Shoes on the guys who own the assets? What are the key factors there? When you look at what the typical trucking company is, largely small trucking companies. Think one to 10 trucks. If you're talking about a Fortune 100 customer or a Fortune 500 customer, they're typically not going to sign up these small carriers. For us, you can come to large brokers like RXO, and they can be an aggregator of capacity. Then you look at things that solutions that we've been able to create, you know, is something like drop trailer. Drop trailer is something to where we've been doing that for over a decade, and we built it off of retail and e-commerce customers. We're really touching all verticals, and it allows us to look and feel like an asset-based carrier, just with more capacity. You know, we've got access to 1.5 million trucks that we work with. Is it been easier to get carriers to sign on with you as you've grown? I mean, how do you think the carrier relationships will look going forward in terms of adding to the base with which you could work off of? We've got a really good base right now. If you look at where we are right now, we've got access to 100,000 carriers. We've got access to 1.5 million trucks. If you look at the base, we have access to a lot of capacity. The first thing that carriers are looking for is, you know, whenever they're logging on to a platform, do they have to leave the platform to find their next load? Because we're one of the largest truckload brokers in the country, you don't have to leave the platform to find your next load. We also just wanna make it easy for them to use. I mean, they can actually pick up their cell phone, they can book a load, negotiate, do all of that with no human interaction. You get access to our overall rewards program, which is RXO Extra. If you think about stuff that pulls them back to the system, RXO Extra gives them discounts on the things that matter most in a trucker's life. Think about fuel, tire, roadside maintenance, hotels, Sirius Radio, anything that they're using on a daily basis, we give them access to a rewards program with discounts, and we base those discounts off of the volume that they do with us, as well as the service that they provide for us. The more volume they do with us and the better their service is, the better discounts they're able to get, and that pulls them back to RXO Connect as well. you know, I wasn't necessarily gonna touch on this now, but it seems like a good segue from thinking about the technology and what you offer, and I know that's been a big part of how you talk about your company. Maybe discuss a little bit, the technology front, the digital access that you provide, how you define digital. That always comes up as questions as well. Sure. Taking a step back, if you look at how we invested in the platform, it was really across three different cohorts. We invested in our technology for our people, invested for our carriers, and for our customers. For our people, it's how do we increase the efficiency and our productivity for our reps internally, right? How do we go ahead and increase number of loads per head per day? That continues to be a significant tailwind for the business. You look back to 2021 and look back to the prior five years, we grew volume at a rate 3 times faster than headcount, and we continue to make productivity gains. From a carrier standpoint, it really comes back to not only increasing top of funnel, where we had cumulatively over one million downloads this most recent quarter, which is up about 45% year-on-year. Once you increase top of funnel, how do you increase engagement and stickiness on the platform? We had a seven-day carrier retention rate of 79%. We had weekly active user growth across Connect and Drive, our platform, up 25% year-on-year. They continue to come back to the platform, and part of that also is RXO Extra that Drew was just talking about in terms of one of the other value adds. Then for our customers, it's how do we integrate into our customers, leveraging APIs, ensuring that we have that connectivity between our system and their TMS, their transportation management system. All of that resulted in a really strong quarter from the technology standpoint, where 96% of loads were created or covered digitally, and we continue to make significant progress on tech adoption. Is there a difference between the customer side and the carrier side in terms of the technology usage? Yeah, for sure. I think we've had significant progress on the customer side in terms of digital adoption. While the carrier side is strong and growing, I think there's significant white space ahead of us for us to go ahead and continue to increase that. When you boiling all that down, when you think about over the long term, the ability to have a load that is fully digital, what does that mean from a profitability standpoint? It will come in at higher incremental margins from a EBITDA standpoint. I think there's a significant opportunity for us to go ahead and increase the amount of loads that are created and covered digitally longer term. Okay. Is that formula, I mean, you know, growing volumes 3 times faster than headcount, I mean, is that going to normalize a bit or do you think that that could continue to stay? I think the way we look at it is much more over a longer term, right? Okay. If there's a particular quarter where we think it makes sense to strategically invest in the business, right, could that number look different in that particular quarter? Of course. I think longer term, as you look at us investing in our sales force and us investing in the platform on the road to our 2027 targets of $500 million in EBITDA, you're gonna continue to see us make significant productivity gains. I mean, sort of one of the questions that occasionally comes up, is with, you know, the technology, and not just you guys, other competitors have put in technology. You know, should there be or could there be concerns about, you know, pricing? Because everyone can look at pricing. I guess what I'm hearing is your plan would be if there was a long-term pressure on price, mitigate that with the efficiency. Is that how you look at it? Yeah. I would say, first, I don't think that to be the case. Okay. Like, whenever you look at who sets the market pricing, it's typically large asset-based carriers that are setting the pricing. While brokerage has made a significant dent in the overall for-hire trucking market, it's still largely controlled by the asset-based carriers. Asset-based carriers set the pricing, and our goal as a broker is to come in and be somewhere around that and work with a smaller carrier who has less operating costs that we're able to pull the margin off of. If that's right, 'cause that's been a theory out there for a long time. Yeah There was gonna be pricing transparency across the board, you were gonna see brokerages margins continue to deteriorate. If that's something that happens, you may see our gross margin% fall off, but what you'll see is our EBITDA margins will actually go up, and we'll be in the best position because of the early investments we started making in technology, the EBITDA margins could actually expand if that were to something to happen because you'd see more automation in the business. Competing on price is nothing new in this industry, right? Ultimately, when you look at our value proposition, it really is volume growth and best-in-class profitability. You know, over the last year or so, as fears of incremental pricing have come into the market, we've been posting anywhere between 16% and 21% gross margins, which are best in class. To Drew's point, you know, that's not something that we we think is base case. Is there additional forthcoming technological advancements, or is it more tweaking what you have now, would you say? There's always there's always more to come. You know what I mean? If you look at one of the things that we're gonna continue to invest in is pricing. While we have the, what I believe to be the strongest algorithms out there on both the customer and the carrier from a pricing perspective, you know, we'll continue to invest in AI and machine learning so that our pricing gets more efficient. You know, really, every load that we put into the system, the stronger the algorithms become and the wider the moat becomes for us from a technology perspective. We're gonna continue to look for things that are more integrated from a customer standpoint. We're not gonna give those away because, you know, we don't want our competitors to know some of the things that we're working on. You know, Jared talked about the carrier side. The carrier side, while it is significant and it's growing, we do have a lot of white space for continued use of technology with the carriers that we're partnered with, and it's because they're smaller carriers. You know, a lot of the carriers, you think of a one truck owner-operator, some of those folks are still operating off a flip phone. Getting them on, onto an iPhone or an Android is step one for us. Maybe you could have a phone program. Yep. Well, let's pull it back a little bit to the near term because certainly a big part of this conference is trying to figure out where we are in the cycle. I mean, it seems to be obviously very pertinent. I know you just reported not long ago, but maybe for everyone's benefit, sort of give some sense for what you're seeing demand-wise and perhaps maybe what your customers are hinting at as we go through the year. Yeah. One of the things that we said in our earnings call last week was the first two weeks of April were fairly soft coming off of quarter end, coming off of an Easter holiday. The volume was not where we had hoped. The last two weeks of April were fairly strong, and, you know, we just reported out last week, so not a lot's changed from, you know, the overall demand perspective. We've seen strong growth in technology and in healthcare from a vertical perspective. From an inventory level, retail and e-commerce last year, every time I had a conversation with a customer, it was all about destocking their inventory. Now the conversations have shifted to where they are restocking the inventory. They're in a more stabilized environment. We view that as a potential tailwind, and retail and e-commerce is a good portion of our business. Even though it's a good portion of our business, we still grew volumes 12% last year. That could potentially be a tailwind for us as that starts to come in. You know, as I look back into the back half of the year and you take those market dynamics and you put it into the first quarter, was also the first time that we've seen in a while where you saw more capacity exit the market than was entering the market. We view that as a good thing on a load-to-truck ratio basis because load-to-truck ratio right now is sitting at two to one. As you start to see capacity exit the market, that'll cause load-to-truck ratio start to rise. As you start to see it start getting at 5.5, six, seven to one, what you'll start to see is tender rejections will rise. It'll start with asset-based carriers rejecting tenders, and then you'll see more on the brokerage side. For us, we're gonna be the big winners during that, whenever that takes place. You saw that in for us in 2020 when coming out of a downturn, and as the market took off, customers leaned into who they trusted the most, who had delivered solutions for them. We were big winners then, and we're positioning ourselves well for when the market inflects. In fact, you know, if you look at from the last time the market inflected in 2018, 2019, our volume's up, like, 55% from that time period. We've got a much stronger base than what we had last time, and last time was pretty good to us. To be clear, as of now. Large customers. You know, we still have room to grow with our current large customers. We're not at the peak of the tipping point, and that's proved by last quarter. Our top 20 customers actually grew volume by 13% on a year-over-year basis. We've got the other half of the Fortune 500 companies to be able to go after, and we still have small to midsize customers that we'll be able to capitalize off of the capacity that we've built on these power lanes for some of the largest companies in the world. We think that our best days are ahead of us, and we're in the early days of growth. Is it tougher, though, to get brand-new customers right now versus growing with existing? I mean, is there a bifurcation? It was always tougher to get a brand-new customer. Okay. Yes, right now, in a loose market, it is tougher to bring on new customer. We're doing it. We've brought on some significant large customers over the last six months. You know, in a loose environment, there's a lot of people calling on them. You know, what you see customers do is they may have less volume overall, but they'll reduce the number of carriers they're working with so that they can try to keep people whole. We've been a winner of that. As customers have reduced the number of carriers they're working with, our piece of the pie has gotten bigger, and that's preparing us even more for when the market inflects. To answer your question, yes, it's always easier to grow with an existing customer than bringing on a new customer. Getting the first load is the hardest load to come by. Once you're able to get the first load, you're able to start showing them your service, solutions, technology, that's where the growth comes in. You mentioned e-commerce and retail. I mean, what is the pie for your verticals? Is that, what proportion would you say that is versus? That's the biggest portion of our vertical. We've got a very diversified portfolio. If you look across the board, we're strong in food and beverage, we're strong in industrial manufacturing, automotive, technology, healthcare. Like, you look across the board, we've got customers that touch all verticals. Well, turning a little bit maybe to the price front or price side of the equation. Obviously, there's been price pressures, you know, in the world of trucking. What are you seeing from a price standpoint? Do you feel that some have talked about a stabilization occurring pretty soon, some may be a little later, a little unclear? What's your general take? Sure. From a pricing standpoint, I think when we're looking at overall calendar 2023, you know, probably a good place to be in terms of contract pricing. You're down 10%-15%. You know, we are using our technology in a significant way to the point where despite that kind of pricing pressure, you saw gross margins being able to be held flat year-on-year in Q1 at 16.3% within brokerage relative to the prior year. From a spot standpoint, to your question, you know, when you look at the current environment, it's obviously a very loose environment with April load-to-truck ratio being around 2:1. I think what we're seeing, that Drew was alluding to this, some pretty good leading indicators that a bottom is trying to form. Unclear when that's going to happen, but what are we seeing, right? We're seeing load-to-truck ratio at two to one. You go back to the 2019 freight recession, anytime it was below the two to one, didn't stay there for very long. You see what's going on with respect to carrier revocations. This is the first time in a while where we've had carriers leave the network sequentially. From an overall industry standpoint, you're starting to see that accelerate. From a capacity production standpoint, you're seeing that down hard, right? April versus March was down about 40% month-on-month. I think all of this, putting it all together, is getting to the point where we are starting to see early signs from a supply standpoint that it's getting healthier. You're starting to see some green shoots on the demand side, especially in retail e-commerce, with the rate of change within the retail and e-commerce verticals improving nicely from Q4 to Q1. I think we remain cautiously optimistic, but we'll certainly see what happens in the second half. Is load to truck the key metric to assessing where the bottom may be forming, would you say? There's a few things that I look at. I look at what load-to-truck ratio is doing, I look at tender rejection, I look at capacity entering or exiting the market, and then I look at what my customers are telling me. Right. You know, whenever I look for where the markets are going, those are the four things that I'm looking at. In terms of the carrier exits, are you seeing that with your carrier partners? We did see that go down for the first time in a while. Again, that's not necessarily a bad thing because we've got access to a lot of carriers. You know, we've got over 100,000 carriers in the network. You know, the stat that I always look at has become more of a vanity metric in truck brokers of how many carriers you're working with, how many trucks do you actually have access to. The stat that I lean on the most is how often are the carriers that you're working with coming back to you. Mm-hmm. That's where Jared hit on, that, you know, if a carrier comes to do business with RXO and they do it through RXO Connect, 79% of the time, they're returning to the platform within a week. You think about the carriers that we're working with are small carriers, that tells you high likelihood that their next load comes from RXO. Got it. I think, Jared, you'd mentioned that gross margins or net margins, however you wanna talk about it, was flat as a percentage versus last year in the first quarter. Obviously, contract and spot are probably getting a little tighter. I mean, how do you think about that net revenue margin now? I mean, I suspect there'll be a little bit of pressure, but... Yeah, that's exactly right. Gross margins within our brokerage business at about 16.3%, roughly flat year-on-year. From a sequential perspective from Q1 to Q2, we talked about a slight moderation from Q1 to Q2 as the new contracts go into effect, where we had most of our bids occur within Q4 to Q1. Q2 will be the full run rate impact of that. From there, I think it really depends on how tight the market becomes from a load-to-truck ratio standpoint, right? We talked a lot about these forward-looking indicators, which are certainly encouraging, but when does it actually show up and manifest itself within a higher load-to-truck ratio? When that happens, you'll certainly see the dynamics play out, where you'll have our contract GP per load be below our spot GP per load, but then you'll see us mix shift aggressively to the spot market. You've seen that mix shift occur. You know, we're very nimble. We use our technology very efficiently, and we can mix shift that, you know, as much as 1,000 basis points or more at any given quarter. We'll still haul the same contractual freight, but we'll mix shift from a volume standpoint pretty quickly to the spot. It's an important point too, where, you know, we're 77% contract right now, which is a pretty enviable position to be in. What is that doing? It's positioning ourselves for the future, when the market does tighten, the customers that we have the relationships with, where we're winning, when we go ahead and we're in an environment where the spot volume starts to come back, we're gonna get awarded with projects, mini bids, spot volumes. We're in a prime position to go ahead and go on another run when the market inflects. Got it. The next really rebid process will start in the fourth quarter this year. That's right. Okay. In terms of that spot contract mix, tilting to contract now is obviously good. Is there an ideal mix, though? I think it depends on where the overall market is, right? Like, you have to look at things like load-to-truck ratio, tender rejection, and see where you are. You also have to look at the strength of the relationship that you've got with a customer. In a loose environment, which is what we're in now, you want as heavy as you can be on the contractual side. That will allow you to build the base. Customers are going to give the spot opportunities, the mini bids, the projects, whenever the market tightens, to the people that they trust and the people that have serviced them the best. That's where we're gonna be in a really good position that as it does tighten, like Jared said, we're gonna haul the same amount of contractual loads that we're hauling now. What you'll see is that spot loads, because of tender rejections, will start to go through the roof. Right. That's where you'll see the spot gross profit per load will come in well ahead of what the contract gross profit per load is, which is the opposite of what it is right now. Right now, your spot gross profit per load is below what your contractual gross profit per load is. In a tighter market, though, I mean, could you see the spot mix go to 50/50, six or never? I don't think it'll go to 50/50 because we do have strong contractual relationships. Okay. with our customers, but I think you'd good see it go in the low 60s. Right. If you look over time, the contract mix has ranged anywhere between the low 60s to the high 70s as a% of our volume. We try to position ourselves to win in both markets, right? Like, if you go to 50/50, you're not positioning yourselves for when there is a downturn, to be able to be one of the winners in a downturn. That's what we've seen is during this downturn, you've actually seen our market share gains accelerate. Right. Okay. I mean, I don't think the competition's that high from a contract perspective, broadly. No, they're not. I mean, is the industry more what, would you say? You know, I mean, you look at some of our competitors, they've been anywhere in a normal market from mid-50s to low 60s. In a looser environment like we're in right now, we've seen a couple of them top 70 that they put out, but generally, I still think a lot of them are in the 60s. You talked about, I think, gross profit per load or per shipment or, you know, some... One of your peers, you know, has talked about like a six-seven month peak to drop and then drop to peak type of cycle. Is that something you would generally describe to as well? I think that's something that, you know, prior to three years ago, most people would have subscribed to. You know, all the cycles have been a little bit different. Some of them have been shorter, some of them have been longer. Like, if you look back over the last decade, yes, I would. Is that the new normal? I don't know. I think that's still be to be determined. Right. The way we think about it now is we gave some more color on the earnings call last week, where we are now approaching our five-year low in terms of gross profit per load. Right. I wanted to just give some context that if you look back to the prior freight recession and you look at where we are right now, more precisely, we're within less than 10% of our of our prior low, excluding the depth of the COVID pandemic. I think that's an encouraging sign that we're certainly approaching the bottom. Obviously, it could certainly go lower if aggregate demand takes a step function lower. We're wanting to give you those guideposts to get comfort that we are approaching our cycle low. I think that also is coincidental with a lot of the encouraging things that we talked about in terms of leading indicators that could certainly tighten the market from a load-to-truck ratio standpoint. Importantly, relative to that prior cycle low, we touched on this a moment ago, our volume is up almost 60%. What we're doing is we are building the base and positioning RXO for the next inflection when we go on another strong run. You know, you do have other businesses besides truck brokerage. We do. We like them. Before I get to that, I am curious, though, obviously, you have a lot of organic growth potential on the brokerage side and you have the other businesses. I mean, could you envision adding to the portfolio inorganically? Yeah. Organic growth is our first priority. It's our number one priority. If you look over the last six years, 100% of our growth has been organic. If you look over the last decade, you know, 90%+ of our growth has been organic. We always have to keep an open mind and an ear for what's going on in the market, being aware of what's taking place in the M&A world is something that we will continue to do. One place where, you know, you could potentially see a lot of synergies is in the managed transportation business. As I look about managed transportation, if there was a company out there that fit our culture, that we felt like we would be able to capitalize on the synergy spin, that they would be able to provide to brokerage and our other lines of business, that's something that we would explore. Not necessarily front and center. Not front and center, but also not going on with blinders to say that... Understood. We're not looking. In terms of the other businesses, I think one that you called out on your call was the final mile business and expectations for growth, which I was a little surprised just 'cause you'd think final mile coming off for two years of COVID-related growth would take a pause, but maybe talk a little bit about that. Yeah. What you saw is in 2022, you started to see your carrier costs come up. When we're dealing with these large customers, we had a choice of, do we try to go in and negotiate outside of bid cycle, or do we hold to our rates and let our margin suffer a little bit in last mile? That's what we did. We held our contractual obligations to the customer. As we went in and we started having these pricing conversations, and towards the end of last year and the beginning of this year, you know, customers were receptive that the service that we're providing is some of the best out there in the industry. When you look from a scale standpoint, there's nobody that has the same setup that we have that puts them within 125 miles of 90% of the U.S. population. We were rewarded with that from our pricing perspective from our customers as we got into this year. That is a tailwind for us as we look throughout the rest of the year. Is the final mile business more concentrated from a customer perspective? Well, if you think about it, yeah, it is more concentrated than, say, a brokerage. You know, if I think back to 10 years ago, it was really just less than a handful of customers that made up the final mile doing big and bulky deliveries, you know, things like washer and dryers, refrigerators, of that nature. Now there's a lot more that are doing that. You've also seen things like fitness equipment is something that has expanded. TVs is something that Electronics is something that's expanded within that world. What we saw during COVID was that the end consumer wanted their products delivered to their home, and they want it as fast as possible. Our last mile business puts us as the best provider in the country to be able to do that. You know, one of the things that, you know, I think final mile has sometimes come under criticism, not you guys, but just as an industry, as maybe the service isn't so good, you know, reliability. You know, how do you look at those metrics for you guys? Yeah. how do you ensure Because you're using third parties, I'm assuming? We do. We use third parties, it's two main things that we watch to keep service. The first is just something that we call the voice of the customer, and it's the end consumer. It's just a quick, you know, text message survey that goes out to them after the delivery of was your driver polite and courteous? Were they on time? How was the installation? Things like that allow us to see what the overall customer satisfaction is. You know, we look to see how people are performing based off of the amount of volume that we want to give- Mm-hmm ...to one of the independent contract carriers. The second, most importantly, is just the feedback that we hear from our customers. We're doing business with some of the largest customers in the world, and when you think about the fact that you are their last brand representation to the end consumer, the last experience that end consumer is gonna have is us representing that customer. And so we take that responsibility seriously, and we get a lot of feedback from our customers that, you know, we do that as well as anybody in the industry. What's the long-term growth prospects for final mile, would you say? Yeah. If you look at it, I think final mile is something that's gonna continue to grow because of what I said earlier. End consumers want the product, and they want it delivered to their home, delivered faster. I think that you could see it go as high as single digits, low double digits. Okay. You know, maybe just a question. You have the managed transport business as well. I think for many, maybe even me included, it's a little bit like trying to understand what drives the fundamentals in that business. Yeah. How much can that be sized over time? Yeah. You know, when you look at what managed transportation is, it's where a customer is outsourcing their entire transportation spend to us. We become their transportation department. They do it because they wanna be able to leverage our purchasing power from a purchase transportation standpoint. They wanna be able to leverage the engineers that we've got behind managed transportation, that it's gonna look at ways for them to optimize the freight that they're hauling. They're gonna do it because of the technology integration that they're gonna be able to have from RXO Connect to all of their vendors. You know, we've got one customer that's got over 7,000 vendors signed up on RXO Connect, and they send us over all of their orders at 2:00 in the morning. By 5:00 A.M. in the morning, we have them all tendered out and ready to go to the carrier base. For us to be able to optimize their overall managed transportation spend is a huge deal and a differentiator for us. We expect managed transportation to grow at a similar rate to brokerage because they're playing in the same market of the for-hire trucking market. It could use any type of asset to move the goods around. That's right. Okay. Well, we don't have much time left. I don't know if anyone in the audience had a question before I go head back in. Give a chance. One up front. The mic is coming. When you think about sort of CapEx more generally, I'm thinking about CapEx more generally in the industry, and hard assets. You know, there's sort of a lot of, I guess, back and forth and speculation about CapEx in terms of assets, truck assets and so forth. I mean, I obviously know you're obviously, you know, asset light, but- Mm-hmm ...you probably have visibility and have an opinion on that. I mean, how are you thinking about sort of that part of the business over the next 12 to 18 months when you look at, you know, rejection rates being very low, and just the demand for, you know, truck logistics, if you will, being low as of this point? Just love to get your thoughts. Demand for truck logistics in the context of where we are in the freight cycle, I mean, clearly lower as it relates to just lower demand across the board, right? I think RXO benefits from many idiosyncratic advantages with respect to how we've built our sales pipeline, specifically within brokerage. Our brokerage pipeline's up 86% over the last three years, right? I think, you know, there are a lot of many different types of brokers. You've got brokers that are owned by some of the asset-based carriers. You've got RXO, which certainly is an asset-light business. But at the end of the day, you'll see brokerage demand fluctuate as it relates to overall freight demand. RXO will be in a position to go ahead and have those idiosyncratic drivers where we are fit for purpose, we are spun, we are benefiting from the growth that we're exposed to from a pipeline standpoint. You're right, we are asset light. Our CapEx is about $50 million per year, of which, you know, this year we're gonna include $15 million of strategic real estate spend as we execute towards that goal of $500 million of EBITDA, building out our brokerage business longer term. We are asset light, and generally, we will spend about 1% of CapEx as a percentage of revenues over the course of the cycle. Okay. Well, I think with that, we're about out of time. Thank you guys for coming and telling us about RXO. Thanks for having us. Absolutely.