Q1 2024 RXO Inc Earnings Call

Operator: Welcome to the ONEQ 2024 RxO Earnings Conference Call. My name is Julie, and I will be your operator for today's call.

Welcome to the one Q 'twenty 'twenty four.

Our next conference call.

Name is Julie and I will be your operator for today's call.

Operator: Please note that this conference call is being recorded. During this call, the company will make certain forward-looking statements within the meaning of federal securities laws, which by their nature involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those in the forward-looking statements. A discussion of factors that could cause actual results to differ significantly is contained in the company's SEC filing as well as in its earnings release.

Julie: Please note that this conference is being recorded.

Operator: You should refer to a copy of the company's earnings release in the Investors Relations section on the company's website for additional important information regarding foreseeing statements and disclosures and reconciliations of non-GAAP financial measures that the company uses in discussing its results.

Julie: During this call the company will make certain forward looking statements within the meaning of federal securities laws, which by their nature and false a number of risks uncertainties and other factors that could cause actual results to differ materially from those in the forward looking statements.

Julie: A discussion of factors that could cause actual results to differ materially is.

Julie: As contained in the company's F E.

Julie: Sally as well as in its earnings release.

Julie: Should refer to the copy of the company's earning release in the investors relations section on the Companys website for additional information regarding forward looking statements and disclosures and reconciliations of non-GAAP financial measures that the company.

Drew M. Wilkerson: Users discussing results I will now turn the call over to drew Volcker said, Mr. Wilkerson you may begin.

Operator: I will now turn the call over to Drew Wilkerson. Mr. Wilkerson, you may begin. Good morning.

Drew M. Wilkerson: Good morning, everyone, and thank you for joining today. I'm here in Charlotte with RxO's Chief Financial Officer, Jamie Harris, and Chief Strategy Officer, Jared Weisfeld. In the first quarter, the prolonged soft freight environment continued, and RxO delivered adjusted EBITDA at the midpoint of the range we gave you in February.

Drew M. Wilkerson: Good morning, everyone and thank you for joining today I am here in Charlotte with Auryxia, as Chief Financial Officer, Jamie Harris, and Chief Strategy Officer, Jared Weisfeld.

Drew M. Wilkerson: In the first quarter, the prolonged soft freight environment continue.

Speaker Change: <unk> delivered adjusted EBITDA at the midpoint of the range. We gave you in February.

Drew M. Wilkerson: In our brokerage business, we posted double-digit volume growth for the fourth consecutive quarter. Total brokerage volume grew by 11%, with 8% growth in full truckload and 29% growth in less than truckload. Full truckload represented 83% of our volume in the quarter. Our LTL business is growing rapidly, and our increased scale and automation capabilities are enabling it to deliver profitable growth. Jared will discuss our results by vertical later, but most of our full truckload verticals grew year over year. In addition, cross-border volume increased by 37% year-over-year.

Speaker Change: In our brokerage business, we posted double digit volume growth for the fourth consecutive quarter.

Total brokerage volume grew by 11% with 8% growth in full truckload and 29% growth in less than truckload.

Speaker Change: Full truckload represented 83% of our volume in the quarter.

Speaker Change: Our <unk> business is growing rapidly and our increased scale and automation capabilities are enabling it to deliver profitable growth.

Speaker Change: <unk> will discuss our results by vertical later, but most of our full truckload verticals grew year over year in.

Speaker Change: In addition, cross border volume increased by 37% year over year.

Drew M. Wilkerson: We continue to strategically manage our mix of contract and spot votes. Contract business represented 79% of our mix in the quarter and positions us well to earn spot volume and project loads when the market improves. Within brokerage, our gross margin was 14.2% in the quarter, and Complementary Services. On a year-over-year basis, MANA's transportation again grew the number of synergy loads it provided to truck brokers. In addition, in the first half of this year, Manus Transportation was awarded or is onboarding more than $350 million in freight under Manus.

Speaker Change: We continued to strategically manage our mix of contract and spot volume.

Speaker Change: Contract business represented 79% of our mix in the quarter and positions us well to earn spot volume and project loads when the market improves.

Speaker Change: Within brokerage our gross margin was 14, 2% in the quarter.

Speaker Change: And complimentary services.

On a year over year basis managed transportation again grew the number of synergy loads. It provided the truck brokerage and.

Speaker Change: In addition in the first half of this year maintenance transportation was awarded or is onboarding more than $350 million in freight under management.

Drew M. Wilkerson: And last mile, we continue to focus on our service and our customer relationships, which generate revenue opportunities with new and existing customers. We also focused on optimizing our network of last mile hubs and decreasing our cost of purchase transportation. RxO's company-wide gross margin was 17.4% in the quarter.

Speaker Change: In last mile. We continued to focus on our service and our customer relationships, which generated revenue opportunities with new and existing customers.

Speaker Change: We also focused on optimizing our network of last mile hubs and decreasing our cost of purchase transportation.

Speaker Change: <unk> company wide gross margin was 17, 4% in the quarter.

Drew M. Wilkerson: At RxO, we build our business on four main growth drivers: service, Solutions, Innovation, and Relationships. When it comes to service, we understand that every shipment matters to our customers, and we work to deliver a great customer experience that delivers value at every touch. We offer a wide variety of solutions to meet every freight transportation need.

Speaker Change: And so we built our business on four main growth drivers service solutions innovation and relationships. When it comes to service, we understand that every shipment matters to our customers and we work to deliver a great customer experience.

Speaker Change: But delivers value at every touch point.

Speaker Change: We offer a wide variety of solutions to meet every freight transportation need we are proactive in solving our customers' toughest challenges.

Drew M. Wilkerson: We are proactive in solving our customers' toughest challenges. We innovate and design technology that leverages data to help customers and internal stakeholders make better decisions and improve productivity, and we build multi-layer, long-term relationships with customers that are built on trust. Our focus on these areas has enabled us to grow quickly. Because of the trust customers have in us and the value we create for them, our company-wide sales pipeline is the largest it's been in four years.

Speaker Change: We innovate and design technology that leverages data to help customers and internal stakeholders make better decisions and improve productivity.

Speaker Change: And we build multi layer long term relationships with customers that are built on trust.

Speaker Change: Our focus on these areas has enabled us to grow quickly.

Speaker Change: Because of the trust customers have in us and the value we create for them. Our companywide sales pipeline is the largest has been in four years.

Drew M. Wilkerson: We recently made an organizational change that will position us to win even more customer business. We moved our freight forwarding business under managed transportation to help create more comprehensive solutions for our customers. In many cases, customers were purchasing services from both groups. Our forwarding business has built many domestic services that complement our managed transportation business. This combination will reduce costs and accelerate the many natural synergies between the two teams.

Speaker Change: We recently made an organizational change that will position us to win even more customer business. We moved our freight forwarding business under managed transportation to help create more comprehensive solutions for our customers.

Speaker Change: In many cases customers were purchasing services from both groups.

Speaker Change: Our forwarding business has built many domestic services that complement our managed transportation business. This combination will reduce costs and accelerate the many natural synergies between the two teams.

Drew M. Wilkerson: Jamie will discuss what this means for our financial reporting, but from a strategic standpoint, this combination will enable RxO to more quickly innovate and grow. Next, I want to talk about the overall market conditions and how they affected our business in the first quarter. The freight market remains soft. All major freight market KPIs weakened as the quarter progressed.

Speaker Change: Jamie will discuss what this means for our financial reporting but from a strategic standpoint. This combination will enable <unk> to more quickly innovate and grow.

James E. Harris: Next I want to talk about the overall market conditions and how they affected our business in the first quarter.

James E. Harris: The freight market remains soft.

James E. Harris: All major freight market kpis weakened as the quarter progressed the.

Drew M. Wilkerson: The quarter was mixed in terms of carriers. While carriers left the market every month, the rate of exits was slower than anticipated. And in some weeks, the total number of registered carrier authorities actually increased. On the demand side, while the macroeconomy remained reasonably healthy, the data was more mixed than in prior quarters. Employment, wage growth, and retail inventory positions were all encouraging. Yet GDP grew at a slower rate than the market's expectations, and inflation remained sticky.

James E. Harris: The quarter was mixed in terms of carrier exits while carriers left the market every month the rate of exits was slower than anticipated and in some weeks. The total number of registered carrier authorities actually increased.

James E. Harris: On the demand side, while the macro economy remained reasonably healthy the data was more mixed than prior quarters employment wage growth and retail inventory positions were all encouraging yet GDP grew at a slower rate than the market's expectations and inflation remains sticky.

Drew M. Wilkerson: January was a difficult month for everyone in the industry, including RxO. As we mentioned during last quarter's earnings report, severe weather caused a temporary market squeeze, but as the weather improved into February, we moved quickly to bring down our cost of purchase transportation. Gross profit per load and gross margin improved every month as the quarter progressed. While we did see some weakening in full truckload volume, it was more than offset by the improvements in gross profit per load.

James E. Harris: January was a difficult month for everyone in the industry, including Rx. So as we mentioned during last quarter's earnings report severe weather caused a temporary market squeezed, but as the weather improved into February we moved quickly to bring down our cost of purchased transportation.

James E. Harris: Gross profit per load and gross margin improved every month as the quarter progressed.

James E. Harris: While we did see some weakening in full truckload volume it was more than offset by the improvements in gross profit per load.

Drew M. Wilkerson: Given current market conditions, we've taken swift actions on cost. Jamie will talk more about this in a few minutes, but this year's actions will now result in at least $35 million of annualized savings. That's $10 million more than the estimate we provided to you last quarter.

James E. Harris: Given current market conditions, we've taken swift actions on costs, Jamie will talk more about this in a few minutes, but this year's actions will now result in at least $35 million of annualized savings that's $10 million more than the estimate we provided to you last quarter.

Drew M. Wilkerson: We'll see the full benefit of these actions in the second half of the year. I'm proud to work with a team that embraces a continuous improvement mindset and reacts quickly to market conditions. Let's now discuss our expectations for the second quarter.

James E. Harris: We will see the full benefit of these actions in the second half of the year.

James E. Harris: I am proud to work with a team that embraces a continuous improvement mindset and react quickly to market conditions.

Speaker Change: Let's now discuss our expectations for the second quarter.

Drew M. Wilkerson: Typically, by this point in the year, we would see a positive seasonal increase in full truckload volume within our brokerage, but that has not materialized given the sustained market weakness. In addition, and as we've discussed previously, we believe carrier rates are at or near the bottom, and we're preparing for a market recovery. We're making strategic decisions on price based on where we think the market is headed. We do this to ensure we are at a fair margin in an environment where carrier rates rise.

Speaker Change: Typically by this point in the year, we would see a positive seasonal increase and full truckload volume within our brokerage business.

Speaker Change: That has not materialized given the sustained market weakness.

In addition, and as we've discussed previously we believe carrier rates are at or near the bottom and we're preparing for a market recovery.

Speaker Change: We're making strategic decisions on price based on where we think the market is heading.

Speaker Change: We're doing this to ensure we earn a fair margin and in an environment where carrier rates rise.

Drew M. Wilkerson: Because we provide great service to our customers and have a history of honoring our contractual agreements, we're also in a prime position to capture spot volume and project freight when the market recovers. Nonetheless, we do anticipate that we will grow our consolidated brokerage volumes again year over year in the second quarter. Our ability to grow total brokerage volumes is a testament to the diversity of our portfolio. Our LTL business continues to gain traction and will grow strongly year over year in the second quarter.

Speaker Change: Because we provide great service to our customers and have a history of honoring our contractual agreements were also in prime position to capture spot volume and project freight when the market recovers.

Speaker Change: Nonetheless, we do anticipate that we will grow our consolidated brokerage volumes again year over year in the second quarter.

Speaker Change: Our ability to grow total brokerage volumes is a testament to the diversity of our portfolio. Our <unk> business continues to gain traction and we will grow strongly year over year in the second quarter.

Speaker Change: We expect brokerage gross margin to hold relatively steady to what we saw in the first quarter.

Drew M. Wilkerson: We expect brokerage gross margin to hold relatively steady compared to what we saw in the first quarter. With our improvement in brokerage gross profit per load and our momentum within complementary services, we anticipate that adjusted EBITDA will increase significantly on a sequential basis in the second quarter. RxO's focus on providing the best service, the most comprehensive set of solutions, continuous innovation, and close customer relationships is enabling us to gain market share and grow our sales pipeline.

Speaker Change: With our improvement in the brokerage gross profit per load and our momentum within complementary services, we anticipate that adjusted EBITDA will increase significantly on a sequential basis in the second quarter.

Speaker Change: Our focus on providing the best service. The most comprehensive set of solutions continuous innovation and close customer relationships is enabling us to take market share and grow our sales pipeline.

Drew M. Wilkerson: When you combine that with our disciplined focus on cost and the expertise of our team, RxO is primed to deliver significant earnings growth when the market inflations. Now, I'll turn it over to Jamie to discuss our financial results in more detail.

Speaker Change: When you combine that with our disciplined focus on costs and the expertise of our team. Our XO is primed to deliver significant earnings growth when the market and flex.

Speaker Change: Now I'll turn it over to Jamie to discuss our financial results in more detail Jamie.

James E. Harris: Thank you, Drew, and good morning, everyone. Let's review our first quarter performance in more detail. We generated $913 million in revenue compared to $1 billion in the first quarter of 2023. Gross margin was 17.4%. While gross margin declined 130 basis points year over year, we're pleased with our performance given the current freight environment. Our adjusted EBITDA was $15 million, at the midpoint of the guidance range we provided you in February. This compares to $37 million in the first quarter of 2023. Our adjusted EBITDA margin was 1.6%, down 210 basis points year over year. The declines in these metrics were primarily due to lower freight rates and lower brokerage gross margins.

James E. Harris: Thank you drew and good morning, everyone, Let's review, our first quarter performance in more detail.

James E. Harris: We generated $913 million in revenue compared to $1 billion in the first quarter of 2023.

James E. Harris: Gross margin was 17, 4%, while gross margin declined 130 basis points year over year.

James E. Harris: Pleased with our performance given the current trade environment.

James E. Harris: Our adjusted EBITDA was $15 million.

James E. Harris: At the midpoint of the guidance range, we provided you in February.

James E. Harris: This compares to $37 million in the first quarter of 2023.

James E. Harris: Our adjusted EBITDA margin was one 6% down 210 basis points year over year.

James E. Harris: The declines in these metrics were primarily due to lower freight rates and lower brokerage gross margin.

James E. Harris: Below the line, our interest expense was $8 million. For the quarter, our adjusted diluted loss per share was $0.03, which includes approximately one penny of the street tax benefit. You can find a bridge to adjust to the EPS on slide 8 of the earnings presentation. Now, I'd like to give an overview of our performance within our lines of business. Brokers generated $564 million of revenue, down 6% year over year, primarily due to lower freight rates.

James E. Harris: Below the line our interest expense was $8 million.

James E. Harris: For the quarter.

James E. Harris: Adjusted diluted loss per share was <unk> <unk>.

James E. Harris: Which includes approximately one penny of discreet tax benefits.

James E. Harris: You can find a bridge to adjusted EPS on slide eight of the earnings presentation.

Speaker Change: Now I'd like to give an overview of our performance within our lines of business.

Speaker Change: Brokerage generated $564 million of revenue down 6% year over year.

Speaker Change: Primarily due to lower freight rates.

James E. Harris: However, as Drew mentioned, brokerage volume for the quarter increased by 11% year over year, the fourth consecutive quarter of double-digit volume growth. Brokerage gross margin remained at a strong 14.2%, above the high end of our expectations, primarily due to lower cost of purchase transportation. While gross margin declined 210 basis points year over year, it only declined by 60 basis points sequentially. Complimentary services revenue in the quarter of $384 million was down 12% year over year. The revenue decline was primarily due to a decrease in automotive expedite volumes in our managed transportation business.

Speaker Change: However, as drew mentioned brokerage volume for the quarter increased by 11% year over year.

Speaker Change: <unk> fourth consecutive quarter of double digit volume growth.

Speaker Change: Brokerage gross margin remained at a strong 14, 2% above the high end of our expectations, primarily due to lower cost of purchased transportation.

Speaker Change: Gross margin declined 210 basis points year over year, it only declined by 60 basis points sequentially.

Speaker Change: Complementary services revenue in the quarter of $384 million was down 12% year over year.

Speaker Change: The revenue decline was primarily due to a decrease in automotive expedite volumes in our managed transportation business.

James E. Harris: Confirmary Services' gross margin of 20.6% declined by 20 basis points year over year. Please turn to slide nine as we discuss cash flow. Our adjusted free cash flow in the first quarter was $1 million, exceeding the expectations that we shared with you in February. Over the trailing six months, we generated $7 million of adjusted free cash flow, representing a conversion rate of about 15%. Lower profitability levels at the bottom of the freight cycle continue to negatively impact cash conversion.

Speaker Change: Complementary services gross margin of 26% declined by 20 basis points year over year.

Please turn to slide nine as we discuss cash flow.

Speaker Change: Our adjusted free cash flow in the first quarter was $1 million exceeding the expectations that we shared with you in February.

Speaker Change: Over the trailing six months, we generated $7 million of adjusted free cash flow representing conversion of about 15%.

Speaker Change: Lower profitability levels at the bottom of the freight cycle continue to negatively impact cash conversion.

James E. Harris: We remain comfortable with a conversion range of 40 to 60% over the long term through the market cycle. We ended the quarter with $7 million of cash on the balance sheet, slightly above expectations due to strong receipts in the quarter. The primary use of cash over the last six months was to prepay our $100 million term loan in November of 2023. Looking ahead, and as we've discussed previously, we pay interest due on our senior notes in the second and fourth quarters. That will be about a $14 million use of cash in each of those quarters. Additionally, in the second quarter, we anticipate approximately $10 million outflows for previously discussed legacy claims.

Speaker Change: We remain comfortable with the conversion range of 40% to 60% over the long term through market cycles.

Speaker Change: We ended the quarter with $7 million of cash on the balance sheet slightly above expectations due to strong receipts in the quarter.

Speaker Change: The primary use of cash over the last six months was to prepay a $100 million term loan in November of 2023.

Speaker Change: Looking ahead and as we've discussed previously we pay interest due on our senior notes in the second and fourth quarters.

Speaker Change: That will be about a $14 million use of cash each of those quarters.

Additionally, in the second quarter, we anticipate approximately $10 million.

Speaker Change: Outflows for previously discussed legacy claims.

James E. Harris: As you can see on slide 10, our liquidity position remains strong with over $600 million of committed liquidity at the end of the quarter. Quarter-end gross leverage was three times trailing 12 months adjusted EBITDA, and net leverage was 2.9 times and approximately half a turn sequential increase due to our cycling of last year's EBITDA. During the quarter, we also proactively enhanced our liquidity position. We amended our revolving credit agreement to relax our covenants for 12 months beginning in the second quarter of 2024. We remain comfortable with our current leverage ratio.

Speaker Change: As you can see on slide 10, our liquidity position remains strong with over $600 million of committed liquidity at the end of the quarter.

Speaker Change: Quarter end gross leverage was three times trailing 12 months adjusted EBITDA and net leverage was two nine times and approximately half a turn sequential increase ddos cycling of last year's EBITDA.

Speaker Change: During the quarter, we also proactively enhanced our liquidity position.

Speaker Change: We amended our revolving credit agreement to relax our covenants for 12 months beginning in the second quarter of 2024.

James E. Harris: Given the strong free cash flow characteristics of our business, we will de-lever rapidly as a cycle inflects. Our customers want to work with partners like RxO that have a strong financial position and can perform and invest across all market cycles. We're pleased with our cash flow and our balance sheet given this extended soft freight cycle. Now, let's talk about cost.

Speaker Change: We remain comfortable with our current leverage ratio and given the strong free cash flow characteristics of our business, we will delever rapidly as a cycle in flex.

Speaker Change: Our customers want to work with partners like <unk> that have a strong financial position and can perform and invest across all market cycles.

Speaker Change: We're pleased with our cash flow and our balance sheet given this extended soft freight cycle.

Speaker Change: Let's talk about cost.

James E. Harris: We're operating with a continuous improvement mindset, and our actions are yielding tangible results. Last quarter, we communicated that we would strategically invest in the business while eliminating at least $25 million of annualized expenses in 2024. In the first quarter, we moved quickly to take actions to further optimize our cost structure.

Speaker Change: We are operating with a continuous improvement mindset and our actions are yielding tangible results.

Speaker Change: Last quarter, we communicated that we will strategically invest in the business, while eliminating at least $25 million of annualized expenses in 2024.

Speaker Change: In the first quarter, we moved quickly to take actions to further optimize our cost structure.

James E. Harris: We now expect to take out at least $35 million of annualized operating expenses this year. That's in addition to the cost savings associated with last year's action. We realize a small benefit from our 2024 actions in the first quarter, but we'll see a more meaningful benefit in the second quarter and beyond. The second half of 2024 will fully benefit from the annualized impact of our actions and will help offset year-over-year declines in gross profit per load and inflationary pressure. It's important to note that the 2024 restructuring charges we previously communicated to you remain unchanged despite the higher cost takeout.

Speaker Change: We now expect to take out at least $35 million of annualized operating expenses this year.

Speaker Change: That's in addition to the cost savings associated with last year's actions.

Speaker Change: We realized a small benefit from our 2024 actions in the first quarter, but we will see a more meaningful benefit in the second quarter and beyond the.

Speaker Change: The second half of 2024, it will fully benefit from the annualized impact of our actions and will help offset year over year declines in gross profit per load and inflationary pressures.

Speaker Change: It's important to note that the 2020 for restructuring charges. We previously communicated to you remain unchanged despite the higher cost takeout.

James E. Harris: We're getting more efficient and productive with every action, and the steps we're taking now will deliver significant operating leverage when the cycle turns. Now, let's discuss our expectations for the second quarter and full year. With the improved momentum Drew mentioned earlier, we anticipate a meaningful sequential increase in our adjusted EBITDA and expect to deliver between $24 and $30 million of adjusted EBITDA in Q2. Jared will provide more details on our outlook shortly. Slide 14 includes our modeling assumptions for the full year. We continue to expect the following.

Speaker Change: We're getting more efficient and productive with every action and the steps, we're taking now will deliver significant operating leverage when the cycle turns.

James E. Harris: Catholic Expenditures, between $40 and $50 million. Appreciation Expansion, between $56 and $58 million. Amortization of Intangibles, Approximately $12 million. Stock-based compensation extends between $24 and $26 million. Restructuring, transaction, and integration expenses between $20 and $25 million, and net interest expense between $31 and $33 million. We expect our full year 2024 Adjusted Effective Tax Rate to be approximately 30%. You should also model an average diluted share count of approximately 120 main shares.

Now, let's discuss our expectations for the second quarter and full year.

Speaker Change: With the improved momentum drew mentioned earlier, we anticipate a meaningful sequential increase in our adjusted EBITDA.

Speaker Change: And expect to deliver between 24 and $30 million of adjusted EBITDA in Q2.

David will provide more details on our outlook shortly.

Speaker Change: Slide 14 includes our modeling assumptions for the full year.

Speaker Change: We continue to expect the following.

Speaker Change: Capital expenditures between 40 and $50 million.

Speaker Change: Depreciation expense.

Speaker Change: Between 56 and $58 million.

Speaker Change: Amortization of intangibles approximately $12 million.

Speaker Change: Stock based compensation expense between 24 and $26 million.

Restructuring transaction and integration expenses between 20 and $25 million.

Speaker Change: Net interest expense between 31% and $33 million.

Speaker Change: We expect our full year 2024, adjusted effective tax rate to be approximately 30%.

Speaker Change: You should also model an average diluted share count of approximately 120 million shares.

James E. Harris: One other thing that you'll see beginning next quarter. As Drew mentioned earlier, we've combined our managed transportation and freight forwarding businesses to improve our customers' experience and help drive growth. Starting in the second quarter, you'll see these businesses combined in our earnings presentation and financial statements. Overall, given the current state of the freight cycle, we're pleased with our execution. Our businesses are operating well, we're taking proactive and sustainable actions to reduce costs, and we continue to invest strategically. All of this positions ARC so well for the cycle inflection. Now, I'd like to turn it over to Chief Strategy Officer Jared Weisfeld, who will talk in more detail about our results and our outlook.

Speaker Change: One other thing that you'll see beginning next quarter as drew mentioned earlier, we've combined our managed transportation and freight forwarding businesses to improve our customers' experience and help drive growth.

Starting in the second quarter Youll see these businesses combined and our earnings presentation and financial statements.

Speaker Change: Overall, given the current state of the freight cycle, we're pleased with our execution our.

Speaker Change: Our businesses are operating well, we're taking proactive and sustainable actions to reduce cost and we continue to invest strategically.

Speaker Change: All of this positions <unk> well for the cycle inflection.

Speaker Change: Now I'd like to turn it over to Chief strategy Officer, Jared Weisfeld, who will talk in more detail about our results and our outlook.

Jared Weisfeld: Thanks, Jamie. And good morning, everyone.

Jared Weisfeld: Thanks, Jamie and good morning, everyone.

Jared Weisfeld: We continue to outperform the market in the first quarter, growing brokerage volume by 11% year over year. This is our fourth consecutive quarter of double-digit volume growth in the prolonged soft rate market. More specifically, we grew our full truckload volumes by 8% year over year. On a three-year stack, our full truckload contract volumes grew by approximately 40%. LTL volume in the quarter group by 29% year over year. Our full truckload customers award us LTL Freight because of our strong service and relationship. LTL shipments represented approximately 17% of brokerage volumes in the first quarter.

Jared Weisfeld: We continued to outperform the market in the first quarter growing brokerage volume by 11% year over year.

This is our fourth consecutive quarter of double digit volume growth in the prolonged soft freight market.

Jared Weisfeld: More specifically, we grew our full truckload volumes by 8% year over year.

Jared Weisfeld: On a three year stack, our full truckload contract volumes grew by approximately 40%.

<unk> volume in the quarter grew by 29% year over year.

Jared Weisfeld: Our full truckload customers award us LPL freight because of our strong service and relationships.

Jared Weisfeld: <unk> represented approximately 17% of brokerage volumes in the first quarter.

Jared Weisfeld: We also maintained a favorable mix of contract and spot business in the quarter, with contractual volume representing 79% of our business, down 100 basis points sequentially and up 200 basis points when compared to the first quarter of 2023. Contract volume grew 18% year over year. Within our full truckload business, we saw year-over-year volume growth in most of our major verticals. Retail and e-commerce volumes grew by 10% year over year.

Jared Weisfeld: We also maintained a favorable mix of contract and spot business in the quarter with contractual volume, representing 79% of our business down 100 basis points sequentially and up 200 basis points when compared to the first quarter of 2023.

Jared Weisfeld: Contract volume grew 18% year over year.

Jared Weisfeld: Within our full truckload business, we saw year over year volume growth in most of our major verticals.

Jared Weisfeld: Retail and e-commerce volumes grew by 10% year over year.

Jared Weisfeld: Volume from industrial and manufacturing customers increased by 13% year-over-year, accelerating from 8% last quarter. The acceleration in our industrial volumes was consistent with the ISM manufacturing PMI entering expansionary territory in the quarter, the first time it's expanded in approximately a year and a half.

Jared Weisfeld: Volume from industrial and manufacturing customers increased by 13% year over year accelerating from 8% last quarter.

Jared Weisfeld: Acceleration in our industrial volumes was consistent with the ISO manufacturing PMI entering expansionary territory in the quarter.

Jared Weisfeld: The first time it has expanded approximately a year and a half.

Jared Weisfeld: Automotive grew at 21% year over year, although at a slower pace than the last few quarters. From a profitability perspective, the brokerage gross margin of 14.2% was ahead of the 12 to 14% range we provided you in February and was a result of our quick actions to bring down our cost of purchase transportation. Brokerage Gross Margin Percentage and Brokerage Gross Profit Per Load improved every month throughout the quarter. In the first quarter, we launched several new technology enhancements across multiple modes of transportation. We increased dedicated lane capabilities to enhance the carrier experience, and seven-day carrier retention remains strong at 76% in the quarter. We also added increased LTL automation capabilities across the order lifecycle.

Jared Weisfeld: Automotive grew at 21% year over year, although at a slower pace than the last few quarters.

Jared Weisfeld: From a profitability perspective brokerage gross margin of 14, 2% was ahead of the 12% to 14% range. We provided you in February and was a result of our quick actions to bring down our cost of purchased transportation.

Jared Weisfeld: Brokerage gross margin percentage and brokerage gross profit per load improved every month throughout the quarter.

In the first quarter, we launched several new technology enhancements across multiple modes of transportation.

We increased dedicated lean capabilities to enhance the carrier experience and seven day carrier retention remained strong at 76% in the quarter.

Jared Weisfeld: We also added increased LPL automation capabilities across the order lifecycle.

Jared Weisfeld: We remain excited about the growth and profitability of our LTL business. Our technology enables our people to become even more productive. On a rolling 12-month basis, productivity in our brokerage business, as measured by loads per head per day, improved by over 18% year-over-year. I'd now like to review our brokerage financial performance and market conditions in more detail. You can find this information on slides 11 through 13 of the presentation.

We remain excited about the growth and profitability of our <unk> business.

Jared Weisfeld: Our technology enables our people to become even more productive.

Jared Weisfeld: On a rolling 12 month basis productivity in our brokerage business as measured by loads per head per day improved by over 18% year over year.

Jared Weisfeld: I would now like to review, our brokerage financial performance and market conditions in more detail.

Jared Weisfeld: You can find this information on slides 11 through 13 of the presentation.

Jared Weisfeld: Revenue per load declines eased for the third consecutive quarter and declined by 15% year-over-year. However, the year-over-year decline improved by 500 basis points when compared to the fourth quarter. To get a better view of our consolidated year-over-year price declines on a per-load basis, it's important to consider the impacts of length of haul, mix, and changes in fuel prices. When normalizing for those items, revenue per load on a percentage basis was down high single digits year over year in line with the broader market. This decline was moderated when compared to last quarter's low double-digit year-over-year decline.

Jared Weisfeld: Revenue per load declines ease for the third consecutive quarter and declined by 15% year over year.

Jared Weisfeld: The year over year decline improved by 500 basis points, when compared to the fourth quarter.

Jared Weisfeld: To get a better view of our consolidated year over year price declines on a per load basis, it's important to consider the impacts of length of haul mix and changes in fuel prices.

Jared Weisfeld: When normalizing for those items revenue per load on a percentage basis was down high single digits year over year in line with the broader market.

Jared Weisfeld: This decline moderated when compared to last quarter's low double digit year over year decline.

Jared Weisfeld: We generate a strong gross margin percentage across all different parts of the freight cycle by leveraging our proprietary technology and pricing algorithms to procure capacity at better than market rates. We expect year-over-year revenue per load declines to improve again in the second quarter, marking the fourth consecutive quarter of moderating declines. Importantly, the change in full truckload year-over-year revenue per load should meaningfully improve in the second quarter. To give additional context, in the month of April, full truckload revenue per load was down just mid-single digits on a year-over-year basis and up slightly when compared to the month of March.

Jared Weisfeld: We generate a strong gross margin percentage across all different parts of the freight cycle by leveraging our proprietary technology and pricing algorithms to procure capacity at better than market rates.

Jared Weisfeld: We expect year over year revenue per load declines to improve again in the second quarter, marking the fourth consecutive quarter of moderating declines.

Jared Weisfeld: Importantly, the change in full truckload year over year revenue per load should meaningfully improve into the second quarter.

Jared Weisfeld: To give additional context in the month of April full truckload revenue per load was down just mid single digits on a year over year basis, and up slightly when compared to the month of March.

Jared Weisfeld: As we look towards the end of the second quarter, we believe full truckload revenue per load will be approximately flat year over year. This would mark the first time in about two years that revenue per load has been flat on a year-over-year basis. Let's move to slide 12 and discuss Brokerage Monthly Gross Margin Trends. The market loosened after January's acute inclement weather.

Jared Weisfeld: As we look towards the end of the second quarter, we believe full truckload revenue per load will be approximately flat year over year.

Jared Weisfeld: This would mark the first time in about two years net revenue per load has held on a year over year basis.

Jared Weisfeld: Let's move to slide 12, and discuss brokerage monthly gross margin trends.

Jared Weisfeld: The market loosened after january's acute inclement weather.

Jared Weisfeld: Load-to-truck ratio, tangent rejections, and line haul spot rates all moved lower throughout the quarter. We moved quickly and leveraged our proprietary technology to reduce our cost of purchase transportation in February and March. Let's go to slide 13 and briefly look at RXO's brokerage gross profit per load, which decreased sequentially in the first quarter because of January's weather-related challenges. However, as we've just walked through, our gross profit per load improved every month as the quarter progressed. I'd now like to look forward and give you some more color on the second quarter outlook that Jamie provided. Let's start with volume.

Jared Weisfeld: Load to truck ratio tangent rejections and line haul spot rates all move lower throughout the quarter.

Jared Weisfeld: We moved quickly and leveraged our proprietary technology to reduce our cost of purchase transportation in February and March.

Jared Weisfeld: Let's go to slide 13, and briefly look at Orix is brokerage gross profit per load, which decreased sequentially in the first quarter because of january's weather related challenges.

Jared Weisfeld: However, as we've just walked through our gross profit per load improved every month as the quarter progressed.

Jared Weisfeld: I would now like to look forward and give you some more color on our second quarter outlook that Jamie provided.

Jared Weisfeld: We expect to grow year-over-year brokerage volumes again in the second quarter, although at a slower rate relative to the first quarter's growth rate. We expect full truckload volume to be down low to mid single digits year over year, primarily because of the prolonged week freight market and more difficult comps given our robust brokerage volume growth in 2023. To put that in perspective, a low to mid-single-digit year-over-year volume decline in the second quarter would still result in full truckload contract volume growth of approximately 40% on a three-year stack, which speaks to our significant multi-year market share gains.

Let's start with volume, we expect to grow year over year brokerage volumes again in the second quarter, although at a slower rate relative to the first quarter's growth rate.

Jared Weisfeld: We expect full truckload volume to be downloaded to mid single digits year over year, primarily because of the prolonged weak freight market and more difficult comps given our robust brokerage volume growth in 2023.

Jared Weisfeld: To put that in perspective, a low to mid single digit year over year volume decline in the second quarter would still result in full truckload contract volume growth of approximately 40% on a three year stack, which speaks to our significant multi year market share gains.

Jared Weisfeld: As Drew mentioned earlier, we approached this bid season anticipating a freight market recovery. We're focused on reliably servicing our customers' needs and honoring our contractual rates. These actions will put us in a prime position to capture spot volume and project freight when the market recovers. Turning to LTL, we have significant momentum and expect year-over-year volume growth to be more than 30 percent. We expect brokerage gross margin to be between 13 and 15% in the second quarter, approximately flat at the midpoint when compared to the first quarter.

As drew mentioned earlier, we approached this bid season, anticipating a freight market recovery.

Jared Weisfeld: We're focused on reliably servicing our customers' needs and honoring our contractual rates.

Jared Weisfeld: These actions will put us in prime position to capture spot volume and project right when the market recovers.

Jared Weisfeld: Turning to <unk>, we have significant momentum and expect year over year volume growth to be more than 30%.

Jared Weisfeld: We expect brokerage gross margin to be between 13% and 15% in the second quarter approximately flat at the midpoint when compared to the first quarter.

Jared Weisfeld: While RX's brokerage gross margin in March and April came in at the high end of that range, we are assuming some seasonal moderation in May and June as a result of DOT road check and produce. We're also not assuming any material spot opportunities in our second quarter outlook. We expect a sequential improvement in brokerage gross profit per load in the second quarter. In complementary services, we expect typical positive Q2 seasonality, primarily in our last mile. Putting it all together, we expect RXO's second-quarter adjusted EBITDA to be between $24 and $30 million.

Jared Weisfeld: While <unk> brokerage gross margin in March and April came in at the high end of that range. We are assuming some seasonal moderation in may and June as a result of Dot road check and produce season.

Jared Weisfeld: We're also not assuming any material spot opportunities in our second quarter outlook.

Jared Weisfeld: We expect a sequential improvement in brokerage gross profit per load in the second quarter.

Jared Weisfeld: And complementary services, we expect typical positive Q2 seasonality primarily in our last mile business.

Jared Weisfeld: Putting it altogether, we expect Arco's second quarter, adjusted EBITDA to be between 24 and $30 million.

Jared Weisfeld: From an industry perspective, there is still too much truckload capacity relative to current demand. Carriers are exiting the market slowly, but we still expect the pace of exits to accelerate throughout the year, given the challenges to carriers' unit economics. Encouragingly, we saw an acceleration in carrier exits in April when compared to March. In summary, we're continuing to do well in the soft freight market. We're entering the second quarter with improved momentum and the largest sales pipeline in the last four years. We're optimizing our call structure while strategically investing in our business, and we have a playbook to deliver strong earnings growth when the market inflects. With that, I'll turn it over to the operator for Q&A.

Jared Weisfeld: From an industry perspective, there's still too much truckload capacity relative to current demand.

Jared Weisfeld: Carriers are exiting the market slowly, but we still expect the pace of exits to accelerate throughout the year given the challenges to carriers unit economics incur.

Jared Weisfeld: Encouragingly, we saw an acceleration in carrier exits in April when compared to March.

Jared Weisfeld: In summary, we're continuing to execute well in the soft freight market.

Jared Weisfeld: We're entering the second quarter with improved momentum in the largest sales pipeline over the last four years.

Jared Weisfeld: We're optimizing our cost structure, while strategically investing in our business and have a playbook to deliver strong earnings growth when the market and flex.

Speaker Change: With that I'll turn it over to the operator for Q&A.

Operator: Ladies and gentlemen, should you have a question, please press star 1. If you'd like to withdraw your question, please press star 2. If you're using a speakerphone, please make sure to lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Stephanie Moore from Jeffreys. Please go ahead.

Speaker Change: Thank you ladies and gentlemen should you have a question. Please press star one if you would like to withdraw your question. Please press star two if you're using a speaker phone. Please make sure to lift the handset before pressing any keys one moment. Please for your first question.

Speaker Change: Your first question comes from Stephanie <unk> from Jefferies. Please go ahead.

Stephanie Lynn Benjamin Moore: Hi, good morning. Thank you.

Stephanie: Hi, good morning, Thank you.

Drew M. Wilkerson: Morning Stephanie, how are you?

Stephanie: Good morning, Stephanie how are you.

Stephanie Lynn Benjamin Moore: I'm doing well. You know, maybe it would be helpful, Drew, could you provide maybe a little bit more color on the volume performance for the first quarter and then, you know, really your truckload volume growth expectations for 2Q, you know, how this stacks up from kind of a multi-year growth standpoint, and then, you know, your ability to take share across the cycle, and, you know, what is the potential for maybe upside to that guidance? Thanks. Yeah,

Stephanie: Well, maybe it'll be helpful. Gerald could you provide maybe a little bit more color on the volume performance for the first quarter and then really your truckload volume growth expectations of our 10-Q.

How this stacks up on kind of a multiyear growth standpoint, and then your ability to take share across the cycle and what is the potential for maybe upside to that guide. Thanks.

Drew M. Wilkerson: Yeah, absolutely. When you look at where we are right now on truckload growth, I'm very proud of what the team did again by growing 8% on a year-over-year basis in the first quarter. As you look out to the second quarter, there are two things that you should look at. One, the overall market is down again on a year-over-year basis. The second thing is that our comps get a little bit more difficult.

Gerald: Yes, absolutely.

Gerald: You look at where we are right now on truckload growth very proud of what the team did again by growing 8% on a year over year basis in the first quarter as you look out to the second quarter.

Gerald: There's two things that you should look at one the overall market is down again on a year over year basis. The second thing is that our comps get a little bit more difficult, but the way that we look at the business is what are we doing on a multiyear stack and when you look on a three year stack in the first quarter, our contractual business was up around 40%.

Drew M. Wilkerson: But the way that we look at the business is, what are we doing on a multi-year stack? And when you look at a three-year stack, in the first quarter, our contractual business was up around 40%. And it's going to be up around the same thing in the second quarter on a three-year stack. So on a multi-year stack, what we've shown is that this market share that we're taking is sticky market share

Gerald: And it's going to be up around the same thing in the second quarter on a three year stack. So on a multiyear stack. What we've shown is this market share that we're taking is sticky market share.

Drew M. Wilkerson: Got it. No, that's helpful. And maybe just a follow-up. Can you provide just color, I guess, on the gross margin and gross profit per load trends that you've seen in April? Thanks. Yeah, so January.

Speaker Change: Got it that's helpful. And then maybe just a follow up.

Speaker Change: Can you provide the color I guess on the gross margin and gross profit per load trends.

Speaker Change: And in April.

Drew M. Wilkerson: Yeah, so January was tough, it got better in February, it got better again in March, and it was a little bit better in April.

Speaker Change: Yes, So January was tough.

Speaker Change: In February they got better again in March and it was a little bit better in April.

Stephanie Lynn Benjamin Moore: Easy enough. Thanks, guys.

Speaker Change: Easy enough thanks, guys.

Thomas Richard Wadewitz: Your next question comes from... Wadewitz from UBS. Please go ahead.

Speaker Change: Your next question comes from Tom.

Tom: Blake switch from UBS. Please go ahead.

Thomas Richard Wadewitz: Yeah, good morning. So I think the, I guess the two questions on the EBITDA guide, is the sequential improvement primarily a function of getting the operating expense reductions? Is that the primary lever of the sequential move? It sounds like you're, you know, you're kind of seeing, I guess, worse than normal seasonality in terms of loads in the market. So is that the right way to look at it? Or are there other kinds of, you know, meaningful assumptions in that sequential move up in EBITDA?

Tom: Yes, good morning so.

Tom: I think the.

Tom: I guess the third.

Tom: Two questions on the EBITDA guide is the sequential improvement primarily a function of getting the operating expense reductions is that the primary lever.

Tom: Sequential move it sounds like Youre kind of seeing.

Tom: I guess worth the normal seasonality in terms of loads in the market. So is that the right way to look at it or are there other kind of.

Tom: Meaningful assumptions in that sequential move up in EBITDA.

James E. Harris: Yeah, hey, good morning. This is Jamie.

Yeah, Hey, good morning, this is Jamie.

James E. Harris: Things are the drivers.

James E. Harris: First of all we entered Q2 with a lot of good momentum.

James E. Harris: The biggest drivers sequentially as our gross profit per load in our brokerage business.

James E. Harris: We moved quickly in January was a tough January early January for whether we move quickly on cost to purchase trends, we've been able to hold that improvement so far to the end of the first quarter into April.

James E. Harris: Keep in mind, we're also replacing April with a place in January with a strong April may June.

James E. Harris: Several things are the drivers. You know, first of all, we enter Q2 with a lot of good momentum. The biggest driver sequentially is our gross profit per load and our brokerage business. We moved quickly in January; it was a tough January, early January for weather; we moved quickly on cost of purchase trends. We've been able to hold that improvement so far to the end of the first quarter and into April. You know, keep in mind, we're also replacing January with a strong, you know, April, May, and June.

James E. Harris: We're also seeing improvement in some of our complementary services in particular to call out last mile where we've got a lot of it's seasonal.

James E. Harris: Sequential seasonal uptick in April May and June also we're seeing a lot of good operational improvements from some initiatives and to your point that you mentioned initially we are going to see some improvement quarter to quarter from our cost takeout.

James E. Harris: So you put all that together, which really drives the sequential increase.

James E. Harris: We're also seeing improvement in some of our complementary services, and particularly in last mile where we've got a lot of good seasonal sequential seasonal uptick in April, May, and June. Also, we're seeing a lot of good operational improvements from some initiatives. And to your point that you mentioned initially, we are going to see some improvement quarter to quarter from our cost takeouts. And so you put all that together, you know, switching is really driving the sequential increase.

Thomas Richard Wadewitz: Right. Okay.

Speaker Change: Right, Okay, and then the second one I think drew you mentioned your positioning for the improvement in the market. It does seem like that improvement in the markets getting pushed out a ways in general, but how do you think about the contract mix.

Thomas Richard Wadewitz: And then the second one, Drew, you mentioned your positioning for the improvement in the market. It does seem like that improvement in the market is getting pushed out of ways in general. But how do you think about the contract mix? management.

Thomas Richard Wadewitz: The 79% you mentioned that's contracted on the brokerage side seems like it's at the high end of the range. And that would maybe point to some risk when your cost of capacity goes up, you get squeezed there. But are you doing shorter commitments on the raid? Do you think you have any flexibility there? Or how do you think about the kind of, you know, preparation for that eventual move up in the market?

James E. Harris: Management.

James E. Harris: 79% you mentioned its contract in the brokerage side. It seems like it's at the high end of the range.

James E. Harris: And that would maybe point to some risk when the when your cost of capacity goes up that you get squeezed there, but are you doing shorter commitments on the rate.

James E. Harris: Do you think you have flexibility there or how do you think about the kind of prep.

James E. Harris: Preparation for that eventual move up in the market.

Drew M. Wilkerson: Tom, we think that our contract mix is actually an opportunity because, one, it's built strong relationships with our customers. It shows that they trust us with their most important pieces of business.

Speaker Change: Tom We think that our contract mix is actually an opportunity because one has built strong relationships with our customers shows that they trust us with their most important pieces of business and as the market shifts the first place that they go as the people that they trust and have delivered value and strong service to them. So spot loads project. Many beds. We think we are in.

Drew M. Wilkerson: And as the market shifts, the first place that they go is the people that they trust and have delivered value and strong service to them. So spot loads, project mini-bids, we think we're in a prime position. And those will typically be at a higher gross profit per load. So yes, we would get squeezed on the contractual business, but the spot business would be at a higher gross profit per load. So it would position us well for when the market does inflect.

Speaker Change: Proposition then those will typically be at a higher gross profit per load. So yes, we would get squeeze on the contractual business, but the spot business would be at a higher gross profit per load. So it positioned us well for when the market does inflect.

Drew M. Wilkerson: You're right that most folks have pushed out on when the market recovery is coming, but we do think that it's going to happen sometime over the next 6, 9, 12 months, which is why we've taken the step to price the business the way that we have. Our customers have told us two things that are really important. One, service the business, and two, whenever you get the business, tender acceptance is extremely important.

Speaker Change: Youre right that I think most folks have pushed out on the market recovery is coming but we do think that it's going to happen sometime over the six 912 months, which is why we've taken the step to price the business. The way that we have our customers have told US two things that are really important one service the business in two whenever you whenever you get the business.

Speaker Change: Tender acceptance is extremely important so we priced the business of quarterly for where we think the market is going.

Drew M. Wilkerson: So we price the business accordingly for where we think the market is going. And with that said, we've seen some business where customers have gone with lower rates, but they've actually already come back to us because service and tender acceptance is so important.

Speaker Change: With that said, we've seen some business that customers have gone with lower rates that they've actually already come back to us because of service and tender acceptance is so important.

Thomas Richard Wadewitz: Right. Okay, great. Thanks for the time.

Speaker Change: Right, Okay, great. Thanks for the time.

Speaker Change: Thank you.

Scott Andrew Schneeberger: Your next question comes from Scott Schneeberger from Oppenheimer. Please go ahead.

Speaker Change: Your next question comes from Scott Schneeberger from Oppenheimer. Please go ahead.

Scott Andrew Schneeberger: Thanks. Good morning, everyone.

Scott Andrew Schneeberger: Thanks, Good morning, everyone.

Scott Andrew Schneeberger: Wanted to focus a little bit on LTE, all youre still anticipating really strong volume growth in in the second quarter and that in fact is probably what's going to keep your overall volume growth in brokerage.

Scott Andrew Schneeberger: Positive and just your level of confidence that you can keep overall volume in brokerage positive and then on the LTE al.

Scott Andrew Schneeberger: Are we going to see some tough comps heading into the back half where were that strong growth will moderate significantly.

Scott Andrew Schneeberger: Yes. So if you look right now on a on a.

Scott Andrew Schneeberger: Year over year basis in the second quarter, we did say that we expected to grow overall volume once again, but with that said, we expect truckloads to be down a little bit and we.

Scott Andrew Schneeberger: Significant growth again in our <unk> business. The reason that we're getting our <unk> business is coming from customers, who do business with us on the truckload side and so what these customers have told US is <unk> is a small piece of their overall revenue and what they're managing but it's a big piece of the headaches that they get meaning claims late deliveries.

Scott Andrew Schneeberger: Things like that and so for us to be able to put it on our platform Rx So connect and manage all of their <unk> is a huge advantage to them they've seen the value that we've created and their transportation network on the truckload side and now getting a shot at the LTM was something that we think is a tailwind for us for the foreseeable future the comps do get tougher in the.

Drew M. Wilkerson: I want to focus a little bit on LTL. You're still anticipating really strong volume growth in the second quarter. And that, in fact, is probably what's going to keep your overall volume growth in brokerage positive. Just your level of confidence that you can keep overall volume growth in brokerage positive. And then on LTL, are we going to see some tough comps heading into the back half where that strong growth will moderate?

Scott Andrew Schneeberger: Second half, but I do expect us to still be growing <unk> volume in the second half.

Drew M. Wilkerson: So if you look right now at a year over year basis in the second quarter, we did say that we expected overall volume to grow once again. But with that said, we expect truckload to be down a little bit, and we expect significant growth again in our LTL business. The reason that we get this LTL business is that it's coming from customers who do business with us on the truckload side.

Speaker Change: Great. Thanks drew.

Speaker Change: And then could you guys elaborate on this.

Speaker Change: Its largest in four years sales pipeline. It sounds like a lot is in managed transportation, but could you just kind of go across the segments touch on what that is how you are getting that.

Speaker Change: And Directionally, what you what you expect going forward. Thanks.

Speaker Change: Yes.

Speaker Change: It's really across the board and it speaks to the diversity of our portfolio I mean, one we've talked a lot about <unk> already this morning, so looking at the LPL pipeline thats coming over from the truckload side is strong we talked about in managed transportation, winning our onboarding $350 million of freight under management, our last mile because.

Drew M. Wilkerson: And so what these customers have told us is LTL is a small piece of their overall revenue and what they're managing, but it's a big piece of the headaches that they get, meaning claims, late deliveries, things like that. And so for us to be able to put it on our platform, RxOConnect, and manage all of their LTL is a huge advantage to them. They've seen the value that we've created in their transportation network on the truckload side, and now getting a shot at the LTL is something that we think is a tailwind for us for the foreseeable future. The comps do get tougher in the second half, but I do expect us to still be growing LTL volume in the second half.

Drew M. Wilkerson: Thanks Drew. Um, and then could you guys elaborate on this, uh, in this largest in four years sales pipeline? Sounds like a lot is in managed transportation, but could you just kind of go across the segments, touch on what that is, uh, how you're getting that, uh, and directionally what you, what you expect going forward. Yeah, it's really across the board, and it speaks to the diversity of our portfolio. I mean, one, we've talked a lot about LTL already this morning.

Scott Andrew Schneeberger: So looking at the LTL pipeline that's coming over from the truckload side, it's strong. We talked about managed transportation, winning our own boarding $350 million of freight under management, our last mile because we're the largest player in the market. Customers are coming to us and saying, Hey, we want to give you new markets. They know that we've got great service, and they know that we've got scale and capacity to serve their business.

Speaker Change: We are the largest player in the market customers are coming to us and saying Hey, we want to give you new markets. They know that we've got great service and they know that we've got scale and capacity to service their business. So we're seeing huge opportunity. There. So very pleased with where the where the overall pipeline is and excited to see the conversion of it in the second half of the year.

Scott Andrew Schneeberger: So we're seeing huge opportunities there. So very pleased with where the overall pipeline is and excited to see the conversion of it in the second half of the year. Great. That sounds good. Thanks. Your next question comes from Brandon Oglenski from Barclays.

Speaker Change: Great that sounds good thanks.

Brandon Robert Oglenski: Your next question comes from Brandon Oglenski from Barclays. Please go ahead. Hey, good morning, gentlemen. Drew, I was wondering if...

Speaker Change: Your next question comes from Brandon <unk> from Barclays. Please go ahead.

Brandon: Hey, good morning, gentlemen.

Brandon: Jim I was wondering if you could talk to the truckload volumes being down in the second quarter I guess, that's a little bit of a deviation from the past.

Drew M. Wilkerson: Yeah, so Brandon, you know, again, two things to start off with. One, if you look at the overall industry and truckload volume, volumes are again down on a year over year basis. So that's been several years that volumes have been down. So there's less volume out there in just the market.

Jim: Yes, so Brandon again, two things to start off with one if you look at the overall industry in truckload volume volumes are again down on a year over year basis. So that's a multi years that volumes have been down. So there is less volume out there and just the market. The second thing is we've created tough comps for ourselves because we have been going out there and taking share.

Drew M. Wilkerson: The second thing is, we've created tough comps for ourselves because we have been going out there and taking share through this market. But you know, as I told Stephanie earlier, the important thing for us is how we look at the business, and we look at it on a multi-year stack basis. And if you look at volumes in the first quarter, or contractual business was up on a three-year stack, 40% is going to be in that same range in the second quarter.

Jim: Through this market, but as I told Stephanie earlier, the important thing for US is how do we look at the business and we look at it on a multiyear stack basis, and if you look at volumes in the first quarter, our contractual business was up on a three year stacked 40% thats going to be in that same range in the second quarter. So again like the biggest thing.

Drew M. Wilkerson: So again, like the biggest thing that we wanted to be able to answer on this is showing that the market share gains that we've had are sticky, and they're going to stay with us for a long time. Okay, I mean, are volumes with existing customers going down? Or did you walk away from some contracted business in the last two months? It is volumes within existing customers that are down. We are always evaluating what's in the portfolio and how we can service that best for the customers and create good solutions.

Jim: We wanted to be able to answer off of this is showing that the market share gains that we've had are sticky and they're going to stay with us for a long time.

Speaker Change: Okay. I mean is this.

Speaker Change: Volumes with existing customers going down or did you walk away from some contracted business and <unk>.

Speaker Change: It is volumes within existing customers that are down we are always evaluating what's in the portfolio and how do we service that best for the customers and create good solutions and like I talked about earlier, we've had customers who have come back and told US Hey, we got paper rates, we took the paper rates, but now we're coming back to you because we <unk>.

Drew M. Wilkerson: And like I talked about earlier, we've had customers who have come back and told us, hey, we got paper rates, we took the paper rates, but now we're coming back to you because we realize that you'll give us the service and the tender acceptance that we desire. OK.

Speaker Change: But youll give us the service and the tender acceptance that we desire.

Speaker Change: Okay. Thank you on that and then Jamie on the cost reductions you mentioned purchase transportation. So should we be thinking cost is coming out of <unk>.

James E. Harris: SG&A, but also purchase Tran on these initiatives.

James E. Harris: Yeah, so the cost the cost outs that we called out are doesn't do not include anything related to cost of purchase trans, two separate topics. The cost of purchase trans is really a reaction to what's going on in the freight marketplace. The cost outs are, you know, back office support services, vendor contracts, we consolidated some, some facilities in our last mile hub operation. It's structural cost items that will have a meaningful impact, kind of below the gross profit line, if you will.

James E. Harris: Yes, so the cost the cost outs that we called out or doesn't do not include anything related to cost of purchase trans two separate topics cause the purchase trans is really a reaction to what's going on in the freight marketplace. The cost outs are.

James E. Harris: Back office support service vendor contracts, we've consolidated some some facilities in our last mile.

James E. Harris: <unk> operation its structural cost items that will have an EMEA full impact kind of below the gross profit line. If you will.

Speaker Change: Alright, thank you.

Kenneth Scott Hoexter: Your next question comes from Ken Hoexter from Bank of America. Please go ahead.

Speaker Change: Your next question comes from Ken <unk> from Bank of America. Please go ahead.

Kenneth Scott Hoexter: Hey, thanks. Just a follow-up on Brandon's truckload volume question there. Is it business, I'm just trying to understand the messaging here. Are you seeing business accelerate on the decline, right, just to flip from up 8% to, I get the tougher comps, but is something shifting quickly here on the market side?

Ken: Hey, Thanks, just a follow up on Brian's truckload volume question. There is is it business I'm just trying to understand the messaging here are you seeing.

Ken: Business accelerate on the decline rate just to.

Ken: From up 8% I get the tougher comps, but it is something shifting quickly here on the market side.

Drew M. Wilkerson: No, so if you look in April, I mean, truckload was down 1% on a year-over-year basis, Ken. It's more about where we think the market is going. And we've said that we've taken a position that we think that the market is going to turn at some point over the next 6, 9, and 12 months. And it's important for us to put in prices that we can service our business to our customers, make a fair profit margin, and be able to give them the service and tender acceptance that they desire. So, you know, for us, it's about pricing for where we believe the market is going.

Speaker Change: So if you look into April truckload was down 1% on a year over year basis Ken.

Speaker Change: It's more about where we think the market is going and we've said that we've taken a position that we think that the market is going to turn at some point over the next six 912 months and it's important for us to put in prices that we can service our business to our customers make a fair profit margin and be able to give them the service and tender it substance.

Speaker Change: They desire so yes for us.

Speaker Change: It's about pricing for where we believe the market is going.

Kenneth Scott Hoexter: Okay, and then in the $24-$30 million EBITDA, I just want to understand the assumption. Does it sound like, I just want to know what's shifting from, I guess, further from 1Q to 2Q. You noted some seasonality in the last mile, I get that, but are you assuming that the $1.25 spot pricing is holding through, and that's related? I just want to know what we should look for if something changes in the market that could impact EBITDA as we move through the quarter.

Speaker Change: Okay.

Speaker Change: Then in the debt.

Speaker Change: <unk> thousand $430 million EBITDA.

Speaker Change: Just want to understand the assumptions it sounds like.

Speaker Change: Just wanted to what shifting from I guess further from one <unk> to two key you noted some seasonality in last mile I get that but are you assuming that the $1 25 spot pricing is holding through and Thats really aiding I just want to know what we should look for it if something changes in the market that could impact that EBITDA as we move through the quarter.

Jared Weisfeld: Sure, Kenneth, and Jared. When we look to the $24 million to $30 million that we provided in terms of Q2 adjusted EBITDA, the way to think about it is, you know, we talked about in the month of March and the month of April, we were at the high end of our brokerage gross margin percentage, so call it in that 15% range or so. What we've done is we're assuming some seasonal moderation already baked into that guide attributable to the tightness that we expect from DOT checkpoint week, as well as produce season.

Speaker Change: Sure Ken it's Jaret, when we look to the 20% to $30 million that we provided in terms of Q2 adjusted EBITDA the way to think about it is.

Jaret: We talked about in the month of March and the month of April we were at the high end of our brokerage gross margin percentage so call. It in that 15% range or so what we've done is we're assuming some seasonal moderation already baked into that guide attributable to the tightness that we expect from D. O T checkpoint week as well as produce season, and we're also assuming no meaningful.

Jared Weisfeld: And we're also assuming no meaningful spot opportunities in that outlook. So we've already accounted for the seasonal moderation that we typically expect in the brokerage business in that second quarter. And on the positive side, like we talked about, you know, Q2 is generally a stronger quarter for complementary services, particularly last mile, and there's some really good business momentum there right now.

Jaret: <unk> opportunities in that outlook. So we've already accounted for the seasonal moderation that we typically expect in the brokerage business in that second quarter and on the positive side like we talked about we Q2 is generally a stronger quarter for complementary services in particular last mile and Theres. Some really good business momentum there right now.

Kenneth Scott Hoexter: Okay, and then given the light cash flow, Jamie. Maybe what shifts sequentially and then the impact of, if we continue with this elongated freight recession, you know, if we go into 25, maybe, what are your thoughts on cash there?

Jaret: Okay.

Jaret: And then given the cash flow.

Jaret: Jamie.

Speaker Change: Maybe what shifts sequentially and then the impact of if if we continue with this elongated freight recession.

James E. Harris: If we go into 'twenty five may be what are your thoughts on on cash there.

James E. Harris: Yeah, Ken. So, you know, in the first quarter, we actually had a really good cash collections quarter. We are at the down part of the freight cycle. And so you see an, you know, just even adjusted cash flow of about a million dollars. That being said, as we look forward heading into the second quarter, as you know, we've got our interest payments on our bonds coming up in Q2, Q4 of each year.

James E. Harris: Yeah, Ken So first quarter, we actually had a really good cash collections quarter.

James E. Harris: We are the down part of the freight cycle and so you see.

Ken: Adjusted EBITDA adjusted cash flow of about $1 million.

Speaker Change: That being said as we as we look forward heading into the second quarter. As you know we've got our interest payments on our bonds coming up in Q2 Q4, each year, so youll see about a $14 million usage of cash for interest payments.

James E. Harris: So you'll see about a $14 million usage of cash for interest payment. We also have some legacy liability claims that we're going to probably pay out in the second quarter, the same ones we talked about last fall. We thought they probably were a Q4 item, but they're highly likely going to be a Q2 item, so think about that as a usage of about 10.

James E. Harris: We also have.

James E. Harris: Some legacy liability claims that were going to probably pay out in the second quarter. The same ones. We talked about last fall, we thought they'd probably we're going to Q4 item.

James E. Harris: Really likely going to be a Q2 item say think about that as the usage of about 10. So.

Kenneth Scott Hoexter: So for the second quarter, we're assuming probably a usage of about $10 million, and then we'll have some restructuring cash charges for about $7 to $8. So it looks like cash usage is all in for the second quarter at about $8 million. That being said, for the first half of the year, if you really take into account that legacy claim and the restructuring, we're really at break-even cash flow for the first half of the year.

James E. Harris: For the second quarter, we're assuming probably a negative or a usage of about $10 million and then we will have some.

James E. Harris: Some restructuring cash charges for of about seven to eight.

James E. Harris: So it looks like cash uses all in in second quarter of about 18 that being said for the first half of the year, if you really take.

James E. Harris: You take into account that legacy claim and the restructuring we're really breakeven cash flow for the first half of the year and if you think about that in this cycle that we're in sexy a great outcome as we look forward.

Kenneth Scott Hoexter: If you think about that in the cycle that we're in, it's actually a great outcome. As we look forward, if there's a prolonged cycle, we feel like, again, this is a counter-cyclical business because of the asset-light model. Cash flow is counter-cyclical to the top line. We feel really good about where we are, and most importantly, we feel great about how we've structured our calls so when the market does inflect, we're going to have a lot of flow through to the EBITDA line, which is going to translate into cash flow. As we look forward, we're very comfortable.

Kenneth Scott Hoexter: Great. Appreciate the insight, guys. Thank you.

James E. Harris: Four four.

James E. Harris: If theres a prolonged cycle.

James E. Harris: Like again this is a countercyclical business because of the asset light model cash flow is countercyclical to the top line and so we feel actually really good about where we are and most importantly, we feel great about how we structured our call. So when the market does inflect, we're going to have a lot of flow through to the EBITDA line, which is going to translate into cash.

James E. Harris: Hello.

James E. Harris: So as we look forward, we're very comfortable.

Speaker Change: Great I appreciate the insight guys. Thank you thanks for the time.

Jason H. Seidl: Your next question comes from Jason Seidl from TD Cohen. Please go ahead.

Speaker Change: Your next question comes from Jason Seidl from TD Cowen. Please go ahead.

Jason H. Seidl: Thank you, operator. Good morning, gentlemen.

Jason H. Seidl: Thank you operator, good morning, gentlemen, I wanted to talk a little bit about the cost savings you said it would be predominantly in the back half of the year should we spread that evenly between <unk> and <unk>.

Jason H. Seidl: Yeah, Hey, this is Jamie.

James E. Harris: I don't think we really said I don't think we really set the back half of the year I think what we said is they happened late in the first quarter. So you don't see the full effect until the second quarter.

James E. Harris: How you really how you should think about it is let's call. It 35, plus 24 impact call it $32 million plus or minus.

James E. Harris: Youll see an increase from about three years to nine ish, which will be the run rate going forward and so youll see that impact hit fully in the second quarter for the balance of the year.

James E. Harris: But keep in mind that that's going to be used to offset some inflationary increases as an example April typically hit some merit increase that youll see it begin to offset that so don't think about it that the full six increase will go to the bottom line and is used to offset some other things that we had in the model for second quarter.

James E. Harris: But that's how it's spread out.

Speaker Change: Alright that makes sense also you mentioned that you saw a little bit more of a of an exit in April of capacity in the marketplace can you put some numbers around that and what youre seeing in your carrier group.

James E. Harris: I wanted to talk a little bit about the cost savings. You said it would be predominantly in the back half of the year. Should we spread that evenly between 3Q and 4Q?

James E. Harris: Yeah, absolutely Hey, Jason it's Jaret, so from an industry standpoint.

Jaret: So January started off strong from an industry exit perspective, like we talked about last call with the month of January industry exits at about 30% higher relative to the 2023 average as the quarter progressed I would say it was a bit mixed with the month of March there were actually.

Jason H. Seidl: Yeah, hey, this is Jamie. I don't think we really said that the back half of the year. I think what we said is that they happen late in the first quarter, so you don't see the full effects until the second quarter. And so, how you really, how you should think about it is, let's call it 35 plus, the 24 impact, call it $32 million, plus or minus, you'll see an increase from about three-ish to nine-ish, which will be the run rate going forward.

Jason H. Seidl: And so you'll see that impact hit fully in the second quarter and for the balance of the year, but keep in mind that that's going to be used to offset some inflationary increases. As an example, April typically hits some merit increases, so you'll see it begin to offset that. So don't think about it that the full $6 increase will go to the bottom line. It is used to offset some other things that we had in the model for the second quarter, but that's how it's spread out.

James E. Harris: There are some weeks where net carrier exits.

James E. Harris: Carriers increased from an industry standpoint, we did see that reverse in April from an industry perspective, and on a monthly basis. We did still see exits in March but the April versus March increase was about 3% to four time so.

Jason H. Seidl: All right. That makes sense. Also, you mentioned that you saw a little bit more of an exit of capacity in April from the marketplace. Can you put some numbers around that and what you're seeing in your carrier group?

James E. Harris: I think it's really a function of carrier unit economics in terms of where carrier costs are right now relative to spot.

James E. Harris: Unsustainable from our standpoint, so I think that you will see that continue to accelerate from and <unk> active network carrier perspective, they were about flat sequentially Q4 Q1 versus Q4.

Speaker Change: Okay, that's great color and lastly on the on the last mile business. You know some of your competitors have reported actually pretty decent results and I understand everybody.

Speaker Change: So a little bit different than the last mile game, but could you talk to demand and what youre seeing out there and what we should expect going forward.

Speaker Change: Yes very.

Speaker Change: Very happy with the last mile team and their performance, we talked in 2022 about the opportunity to improve last miles overall profitability and growing EBITDA last year in 2023, they started off this year strong.

Speaker Change: The reason why we have the strongest pipeline that we've had in four years is because the last mile team has such strong relationships with our overall customers right now.

Speaker Change: And a seasonal uptick so part of the reason for the guide being raised for Q2 versus what it was in Q1 is because of the performance, but last mile as having they've got a number of operational initiatives underway. One just continuing to utilize all of the space that we've got at our last mile hubs.

Speaker Change: Number two pulling down purchase transportation from where it started to rise in 2022 in early 2023.

Speaker Change: I mentioned earlier that we've got opportunities with some of our large customers that trust us and want to give us the opportunity to win more of their business. We're in the middle of some of that right now in.

Speaker Change: The early returns are extremely positive and then the last thing is we still got some opportunity to take price.

Speaker Change: Some of our customers in last mile and get paid a fair value for the service that we provide for them.

Speaker Change: Can we just get a little bit more into what you were talking about you said a record pipeline last mile is responsible for a bunch of that what percentage of the pipeline as last mile now versus maybe say last year.

Speaker Change: So I don't think that I've said that they were responsible for a bunch of it I said that they were one of the reasons that we were able to have the strongest pipeline of what we what we had in four years not going to break that down by our overall lines of business because.

Speaker Change: That's not how we manage the business. We told you all along as you look out over the long term there are a number of ways for us to hit our longer term targets.

Speaker Change: Improving and last mile is one growing brokerage taking market share improving the volumes on the <unk> business, adding managed transportation, there's a lot of opportunities and were excited about where the overall pipeline is right now.

Speaker Change: Understand gentlemen, I appreciate the time as always.

Speaker Change: Thank you. Thank you.

Speaker Change: Yes.

Speaker Change: Your next question comes from Ravi Shanker from Morgan Stanley. Please go ahead.

Ravi Shanker: Hey, Thanks morning, guys.

Ravi Shanker: The commentary on your existing dealer customers, giving you incremental LPL volumes is really interesting.

Ravi Shanker: Are you are they explained the rationale for that kind of is that a function of what's going on in the LDL marketplace on the asset base side in terms of capacity and are you seeing any shift in the other direction, which is the NPL customers tried to move into the TL market just given what's going on there.

Ravi Shanker: So the.

Ravi Shanker: First thing that we hear from our customers Ravi is that when theyre looking at their overall spend <unk> is a small piece of a truckload for the most parts dominates their spend but they spend a lot of time on LPL clean.

Ravi Shanker: Cleaning up things like claims late deliveries lost shipments and so what they've seen on the truckload side is they love the platform of Rx. So connect is easy to do business with is something that gives them a lot of data to help them make decisions gives them great visibility, so they're coming back to it.

Ravi Shanker: Loved the fact that it lets them work with multiple LPL carriers. So for for them, we're taking away a headache and they trust us because of the service that we've provided on the truckload side.

Ravi Shanker: As far as mode mode shifting over from from LPL to truckload, we haven't seen a ton of that at this point, but we always monitor where.

Ravi Shanker: We're mode conversions are going whether it's from LPL to truckload truckload, LPL or intermodal truckload or vice versa, but we're doing the last point that I want to make is right now Ravi we're doing rfps for our largest customers on the truckload side, we're doing <unk> every single day right now.

Ravi Shanker: Got it and maybe as a follow up.

Ravi Shanker: Can you talk about the decision to get yourself more headroom on the covenants a few weeks ago kind of was that opportunistic or is that necessary and kind of what's the messaging on the balance sheet over the next.

Speaker Change: 612 18 months.

Ravi Shanker: As we potentially you're going to.

Ravi Shanker: It goes through a prolonged down cycle, but maybe inside of an upcycle.

Speaker Change: Yes, I'd say the message on the balance sheet first of all it's very strong.

Ravi Shanker: Our customers want to do business with people with strong balance sheets, and we clearly have a strong balance sheet the decision.

Ravi Shanker: Upsized the revolver purely opportunistic proactive in nature.

Ravi Shanker: We don't know exactly what the freight market looks like for the next 612 18 months. So we wanted to be proactive to give ourselves plenty of headroom as we said last quarter. We didn't anticipate an issue we still do not anticipate an issue, but you know.

Ravi Shanker: We're doing what we should be doing as a management team is proactively planning and so we took the opportunity to go out and raise the amendments and look we had good banking partners, who understand this freight cycle and so that's why we did that acts and Ravi.

Ravi Shanker: Very good thank you.

Ravi Shanker: Your next question comes from Scott Group from Wolfe Research. Please go ahead.

Jared Weisfeld: Yeah, absolutely. Hey, Jason, it's Jared.

Ravi Shanker: Hey, this is Jake on for Scott. Thanks for your time.

Jake: Can you give us a sense about how you're thinking about the shape of seasonality of EBITDA from the second half of the year.

Jake: So you would expect to return to EBITDA growth.

Jared Weisfeld: So from an industry standpoint, hey, January started off strong from an industry exit perspective, like we talked about last call with the month of January industry exits, about 30% higher relative to the 2023 average. As the quarter progressed, I'd say it was a bit mixed, with, you know, the month of March, there were actually weeks where net carrier exits, net carriers increased from an industry standpoint. We did see that reverse in April from an industry perspective.

Ravi Shanker: Hey, Jake it's Jaret. So as you know we we.

Jaret: We gave an outlook one quarter at a time, we're very pleased that were able to almost double our EBITDA sequentially at the midpoint of our guide Q1 versus Q2.

Jaret: I'll hit on what drew said earlier right. We look at this business over a multi year view of our volume growth is holding very very strong in Q1, and Q2 with truckload contract up in the second half of the year I think we're very excited about converting some of the pipeline that we have which is the largest in four years for the company and we also have obviously significant cost initiatives underway with respect.

Jaret: At least $35 million of.

Speaker Change: Of course, that's for 2024, so im not going to specifically comment on the second half, but I think that obviously is going to depend on the shape of the recovery and what the market looks like but I think we need to make sure that we are we've got a playbook for different parts of the cycle and where we go ahead and we're positioned really really well in terms of.

Ravi Shanker: Whatever the market gives us.

Ravi Shanker: Understood.

Ravi Shanker: Youre, taking a fair amount of talk off between last year. This year, how should we think about operating leverage in the up cycle.

Ravi Shanker: Do these cost return.

Speaker Change: Great to get your perspective there.

Jared Weisfeld: And, you know, on a monthly basis, we did still see exits in March. But, you know, the April versus March increase was about three to four times. So I think it's really a function of carrier unit economics in terms of where carrier costs are right now relative to spot. It's unsustainable from our standpoint. So I think that you will see that continue to accelerate. From an RxO active network carrier perspective, they were about flat sequentially, Q1 versus Q4.

James E. Harris: Yes. This is Jamie.

James E. Harris: The overwhelming majority of these costs are structural in nature and permanent in nature. So how I think about it is if you take a dollar of gross margin that hits, our P&L used to think about in excess of about 60% of that forward flowing through to the EBITDA line and so as the market and flag.

James E. Harris: We're working hard with our customers to make sure. We're there provide good contract great customer service that we're positioned to get incremental volume.

Jared Weisfeld: We're doing working hard on our cost structure. So when the market does inflect, we're positioned to have significant flow through.

James E. Harris: Yes.

Speaker Change: Great. Thanks for your time.

Speaker Change: Yeah.

Speaker Change: Your next question comes from Jordan Alegar from Goldman Sachs. Please go ahead.

Drew M. Wilkerson: Okay, that's great color. And lastly, on the last mile business, you know, some of your competitors have reported actually pretty decent results. And I understand everybody is a little bit different in the last mile game, but can you talk about demand and what you're seeing out there and what we should expect going forward?

Jordan Robert Alliger: Yes, hi, good morning.

Jared Weisfeld: I know, there's a lot of uncertainty injectant injected into the freight recovery, but are you hearing anything from your customers I guess, particularly in brokerage that maybe give some optimism and a recovery over the next six months and then second question I'm, assuming on the restructuring charges. Those are in some way directly tied to the <unk>.

James E. Harris: $35 million in annualized structural cost savings.

Drew M. Wilkerson: Is there a structuring mostly head count or our facilities reductions just some help there. Thanks.

Drew M. Wilkerson: Yeah, I'm very happy with the Last Mile team and their performance. We talked in 2022 about the opportunity to improve Last Mile's overall profitability and growing EBITDA last year in 2023. They started off this year strong.

Speaker Change: I'll start off with the first question and Jamie will take the second one on the restructuring so we're always talking to our customers.

Drew M. Wilkerson: A lot of time with customers I think it depends on the vertical that you're looking at but if you look at inventory positions right now that are at a much healthier position than what they were this time last year, we're happy with where our overall pipeline is so I think that customers are similar to what you've heard this morning do they expect a recovery.

Drew M. Wilkerson: Part of the reason why we have the strongest pipeline that we've had in four years is because the Last Mile team has such strong relationships with their overall customers. Right now, they're in a seasonal uptick, so part of the reason for the guide being raised for Q2 versus what it was in Q1 is because of the performance that Last Mile is having. They've got a number of operational initiatives underway. One is just continuing to utilize all of the space that we've got in our Last Mile hubs.

Drew M. Wilkerson: Number two, pulling down purchase transportation from where it started to rise in 2022 and early 2023. I mentioned earlier that we've got opportunities with some of our large customers that trust us and want to give us the opportunity to win more of their business. We're in the middle of some of that right now, and the early returns are extremely positive. The last thing is, we've still got some opportunity to take prices from some of our customers in Last Mile and get paid a fair value for the service that we provide for them.

Jason H. Seidl: Oh, that's good. Can we dig in a little bit more into, you know, what you were talking about? You said a record pipeline blast mile is responsible for a lot of that. You know, what percentage of the pipeline is the last mile now versus maybe, say, last year?

Jason H. Seidl: At some point over the next six to 12 months, yes. They do do they know the exact timing of it I don't think anybody does.

Jason H. Seidl: And Jordan. This is Jamie on your second question. The answer is yes, all of the restructuring charges relate to the cost outs first of all if you.

Jason H. Seidl: Think about where the cost outs came from.

Jason H. Seidl: There were some reduction in some some employment.

Jason H. Seidl: Consolidation of vendors consolidation of roles.

Jason H. Seidl: We took opportunity as folks have retired or.

Jason H. Seidl: The attrition to not replace roles and find a more efficient way to maybe put two or three roles together.

Jason H. Seidl: Question about facilities, there has been some consolidation of facilities, where it makes sense always with the mindset towards making sure that we can service the business well and so.

Jason H. Seidl: We're actually very pleased with the cost out and again I think it positions us well for when the market does and collect we will have significant flow through.

Speaker Change: And just as a follow up I mean.

Speaker Change: Hi, I'm, assuming then those restructuring numbers will diminish.

Jason H. Seidl: Quarterly but check.

Speaker Change: That is correct they should diminish correlate.

Jason H. Seidl: One thing to throw out and we've said it all along we want to be known as a continuous improvement company and we're constantly looking at ways to become more efficient, but specifically to the to the restructuring charges, yes. They should go down.

Speaker Change: Thank you.

Speaker Change: Your next question comes from Danielle <unk> from Stephens, Inc. Please go ahead.

Speaker Change: Yeah, Hey, Thanks, Good morning, guys. Thanks, taking my questions.

Jason H. Seidl: Maybe one near term and one longer term one on the near term just looking back at the first quarter since the last call you talked about coming in towards the high end of the EBITDA range. If buy rates fell from January they did and it sounds like you are running in line to ahead on the cost Takeouts, but results were kind of at the midpoint. So was there anything on the cost side or anything else in the first quarter. The develop any worse then.

Jason H. Seidl: You anticipated that kind of kept us from getting to that high end of the range.

Speaker Change: Hey, Dan Hurwitz, Sharon I'd say, a couple of things with respect to the outlook that we provided 90 days ago, you're right. We did say that easing of buy rates would be one factor to get us to the eye and we also set a seasonal improvement in volumes in demand would also be the other factor and as we talked about in our prepared commentary.

Jason H. Seidl: Ultimately its seasonality is not right there not that right now as we think about the sustained prolonged freight market. We also did talk about in some of the opening remarks with respect to some of.

Jason H. Seidl: Manage expedite weakness with respect to automotive. So I think those are the two main reasons that caused us to come in at the midpoint versus high end.

Jason H. Seidl: Got it and then one strategically you are talking about revenue per load improvement to flat and growth on the headline is slowing due to harder comps that makes sense I mean, it sounds like managing price to make money in a rational way to do the business but.

Jason H. Seidl: Is it three years' tax stay hard in the back half should we expect negative growth could persist into the third quarter and strategically this.

Jason H. Seidl: So potentially a slower topline growing but more profitable business going forward or we kind of transitioning to that point in the growth curve.

Speaker Change: Yes, I think it depends on what happens in the market overall, we've got tough comps, we think our three year stacks for the back half of the year will be extremely strong.

Jason H. Seidl: But we've told you that we've taken a position on where we believe the market is going and the conversations with our customers. We priced accordingly. So if if you do not see the recovery in the back half of the year and there is no spot loads them volume growth gets a little bit tougher. If there is some sort of spot market activity. We think we're going to be one of the first calls if not the first call.

Jason H. Seidl: For our customers for spot loads projects in many beds, you've seen that before whenever the market tightens. So we're confident in our position that whenever the market does turn we will be the place that they turned to but I think the volume growth will depend on how much spot load opportunity there is there.

Jason H. Seidl: And then strategically to tell or is there any change in kind of all thinking around kind of focusing on growth versus the profitability of your pricing per contract as you as you approach kind of the out years, maybe not back half, but just the forward looking timeframe.

Jason H. Seidl: We've always said that there is a playbook for every market and so I mean, if you go back to last year. The market was falling all year long rates fell all year long as you look into this year, we believe that youre going to start to see a market recovery over the next six 912 months. So I think that the best approach to have as an agile one a flexible one one that can move.

Jason H. Seidl: Move with the market this dynamic.

Jason H. Seidl: The last decade, we've shown the ability to do that and the important way to look for growth is on a multiyear stack basis.

Speaker Change: I appreciate the color best of luck.

Jason H. Seidl: And our last question for today is coming from Kevin <unk> from Thompson Davis. Please go ahead.

Speaker Change: Hi, guys good morning.

Speaker Change: Hi, good morning wanted to touch on.

Jason H. Seidl: How are you guys at <unk>.

Jason H. Seidl: Progress post spin on some of the facilities and operations that you've opened the capital expense and how those things have performed versus what your expectations were with us.

Jason H. Seidl: Yes.

Jason H. Seidl: Are you talking about like open it up like brokerage offices, so and correct manner.

Speaker Change: Yes, yes.

Jason H. Seidl: Have not opened up any new brokerage offices set suspend.

Jason H. Seidl: We've expanded some offices. So for example, like if youre here in Charlotte today.

Jason H. Seidl: Years ago, we had one office there now we've got three branch leaders. If you think back to one of our acquisitions from Gainesville, Georgia, we have multiple offices that it has expanded too. So it's been more about expanding our larger offices and putting a new real estate for some of those offices Ann Arbor, Michigan, Another one Columbus, Ohio.

Jason H. Seidl: Has grown has been expansion within our existing offices and adding new branches within those offices.

Jason H. Seidl: <unk> new locations.

Jason H. Seidl: Okay that sounds good and then.

Jason H. Seidl: Maybe if we could talk about this is first time I think you guys have emphasized the tech capability of the <unk> business.

Jason H. Seidl: How much is that of a lag versus the TL business.

Jason H. Seidl: Is that something that you guys are going to focus on this year to improve.

Jaret: Hey, it's jaret.

Jason H. Seidl: One of the very appealing aspects of LCL business is that it is highly automated so if we think about that business at scale actually being accretive to both gross margin and EBITDA margins just given the technology capabilities that we've put into that business and we're very pleased with the outlook in terms of delivering profitable growth for our retail business.

Speaker Change: Perfect. Thank you.

Jason H. Seidl: Thank you we have reached the end of our question and answer session for today I will hand, the floor back over to Joe Wilkinson for closing remarks.

Drew M. Wilkerson: Yeah, so I don't think that I said that they were responsible for a lot of it. I said that they were one of the reasons that we were able to have the strongest pipeline of what we've had, of what we had in four years. I'm not going to break that down by our overall lines of business because that's not how we manage the business. We've told you all along that as you look out over the long term, there are a number of ways for us to hit our longer-term targets and, you know, improving in the last mile, growing market share, improving the volumes on the LTL business, adding a managed transportation fund. There are a lot of opportunities, and we're excited about where the overall pipeline is right now.

Speaker Change: Thank you Julie we entered the second quarter with momentum in our sales pipeline is the largest that it's been in four years, we expect to deliver a significant sequential increase in our adjusted EBITDA in the second quarter, we're doing all the right things today to ensure our success, including focus on service solutions innovation and our.

Drew M. Wilkerson: Relationships. We also continue to have a disciplined focus on costs, while we're still investing in our future. Thanks for joining us today and I'll look forward to seeing many of you at the upcoming conferences.

Jason H. Seidl: I understand. Gentlemen, I appreciate the time as always.

Ravi Shanker: Your next question comes from Ravi Shanker from Morgan Stanley. Please go ahead.

Drew M. Wilkerson: The commentary on your existing TL customers giving you incremental LTL volumes is really interesting. Are you... Are they explaining the rationale for that, kind of, is that a function of what's going on in the LTL marketplace on the asset-based side in terms of capacity? And are you seeing any shift in the other direction, which is LTL customers trying to move into the LTL market, just given what's going on there as well?

Drew M. Wilkerson: Yeah, so the first thing that we hear from our customers, Ravi, is that when they're looking at their overall spend, LTL is a small piece of it. Truckload, you know, for the most part, dominates their spend, but they spend a lot of time on LTL cleaning up things like claims, late deliveries, and lost shipments. And so what they've seen on the truckload side is that they love the platform of RxOConnect. It's easy to do business with, it's something that gives them a lot of data to help them make decisions, and gives them great visibility.

Drew M. Wilkerson: So they're coming back to it, and they love the fact that it lets them work with multiple LTL carriers. So for them, you know, we're taking away a headache, and they trust us because of the service that we've provided on the truckload side. As far as mode shifting over from LTL to truckload, we haven't seen a ton of that at this point, but we always monitor where mode conversions are going, whether it's from LTL to truckload, truckload to LTL, intermodal to truckload, or vice versa. But we're doing, the last point that I want to make is that right now, Ravi, we're doing RFPs for our largest We're doing LTL RFPs every single day right now.

Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.

James E. Harris: Gardner, and maybe as a follow-up, can you talk about the decision to get yourself more headroom on the covenants a few weeks ago? Was that opportunistic? Was that necessary? And what's the messaging on the balance sheet over the next six, 12, 18 months, as we potentially go through a prolonged down cycle, but maybe, in fact, an up cycle? Yeah, I'd say the message is on the balance.

Speaker Change: Ladies and gentlemen. This concludes today's conference call you may now disconnect. Thank you.

James E. Harris: Yeah, I'd say the message in the balance sheet is, first of all, it's very strong. Our customers want to do business with people with strong balance sheets, and we clearly have a strong balance sheet. The decision to upsize or mend the revolver is purely opportunistic and proactive in nature.

Ravi Shanker: We don't know exactly what the freight market looks like for the next six, 12, 18 months, so we wanted to be proactive to give ourselves plenty of headroom. As we said last quarter, we didn't anticipate an issue. We still do not anticipate an issue, but you know, we're doing what we should be doing as a management team, which is proactively planning, and so we took the opportunity to go out and raise the amendments. Look, we have good banking partners who understand this freight cycle, and so that's why we did that Axon, Ravi. Very good, thank you. Your next question comes from...

Scott H. Group: Your next question comes from Scott Group from Wolf Research. Please go ahead. Hey, this is Jake. I'm on behalf of Scott. Thanks for your time. Can you give us a sense about how you're thinking about the shape or seasonality?

Jared Weisfeld: Hey, Jake, it's Jared. So, as you know, we give an outlook one quarter at a time. We're very pleased that we were able to almost double our data sequentially at the midpoint of our guide, Q1 versus Q2. You know, I'll hit on, you know, what Drew said earlier, right, we look at this business over a multi-year view, our volume growth is holding very, very strong in Q1 and Q2, with truckload contract up in the second half of the year.

Jared Weisfeld: I think we're very excited about converting some of the pipeline that we have, which is the largest in four years for the company. And we also have, obviously, significant cost initiatives underway with respect to at least $35 million of cost outs for 2024. So, you know, I'm not going to specifically comment on the second half, but I think that, obviously, it's going to depend on the shape of the recovery and what the market looks like.

Jared Weisfeld: But I think we need to make sure that, you know, we've got a playbook for different parts of the cycle, and we're, we're, we go ahead, and we're positioned really, really well in terms of, you know, whatever the market gives us.

James E. Harris: [music].

James E. Harris: Yes, this is Jamie. The overwhelming majority of these costs are structural in nature and permanent in nature. So, you know, how I think about it is, if you take a dollar gross margin that hits our, you know, our P&L, you should think about in excess of about 60% of that full and flowing through to the EBITDA line. And so as the market inflects, we're working hard with our customers to make sure we're there providing good contracts and great customer service. So we're positioned to get incremental volume. We're working hard on our call structure. So when the market doesn't collect, we're positioned to have a significant flow through.

Jordan Robert Alliger: Your next question comes from Jordan Alliger from Goldman Sachs. Please go ahead.

Jordan Robert Alliger: Yeah, hi, good morning. Yeah, I know there's a lot of uncertainty injected into the freight recovery, but are you hearing anything from your customers, I guess, particularly in brokerage, that maybe gives some optimism in a recovery over the next six months? And then second question, I'm assuming the restructuring charges are in some way directly tied to the $35 million in annualized structural cost savings. Is the restructuring mostly headcount or facilities reductions? Just some help there, thanks.

Drew M. Wilkerson: I'll start off with the first question, and Jamie will take the second one on the restructuring. So we're always talking to our customers, and I spend a lot of time with customers. I think it depends on the vertical that you're looking at, but if you look at inventory positions right now, they're in a much healthier position than what they were this time last year. We're happy with where our overall pipeline is.

Drew M. Wilkerson: So I think that, you know, customers are similar to what you heard this morning. Do they expect a recovery at some point over the next six to 12 months? Yes, they do. But do they know the exact timing of it? I don't think anybody does.

James E. Harris: And, Jordan, this is Jamie. On your second question, the answer is yes, all the restructuring charges relate to cost outs, first of all. If you think about where the cost outs came from, there was some reduction in some employment. There's consolidation of vendors, and consolidation of roles. We took the opportunity as folks have retired or, you know, just through attrition not to replace roles and found a more efficient way to maybe put two or three roles together.

James E. Harris: Your question about facilities; there has been some consolidation of facilities where it made sense, always with the mindset towards making sure we can service the business well. And so, you know, we're actually very pleased with the cost outs, and, again, I think it positions us well for when the market does inflect. We'll have some difficulties.

Jordan Robert Alliger: And just as a follow-up, I mean, I'm assuming then that those restructuring numbers will diminish quarterly, but check it out. Yeah, that is correct. They should diminish quarterly. One thing to throw out, and we've said it all along, we want to be known as a continuous improvement company, and we're constantly going to be looking at ways to become more efficient, but specifically, the restructuring charges, yes, they should go down.

Danielle Ambrose: Your next question comes from Danielle Ambrose from Stevens Inc. Please go ahead.

Danielle Ambrose: Yeah, hey, thanks. Good morning, guys.

Danielle Ambrose: Thanks for your questions. Maybe one nearer term and one longer term one. On the nearer term, just looking back at the first quarter, so last call, you talked about coming in towards the high end of the EBITDA range if buy rates fell from January. They did. And it sounds like you're running in line to a head on the cost takeouts, but results were kind of at the midpoint. So was there anything on the cost side or anything else in the first quarter that developed maybe worse than you anticipated that kind of kept us from getting to that high end of the range?

Jared Weisfeld: Hey, Daniel, it's Jared. I'd like to say a couple of things. With respect to the outlook that we provided 90 days ago, you're right; we did say that an easing of buy rates would be one factor to get us to the high end. We also said that seasonal improvement in volumes and demand would also be another factor. And as we talked about in our prepared commentary, I mean, ultimately, seasonality is not right there, not right now, as we think about the sustained, prolonged free market.

Jared Weisfeld: We also talked about in some of the opening remarks with respect to some of the managed expedite weaknesses with respect to automotive. So I think those were the two main reasons that caused us to come in at the midpoint versus the high end.

Danielle Ambrose: Got it. And then Drew, strategically, you're talking about revenue per load improving to flat, and growth on the headline is slowing due to harder comps. That makes sense. I mean, it sounds like managing price to make money is a rational way to do business. But as the three-year stacks stay hard in the back half, should we expect negative growth could persist into the third quarter? And strategically, is this, you know, potentially a slower top line growth but more profitable business going forward? Are we kind of transitioning?

Drew M. Wilkerson: Yeah, I think it depends on what happens in the market overall. We've got tough competition.

Drew M. Wilkerson: We think our three-year stacks for the back half of the year will be extremely strong. But we've told you that we've taken a position on where we believe the market is going, and in our conversations with our customers, we've priced accordingly. So if you do not see the recovery in the back half of the year and there are no spot loads, then volume growth gets a little bit tougher. But if there is some sort of spot market activity, we think we're going to be one of the first calls, if not the first call, for our customers for spot loads, projects, and many bids.

Drew M. Wilkerson: You've seen that before whenever the market tightens, so we're confident in our position that whenever the market does turn, we'll be the place that they turn to. But I think volume growth will depend on how much spot load opportunity there is.

Danielle Ambrose: And then strategically, as a follow-up, is there any change in kind of your thinking around kind of focusing on growth versus profitability or pricing per contract as you approach kind of the out years, maybe not the back half, but just the forward looking timeframe?

Drew M. Wilkerson: We've always said that there is a playbook for every market. And so, I mean, if you go back to last year, the market was falling all year long, and rates fell all year long.

Drew M. Wilkerson: As you look into this year, we believe that you're going to start to see a market recovery over the next 6, 9, 12 months. So I think that the best approach to have is an agile one, a flexible one, one that can move with the market and this dynamic. And, you know, over the last decade, we've shown the ability to do that.

Kevin Sterling: I appreciate the color. That's a lot. And our last question for today is coming from Kevin Ganey from Thomson's Davis. Please go ahead. Hi guys, good morning.

Kevin Sterling: And our last question for today is coming from Kevin Ganey from Thomson's Davis. Please go ahead. Hi guys, good morning. I actually wanted to touch on how you guys have Progress Postman on

Drew M. Wilkerson: Are you talking about opening up like brokerage offices since the spend? Correct. Yeah.

Drew M. Wilkerson: We have not opened up any new brokerage offices since the summer. We've expanded some offices. So for example, like if you're here in Charlotte today, you know, years ago, we had one office that was there. Now, we've got three branch leaders.

Drew M. Wilkerson: If you think back to one of our acquisitions from Gainesville, Georgia, we have multiple offices that it has expanded to. So it's been more about expanding our larger offices and putting in new real estate for some of those offices. Ann Arbor, Michigan's another one. Columbus, Ohio has grown. It's been an expansion within our existing offices and adding new branches within those offices versus new locations. Okay, that sounds good.

Jared Weisfeld: Hey, it's Jared. So one of the very appealing aspects of the LTL business is that it is highly automated. So we think about that business at scale actually being accretive to both gross margin and EBITDA margins, just given the technology capabilities that we've put into that business. And we're very pleased with the outlook in terms of delivering profitable growth for our LTL business.

Drew M. Wilkerson: Thank you. We have reached the end of the question and answer session for today. I'll hand the floor back over to Drew Wilkerson for closing remarks.

Operator: Thank you, Julie. We entered the second quarter with momentum, and our sales pipeline is the largest that it's been in four years. We expect to deliver a significant sequential increase in our adjusted EBITDA in the second quarter. We're doing all the right things today to ensure our success, including focusing on service, solutions, innovation, and our relationships. We also continue to have a disciplined focus on costs while we're still investing in our future. Thanks for joining us today, and I look forward to seeing many of you at the upcoming conferences.