers expected to face significant premium increases. While RxO is positioned to outperform the broader industry, there is still uncertainty around the magnitude of any premium increases for the company.
• Ongoing regulatory changes and carrier capacity exit are creating cost pressure for purchased transportation, and contract rate increases have not yet fully offset rising purchased transportation costs in the brokerage segment.
• Ongoing industry legal trends around broker liability for carrier incidents create increased attention to insurance and vetting requirements, though management views this as an opportunity given its strong position.
• Working capital is impacted during the early stages of a freight cycle recovery, as revenue growth creates temporary working capital usage, which was the primary driver of negative $42 million adjusted free cash flow in Q2 2026.

Q: Many peers prioritize contractual volume over spot for sustainability. How enduring is RxO's current spot opportunity, do you have a target spot-contract mix, and what incremental hiring is needed for the higher spot mix? / A: Strong service to the core contract business is what gives RxO the right to participate in spot opportunities, which often convert to longer-term project or contract business at reset, higher rates. AI tools have improved customer response speed for spot quotes, and the company has been pre-staffed for growth for three years, so it already has the bandwidth to handle higher spot volumes. Management does not have a fixed optimal mix, and expects spot share to continue increasing from current levels as capacity exit continues, with the core priority being strong customer service rather than hitting a mix target.

Q: Has RxO's differentiated carrier vetting process already driven current market share gains, and how much volume growth can it handle before needing to ramp hiring if demand rebounds? / A: Yes, shipper focus on strong vetting and insurance coverage is already driving market share gains, as this has been a core competitive differentiator for RxO built into its business model serving large enterprise customers for decades, with an average customer tenure of 16-17 years. The company has structured its staffing to be able to handle 15-20% overnight growth, to capitalize on rapid market turns, and AI tools are decoupling volume growth from headcount growth to support continued expansion.

Q: Current industry spot rates have seen seasonal softness in July, but RxO has strong momentum. How do you reconcile broader market seasonality with your internal performance? / A: Despite typical seasonal softness in July, RxO's spot mix increased further to 50% of truckload volume, as the company is capitalizing on elevated industry tender rejection volumes that create spot opportunities. Combined with ongoing contract repricing, July revenue per load (excluding fuel and length of haul) grew more than 25% year-over-year, pushing gross profit per load up 40% since the start of the year, with strong momentum entering Q3.

Q: What is your framework for potential insurance premium increases, and what is the baseline size of current insurance spend to help investors model potential impacts? / A: RxO's current annual casualty insurance spend is $15 million to $20 million, with a $5 million per-occurrence deductible and a total insurance tower in the top percentile of the industry. The company has a significantly better safety and claims record than the industry average, and has always had its strong vetting process in place, so it expects its premium increase to be far lower than the broader industry average. Reserves for existing claims are already adequate and reflected in current financials.