Welcome to the RXO Q1 2023 Earnings Conference Call and Webcast. My name is Lara, and I will be your operator for today's call. Please note that this conference 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 materially is contained in the company's SEC filings as well as in its earnings release. You should refer to a copy of the company's earnings release in the investor relations section on the company's website for additional important information regarding forward-looking statements and disclosures and reconciliations of non-GAAP financial measures that the company uses when discussing its results. I will now turn the call over to Drew Wilkerson. Mr. Wilkerson, you may begin. Good morning, everyone. Thanks for joining today's earnings call. Joining me today in Charlotte, our Chief Financial Officer, Jamie Harris, and Chief Strategy Officer, Jared Weitzel. RXO delivered solid results in the Q1 of 2023 despite the tough economic backdrop. The Q1 results were driven by another quarter of year-over-year brokerage volume growth and best-in-class brokerage profitability. Overall, our company-wide Adjusted Gross Margin remains strong at 18.8%, up 80 basis points year-over-year. Our tech-enabled brokerage business continued to significantly outperform the industry. We took share and achieved best-in-class gross margin. Brokerage volume was up 6% year-over-year. The most important driver of our growth was contractual volume. We also grew synergy loads from our managed transportation business, cross-border loads and other modes in the quarter, including LTL. Brokerage gross margin was 16.3%, flat year-over-year. To give some more color, year-over-year volume growth was consistent throughout the quarter. From a vertical perspective, there have been some improvements in the inventory positions at our retail and e-commerce customers. We have seen increased brokerage volumes from home furnishing, building products, and technology customers. Last quarter, we highlighted our robust sales pipeline, and we're pleased with our conversion in the Q1. Our pipeline conversion resulted in our contractual volume growing 19% year-over-year. As a result, our contract business now represents 77% of our brokerage volume. We also saw continued momentum with bids, and in the Q1, annual bids were up 11% sequentially, as measured in revenue. This is the hardest part of the cycle to grow volumes, and we were able to do so because of our customer relationships, service, technology, and scale. We are confident that when the market inflates, we are in a great position to win. Our complementary services also continued to execute well in the quarter, and complementary services adjusted gross margin expanded by 160 basis points year-over-year. Managed Transportation significantly increased the number of synergy loads it provided to our truck brokerage business. Managed Transportation continues to benefit from the outsourcing trend. The world's largest companies are turning to RXO to handle their freight transportation needs. In fact, for the fifth straight year, General Motors named RXO Supplier of the Year. It's an honor to work with global powerhouses like GM and to help provide consistent, reliable solutions for their shipping needs. We're also capitalizing on the nearshoring trend. In the Q1, RXO's cross-border brokerage loads increased by more than 30% year-over-year. We're supporting our customers' efforts through our new cross-border facility in Laredo. We're in the contracting process with several large customers who want to utilize the wide array of services the site offers. Turning to our last mile business, RXO is the largest provider of big and bulky services in the U.S. Our customers tell us we offer the best service in the industry. Our recent pricing actions reflect the premium service that we provide, and we now expect to grow EBITDA within last mile year-over-year for full year 2023. We also had a very good cash flow quarter, converting 100% of Adjusted EBITDA to Adjusted free cash flow. I'm also pleased to announce that our board of directors has authorized a $125 million share repurchase program. This program fits into our balanced capital deployment approach, which Jamie will expand on later. Our business results were underpinned by adoption of our best-in-class technology, which helps customers and carriers make sound decisions and improve productivity. In the Q1, 96% of loads were created or covered digitally. We also hit a milestone for the RXO Drive app, which surpassed one billion downloads in the quarter. As RXO continues to grow, we remain focused on developing our people. We have a strong bench of talent, and I wanted to highlight two leadership changes we made in the quarter. Paul Booth, who has led our managed transportation business for the last three years, has been named the President of our last mile business. Under Paul's leadership, we successfully onboarded several high-profile customers and freight under management more than doubled to $4 billion. Paul brings operational expertise that will help us improve the structural profitability of last mile. I'd like to thank Fernando Rabelo, who served as interim last mile president. Fernando will work closely with Paul to ensure a smooth transition and will continue to deliver results for our largest customers. Brian Dean has been promoted to lead RXO's managed transportation business. Brian has been with RXO for more than 20 years, and most recently served as vice president of operations for managed transportation. Brian has been a key driver in designing and delivering solutions for our customers that help them optimize their transportation spend. I'm thrilled that we have been able to fill these roles internally, and I'm looking forward to continuing to work closely with Paul and Brian on my leadership team. Looking ahead, we still anticipate a tough macro environment in the Q2, similar to what we saw in the Q1. We again expect to grow brokerage volumes on a year-over-year basis, but continue to anticipate further moderation in gross profit per load. While April started off slow, in the last two weeks, we have seen volumes improve. Jared will provide more detail about our expectations in a few minutes. We are executing our playbook and remain focused on profitable growth. Our playbook proves its value in times of chaos and disruption. It positions us well for the long term. Customers continue to consolidate the number of carriers they work with, and our service, best-in-class technology, and financial stability have led many to choose RXO as a strategic partner. As a standalone company that's more fit for purpose, everyone at RXO is focused on delivering results for our customers and shareholders. With our accelerating market share gains and best-in-class profitability, we are positioning the business to deliver significant returns when the market inflects. Now over to Jamie. Thank you, Drew. Good morning to everyone. In the Q1, we generated $1 billion in revenue compared to $1.3 billion in the Q1 of 2022. The revenue decline was primarily due to lower freight rates year-over-year. Profitability remained strong with an adjusted gross margin of 18.8%, up 80 basis points year-over-year, primarily driven by our ability to bring down the cost to purchase transportation as the market softened. Additionally, adjusted gross margin within complementary services expanded by 160 basis points year-over-year, driven by managed transportation and freight forwarding. Our Adjusted EBITDA was $37 million in the quarter, compared to $75 million in the Q1 of 2022. Our Adjusted EBITDA margin was 3.7%, down 200 basis points from the prior year. These declines were primarily due to the lower year-over-year freight rates, the resulting moderation in brokerage gross profit per load, and the incremental corporate cost of being a standalone public company. Below the line, our interest expense for the quarter was $8 million. Our income taxes were favorable for the quarter, driven by discrete non-recurring tax items. Adjusted diluted earnings per share for the quarter was $0.11. You can find a bridge to the adjusted EPS on slide eight of the earnings presentation. Importantly, we continued to outperform the industry. Despite the difficult macroeconomy, we grew brokerage volume by 6% year-over-year. Profitability in brokerage remained best in class with gross margins of 16.3%, flat year-over-year. It was a very strong cash flow. Please refer to slide nine, which has a walk from Adjusted EBITDA to Adjusted free cash flow. We ended the quarter with $121 million of cash versus $98 million at the end of the Q4. Our Adjusted EBITDA converted to adjusted free cash flow at 100% in the quarter, a great result. Please note that the quarter's adjusted cash flow result included the payment of 2022 incentive compensation. The quarter also included several timing-related items that had positive impacts during the quarter. These items included earlier than expected collection of some accounts receivable, zero interest payments on our bonds during the quarter. We pay interest on a semi-annual basis in the second and Q4s. We incurred minimal cash taxes in the Q1 based on normal regulatory timing. Most of our cash taxes for Q1 and Q2 will be paid in the Q2. As we look to the Q2, these items will normalize, and we expect our cash conversion for the first half of 2023 to be approximately 50%. Over the long term, across market cycles, we'll remain comfortable with our cash conversion at a rate between 40% and 60%. I also want to spend some time discussing spend-related and restructuring costs. Last quarter, we communicated approximately $10 million-$15 million for the full year 2023, of which $10 million were expected cash outflows. We continue to optimize our cost structure as a standalone entity. Since our spin-off, we have launched several initiatives to ensure that we have the appropriate cost structure and processes in place to improve profitability and support our growth. Given the weak freight environment, we moved expeditiously in the quarter and achieved annualized run rate savings of approximately $20 million. These savings helped us absorb some of the reduction in brokerage gross profit per load in the quarter. We incurred $8 million of restructuring charges to achieve the $20 million savings, a significant return. Looking ahead, we're proactively optimizing our cost structure and are positioned the organization for incremental operating leverage when the freight cycle inflects. As a result, we now expect 2023 spin-related and restructuring costs to be closer to $35 million, with approximately $30 million of expected cash outflows. On Slide 10, we have provided an update on our balance sheet. We have $621 million in liquidity, including our $500 million revolver, which remains undrawn. We have a strong balance sheet and our net leverage at quarter end was approximately 1.2 times trailing twelve months adjusted EBITDA. This remains at the low end of our stated range of one-two times. As Drew mentioned, our board of directors authorized a $125 million share repurchase program. Given our strong balance sheet and free cash flow generation, we are pleased to have this authorization as a formal part of our capital allocation framework. We will opportunistically repurchase shares through a balanced approach that will include relative market value, leverage, free cash flow, and overall macroeconomic conditions. At a minimum, we plan to buy enough shares to cover dilution from restricted stock grants on an annual basis. Additionally, as you saw this quarter, we will continue to settle tax withholding obligations for the vesting of pre-spin RSU grants in cash. Using cash in lieu of selling shares to settle these tax withholding obligations will help minimize dilution. For the Q1, this was a $7 million cash outflow. We estimate an additional $10 million for the balance of the year for a total 2023 estimate of approximately $17 million. You can find an update to our 2023 modeling assumptions on page 13 of the presentation. We now expect capital expenditures between $60 million-$65 million. This includes $15 million of strategic investments in real estate to accommodate growth in our brokerage business. We remain committed to spending approximately 1% of revenue on capital expenditures over the long term, in line with our guidance at Investor Day. Stock-based compensation expense is expected to be between $20 million and $22 million. Depreciation and amortization is expected to be between $70 million and $75 million. Interest expense will be between $32 million and $34 million, $1 million lower than our prior forecast. We expect our adjusted effective tax rate will be approximately 25%. You should also model an average diluted share count of approximately 120 million shares. Please note that this does not include any impact associated with potential share repurchases. Overall, given the current macroeconomic backdrop, we are pleased with our financial results. We are operating well, have solid cash flow generation, and a strong balance sheet. Now I'd like to turn it over to Chief Strategy Officer, Jared Weitzel, who will talk more about our outlook. Thanks, Jamie. Good morning, everyone. I'd like to start with the structural profitability of our business. We again outperformed the market this quarter with best-in-class brokerage volume growth and profitability enabled by our technology. Brokerage gross margin of 16.3% was flat year-on-year despite the difficult freight cycle dynamics, a testament to our technology and pricing algorithms. Our driver app, RXO Drive, surpassed one million downloads in the quarter, up 45% year-over-year. Average weekly users increased 25% year-over-year in Q1, and importantly, seven-day carrier retention was a strong 79%. Q1 active network carriers declined 3% sequentially as carriers began to exit the market during the quarter, which will ultimately lead to a more balanced supply and demand dynamic. In the Q1, 96% of our loads were created or covered digitally, versus 87% last quarter and 74% in the Q1 of 2022. This was the result of continued adoption of our technology, in addition to the full quarter impact of the platform capability within RXO Connect that was discussed last quarter. Over the next few quarters, while we expect the percentage of loads created or covered digitally to stabilize around the current level, we are not stopping there. Increasing the number of fully digital loads on the platform is a top strategic priority for the business. We've done an excellent job on the customer side with digital integration, but there's still plenty of white space ahead of us on the carrier side. The value proposition of RXO Drive and Connect is clear and helps drive engagement and stickiness with our customers and carriers, as evidenced by our seven-day carrier retention rate. Importantly, as the percentage of digital loads increases, we would anticipate higher contribution margins. This quarter, we again were in an enviable position, with contractual volume representing 77% of our business, up 200 basis points sequentially and 900 basis points when compared to the Q1 of 2022. RXO continues to benefit from ongoing carrier consolidation across our customer base. Even though freight demand is weakening, we are viewed as a strategic carrier, and we are gaining share given our exceptional technology, service, and deep customer relationships. RXO's top 10 customers have been with us for 16 years on average. From a vertical perspective, retail and e-commerce volumes declined in the quarter, as expected, but the rate of decline moderated relative to the Q4 as customers inventory positions improved. Additionally, we saw significant volume growth in our other verticals, including home building, healthcare, biotech, and technology. Last quarter, I told you that our Q4 brokerage gross profit per load was roughly in line with our three-year average. I thought it would be helpful to share current trends relative to prior freight cycles, and I'll refer you to slide 12, which details our historical volumes and gross profit per load trends. Specifically, we are within 10% of our trough gross profit per load over the last five years, excluding the low of the COVID-19 pandemic. Since that trough, our brokerage volume has grown by more than 55%. This is our playbook for this very important part of the freight cycle. Increasing share with best-in-class profitability while we strategically invest in the business positions us well for the next inflection and the road to $500 million in EBITDA. I'd now like to look forward and give you some more color on what we are expecting in the Q2. We do not anticipate any major changes in the state of the economy or the freight cycle. Both will remain challenging. We do continue to expect a moderation in gross profit per load, as the Q2 will reflect the full run rate impact of new contract rates. Our brokerage sales pipeline remains robust, up 50% and 84% on a two and three-year stack, respectively. Retail and e-commerce volume declines are moderating and our non-retail verticals are still growing year-over-year. We entered April with strong brokerage volume momentum, giving us confidence that we will again grow brokerage volume on a year-over-year basis in the Q2. Putting it all together, we expect company-wide Q2 adjusted EBITDA to grow sequentially when compared to the Q1. Turning to the full year. Our brokerage business continues to have momentum, supported by year-over-year volume growth in the Q1 and our expectation for Q2 year-over-year volume growth significantly outperforming the industry. I mentioned that the inventory position of some customers within the retail and e-commerce sectors has improved. This may lead to restocking activity in the second half. However, visibility remains limited. Within Last Mile, we continue to work on operational improvements, execution, service, and pricing. Given the success of our strategic pricing actions, we are confident that 2023 Last Mile EBITDA will grow versus 2022 levels, helping to partially mitigate brokerage's moderating gross profit per load. Our asset-light business model generates significant free cash flow. Prospectively, we remain confident that we will continue to achieve a strong adjusted free cash flow conversion relative to adjusted EBITDA. We will thoughtfully deploy capital through a balanced capital allocation approach, including the $125 million share repurchase program that we announced this morning. We believe that growth of free cash flow on a per share basis is a primary driver of long-term value creation. I'll leave you with why we remain so excited about our business despite the challenges of the current price cycle and the economy. We operate in a $750 billion market with plenty of room to grow. Our financial profile can generate meaningful free cash flow, and our strong balance sheet and new share repurchase authorization provide us with flexibility to deliver returns to our shareholders. We have a small share of an enormous market, a proven team, a winning strategy, and a long runway for profitable growth. With that, I'll turn it over to the operator for Q&A. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press-- if you would like to withdraw your request, please press star followed by the two. Just a reminder, please limit yourself to one question and one follow-up. One moment please for your first question. Your first question comes from the lines of Ken Hoexter from Bank of America. Please go ahead. Great. Good morning, Drew, Jared, Jamie. Let me just dig into the outlook a little bit. Your, you know, solid performance in terms of the 6% volume growth. Maybe thoughts on that thought of continued volume growth in the face of softening margins that you talked about. You know, you're still outpacing your peers on margins. You noted the last two weeks showed some improvement. I think the market is still trying to understand what that means in terms of is that a seasonal bounce, if there's any insight you can provide. Obviously maybe compare and contrast that with the conflicting data of margins still coming in. if you can just walk us through maybe a little bit more detail on that, on that Q2 outlook and the turnaround you're seeing, the last few weeks. Yeah, absolutely. Good morning, Ken Hoexter. This is Drew Wilkerson. I'll start with the Q2 outlook. When you look at what we saw as April started off, April started off fairly slow. Coming off of quarter end, coming out of Easter holiday, the first two weeks were a lot slower than what we had hoped. But the back half of April and the last two weeks picked up fairly well, and we saw good returns, enough returns that we were comfortable enough to be able to endorse volume growth for the full year. As you look a little bit farther out, we've got signs of some things that we like that we're seeing overall in the market. Retail, e-commerce inventory levels are much better than what they were last year. Growth in technology, healthcare, and home furnishing has been really strong for us, and we expect that to be able to continue through the back half of the year. We started to see for the first time in the Q1, we started to see more capacity exit the market than was entering the market. That's the first thing that you see before tender rejections start to increase. For us, that's something that's got us excited looking as we look forward. With that, there's a lot unknown in the overall macro for the rest of the year. Very, very happy with where we sit right now and the playbook that we've got to be able to continue to build the foundation, take market share and do it profitably. Ken, this is Jared. Just building on what Drew was saying, with respect to volume growth, you know, we feel comfortable with respect to Q2 volume growth on a year-over-year basis. To give you some puts and takes as it relates from Q2 to Q1, you know, Q2 is seasonally a better quarter for us from our RXO standpoint. That's across our businesses, including within Last Mile. We'll have the benefit of seasonality as it relates to Last Mile as well, with respect to also benefiting from the strategic pricing actions that we took in the quarter. We'll also have the full run rate impact of the cost takeout that we talked about in Q1, benefiting Q2, giving us comfort that company-wide adjusted EBITDA will grow sequentially from Q1 to Q2. Just to clarify before I get to my second question. Drew, you said, you're confident in endorsing volume growth for the full year, Jared jumped in with volume growth through Q2. I just want to make sure you're talking Q2 or you-? Jared. I was talking Q2 on a year-over-year basis and said full year. With that said. Okay. I like where we're sitting for the full year. Just as I said, there's still some unknowns with the overall macro. I don't think that anybody is. There's no crystal ball for when the market inflex, if it's Q3, Q4 or Q1. I just wanted to make sure you, we got that right. You raised restructuring costs, Jamie, to $35 million. Maybe I'm a little confused. I mean, the spin is complete. Why are restructuring and these other costs going up at this point? Maybe dig into the thoughts on your EBITDA growth comment. Can you put parameters on that? Ken, this is Jamie. So restructuring and the spin-related cost, we came into the quarter, first of all, as a standalone public company, we wanted to take a look at every single cost we had in the company. We did a ground up, zero-based budgeting process, looked at every vendor, every contract, all of our org structures. As you saw, we were able to take out about a run rate of about a $20 million savings on a go-forward basis. That restructure cost us about $8 million. That was not included in that $10 million-$15 million because we really went after that aggressively in the middle of the Q1. As we look forward for the year, we did raise our number to include the $8 that we already spent, but we raised it another $10 because we have several initiatives in place today that we're working on that we expect to complete during the course of the second, third quarters, let's call it. We also expect to have some additional savings to come out of a run rate basis. You know, for us, we spent $8 million more of the quarter than we had communicated in the $15, but we were able to produce a $20 million annualized run rate savings. That's a return that, you know, for the work we did and outlook, we like the return, but also it positions us very well to be ready to leverage our cost structure with a very efficient back office and shared service functions to take advantage of the market when it inflects. Thanks for the time, guys. Appreciate it. Thanks, Ken. Thank you. Your next question comes from the line of Stephanie Moore from Jefferies. Please go ahead. Hi, good morning, Drew and Jared and team. This is actually JJoe Havert on for Stephanie. Thanks for taking the question. My first question is actually Drew. You mentioned capacity exiting, that's kind of the first sign you see before tender rejections start to pop up. I was kind of curious what your view, kind of where we are on the cycle is today. I think most have talked about the 1Q maybe being weaker than expected and things kind of playing out with a little bit of stabilization. Do you feel at this point that things kind of seasonally move normally, albeit off of a lower base on the 1Q? You know, what's kind of your view on the cycle right now? Yeah. I think for seasonality, when you look at it for the last three years, there's been a lot of puts and takes, so it's hard to peg exactly what happens from a seasonality perspective. Typically, you see volumes increase from Q1 to Q2 because that's when you've got the full run rate of implementing the bids that you completed in Q4 and Q1. You know, when you look at this market cycle that we've seen, I talked about capacity exiting the market, and we think that is a good thing because it will lead to tender rejections over the longer run. Right now, we're seeing load-to-truck ratio at around two to one. I've been doing this for 16 years, and I haven't seen it go below two to one for any sustained amount of time. While we're not calling the bottom, you know, we feel like there are signs that are pointing towards a more positive direction from a capacity standpoint, which will benefit the difference. When you look at compare it to previous cycles, you know, we're not in something that is similar to 2008 and 2009. What we're seeing from a load-to-truck ratio and a tender rejection ratio runs more in line with what we saw in 2018 and 2019. I think that's helpful. On the Last Mile piece, I was hoping, is there anything you guys can give in terms of metrics on quantifying sort of what the repricing is looking like or how things are going? I know you mentioned that you guys were okay walking away some business if it meant it was going to be more profitable, but I was hoping you guys could maybe peel back the onion a little bit on going on with Last Mile. You know, we were in pricing conversations with our customers for really the last, you know, three to six months. What we found is that because of our service, because of our scale, our customers wanted to continue to partner with us and value the business that we're doing. Despite the tough macroeconomics, we are a co-company that will grow last mile EBITDA on a full year basis and are happy to be rewarded and recognized for the service that we're giving to our customers. Actually, you know, there was a small piece of business that we ended up parting ways from with the customer, but on the other hand, we actually picked up a few markets from several of our customers. Happy with how those conversations turned out. Maybe just to confirm, I know this is historically a difficult business to be profitable, and you guys are profitable in final mile, and you're just growing that profitability. That is correct. We are profitable, and we are growing the profits on it. Perfect. Thank you guys for the time. Thank you. Your next question comes from the line of Scott Schneeberger from Oppenheimer. Please go ahead. Thank you very much. Good morning, all. I'd like to speak kind of similar to Ken's question on volumes, on pricing and cadence. How did spot pricing look throughout Q1 and into first and second half of April, just on an intro basis? Drew on the last response, you were talking about potentially bottoming on the load-to-truck ratio. When would we see that in pricing on a spot and contract basis? Thank you. Yeah. On the spot pricing, what little bit of spot loads that are out there is down significantly. Your spot pricing at a 2:1 load-to-truck ratio is well below what your contract pricing is. That's one of the things that we talk about as you see the capacity exit the market and you start to see that load-to-truck ratio shift, that's a positive thing because it creates spots at that point that'll go higher than what you see on the contractual loads. As far as the overall bottoming of the market, you know, again, we're not gonna call the bottom, but there are signs of optimism that we got as we look ahead. You know, retail e-commerce is a big part of our business, and you look at those inventory levels are in a lot better position than what they were a year ago. That's a positive thing for us. The growth that we're seeing in technology and healthcare specifically are tailwinds that we think will continue. If you see more capacity exit, that's gonna create spot loads. We're in the position to win when the spot loads come. Because if you look from 2018 to 2019 over the last down cycle, we're up. Our volume's up, like, 55% from that time period. Our foundation is much bigger than what it was during the last downturn. For spot loads, projects, mini bids, we're gonna be the place the customers turn, and we'll be in a position to win. Thanks for that. On my follow-up, it's a, it's a bit of a multi-parter, but, just curious. You, you said annual bid opportunities, measured by revenue up 11% quarter-over-quarter in the Q1. Just curious, how's that, how's that looking at, looking from a, from a customer basis? You all are clearly taking share, and it sounds like your bids are still very strong. Are these smaller competitors, from whom you're taking share? Are there some large in there, from what you can tell? You know, you mentioned that by revenue. How, how is that? Is that just a few lumpy opportunities, or is that just a lot of different customers in there? The last part of this long question is, how meaningful is this cross-border business, the new Laredo facility to these bid opportunities and maybe this new real estate development you're talking about, is that at the border as well, or that's something else? Thank you. Yeah. When you look at share gains, you know, we're not picky on where we take share gains. We're taking it from everybody. We don't walk into a bid looking to target one competitor or one asset-based company where share gains come from. We look at it, how can we match our services to best align with what the customer needs? Because of that, we're winning big. I mean, you mentioned our customers. If you look at our top 20 customers, we actually grew volume by 13% on a year-over-year basis. Our largest customers are recognizing our service, and they're not just coming back to do business with us, they're coming back to us and say, "Hey, we want to give you more business because of the service and solutions that you're able to offer." On the cross-border side, we think nearshoring is something that's going to continue, and U.S. and Mexico will benefit from that. We've been doing cross-border freight for a decade now and very happy with the investment that we made into Laredo. That's helped us grow our brokerage volume by 30% on a year-over-year basis, and we think that that will continue for the long run. We have an array of things out of Laredo. It's not just the truckload moves that are going cross-border, which we do a lot of. We're also doing transloading, cross-docks. We're doing a little bit of storage for our customers as they're waiting to get product through one side of the border to another. It just speaks to the array of services and solutions that we create and the stickier we're becoming with our customers. Scott, the question to follow up on the real estate. The real estate is more about expanding or opening some offices for our brokers business, so we have capacity to fill as volume grows and as the market collects. That's really positioning ourselves for the growth that we believe we're gonna have. All right. Thanks for the color, guys. Thank you. Your next question comes from the line of Scott Group from Wolfe Research. Please go ahead. Hey, thanks, good morning, guys. Any directional color on how much sequential EBITDA growth you expect from Q1 to Q2? There's a decent range of expectations within mid-single, double. Any color would be helpful. Hey, Scott, it's Jared. Good morning. You know, look, I'll give some puts and takes as we think about it for the quarter Q2 versus Q1. As we mentioned, we expect year-on-year volume growth, again, Q2 versus Q1, offset partially by the continued gross profit per load reduction that we expected, as we talked about in the script. April started off slow, but we had strong momentum in the back half of the month and thus volume growth for Q2 versus Q1, both on a year-on-year basis. As it relates to seasonality, you know, seasonally it's a better quarter for RXO as a whole across all aspects of the business. We'll benefit that in, you know, benefit from brokerage, we'll benefit in last mile. We'll have the pricing benefit that we talked about. Then lastly, we'll have the full run impact of the cost actions that we took. As it relates to, you know, specific guidance on EBITDA sequentially, you know, that we don't, you know, provide guidance at the consolidated level, but hopefully that's helpful in terms of the puts and takes. Okay. Then just wanted to get your perspective, do you think that Q2 is the bottom for gross profit per load? Then, I mean, maybe in this context, I'll ask, like, when you go back, the chart of historical gross profit per load was helpful. When you look at that prior trough, does that trough, is that coincident with spot rates bottoming, or does the trough in profit per load tend to lag spot rates by a quarter or two? I'm just trying to understand, you know, are we at this, you know, trough in profit per load yet or if it needs to take a few more quarters. The couple of things I would offer off this, you know, when you think about the profitability trough, I think that's also going to come down to when the load-to-truck ratio really starts moving higher. You know, when we do get that sustained move higher, you obviously You'll see the spot loads start to come back, and we'll have nice spot gross profit per load, which will, you know, certainly be offset on, from a contract standpoint when you think about the dynamics from a cycle perspective. You know, that's certainly something to be mindful of. You know, if the sense that we start to see the supply exit the market and it has more of an impact here in Q2, could that yield some more gross margin pressure to the extent that we start seeing the load-to-truck ratio move up? Absolutely. I think it's on us to go ahead and ensure that we leverage our technology, leveraging our pricing algorithms, to go ahead and maintain best in class profitability, as you saw this quarter with gross margins, flat year-on-year, within brokerage. You know, hopefully that's that gives you more what you're looking for. You know, as you look back to the chart that we provided on slide 12, you know, I think the message that we wanted to relay was, you know, certainly to look back over the last five years, give you a sense of the different rate cycle dynamics. You know, I think as Drew just said in one of the earlier questions, this is more like 2018, 2019 from a freight recession standpoint. As we're approaching that gross profit per load cycle bottom, you know, we are just in a much stronger position with our volume growth in excess of 55%. As that second derivative moderates on gross profit per load, you'll see, you know, pretty significant impact from an EBITDA contribution standpoint. Okay. Thank you, guys. Thanks, Scott. Thank you. Your next question comes from the line of Ravi Shanker from Morgan Stanley. Please go ahead. Thanks. Morning, gents. The tone and content of this call is very different than what you've heard on the 1Q call so far, which had been pretty dour. I'm trying to understand how much of this is idiosyncratic to you and you guys just doing an incredibly good job with execution versus how much of this is genuinely the cycle of the market picking up, especially in the last couple of weeks of April, like you mentioned, and the fact that you guys are reporting a little bit later than peers. Maybe Drew, I'm just teeing up to give you a thirty-second sell us how awesome you guys are, but just figure out how much of this is cycle versus execution? Well, well, well, thank you for that, Ravi. We definitely have a lot of things to our business that are idiosyncratic that play into our favor. If you look at our technology, it's second to none. It allows us to operate at best in class margins, and it also helps us become more integrated with our customers to where we're able to continue to grow and take share and do it at a faster clip than what most are doing it in the industry. As far as the tone of the call and where we see the overall macro, I want to be clear, it's still a tough macro environment that we're in. load-to-truck ratio is still at a two to one ratio, for us to start to see that inflection, you're gonna have to see load-to-truck ratio start to move. For us, this is the part of the cycle, to what Jared said earlier, is about building that foundation and being much bigger than we were at the last market inflection, much more integrated with our customers to prepare to go on a really good run for that. You know, as I noted earlier, we've changed some things about this market that we like that we show that you could see an inflection, but we're just not ready to call the point of what that inflection could be because there's not enough data there to call it a Q3, Q4, Q1. Got it. Understood. I need to basically follow up, one for Jared. The outlook slide, in the last quarter, you had the recreation of the five hundred guide in there. This time you didn't. I'm assuming it was just a formatting thing and nothing has changed with your outlook for five hundred guidance. On the restructuring costs, kind of understood on you guys going for the ROIC there, but how long do you think, is this going 20.4? How long do you think these restructuring actions will continue? Thank you. Hey, Ravi, good morning. It's Jared. I'll start, then I'll hand it over to Jamie. Nothing has changed with respect to our confidence in the $500 million of EBITDA. I referenced it in our script in terms of the road to $500 million. I think the slide that we're referring to, you know, if you look at slide 12 in the presentation with, you know, volume up 55% when compared to the 2018, 2019 downturn, really is laying that foundation for us to go ahead and build from a momentum standpoint. Remaining very comfortable with the outlook that we provided investors a month ago. Robbie, on the restructuring, the SAND-related restructuring should diminish materially by the end of this year. In terms of the restructuring itself, we're gonna be a company that's constantly looking for ways to optimize costs. That's just gonna be who we are as a company. We're always gonna be positioning ourselves to be cost efficient, at the same time have capacity for growth. We don't have any plans for a restructuring 2024, but if the market dynamics say we need to, we're gonna look at it. We're always gonna be a company looking to find a way to be better cost-wise. You'll see these costs down materially by the end of the year. Understood. Thank you. Thanks, Robert. Thank you. Your next question comes from the line of TTom Wadewitz from UBS. Please go ahead. Hi. Good morning. This is Mike DiMattia, for Tom. I was wondering if you could provide any additional commentary regarding super feedback on the inventory cycle and what's providing confidence in the turn. Also for spot markets, when do you think bottoms and where we are currently? Thank you. As far as what we're hearing back from our customers on inventory levels, specifically in retail e-commerce, are a lot better than what they were a year ago, and we think that's got the potential to be a tailwind for us. That's a deep piece of our business and one that we look to continue to be able to go out and grow. As you look into other verticals, inventory levels I would call stable right now overall, and specifically in technology and healthcare and food and beverage, they are everything is running extremely efficient and smooth. As far as calling the bottom of the spot, you know, we said earlier, we're not gonna call the bottom. I don't think there's a crystal ball out there that tells you exactly what the market is gonna do. I am confident that we will be able to go out and take market share and do it at best in class gross profit in the industry. You know, we're not going to be the ones who call the bottom. There are signals that we see out there that we like that show that, you know, things could be getting better from a brokerage standpoint. That's helpful. Thank you. Thank you. Your next question comes from the line of Allison Poliniak-Cusic from Wells Fargo. Please go ahead. Hi, this is Ryan on for Allison. I just wanna talk a little bit about the supply leaving the market. You mentioned it with doing so. I was wondering how long that process will take or how long you think it will be, and do you think that's gonna be a longer process than, you know, the 2018 cycle, given the run up here? Yeah. You know, I don't think that we know how long it's going to take yet. We are seeing capacity exit the market faster than it was entering it, but it hasn't exited at a fast enough rate to be able to cause load-to-truck ratio to shift in any sort of dramatic levels at this point. We're prepared for when the market inflects. You know, we continue to grow our base of business with our customers, and we're prepared to go on a really good run whenever the market inflects, but we don't know exactly when that will happen. The one thing that you've seen recently is Class eight orders have been down, and they're down significantly. I think that's another sign that, you know, when we talk about capacity exiting the market, that's also less capacity entering the market from that standpoint. View that as something that could be a positive trend as far as this load-to-truck ratio comes. Thank you. Appreciate the question and answer. Thank you. Your next question comes from the line of Jack Atkins from Stephens. Please go ahead. Okay, great. Good morning. Thanks for taking my questions. I guess, you know, J.D., or not J.D., Drew, I'd love to get your thoughts here on sort of how you're positioning the business through the bid cycle here. Because if I look at your revenue per load and brokerage down about 33% or so in the Q1, it certainly feels like you guys are using price as a lever to take share. At the same time, the market is potentially bottoming here. Are you structuring the contracts in a way to give you an opportunity to come back and take that price higher once the spot market moves up? How are you thinking about that? It feels like with 77% of the business, under contract, you know, if the spot inflects, that could be a pressure on net revenue per load. At first, we're not using price as a way of getting business, and I think you can see that because our gross profit percentage is the best there is in the industry right now. As far as, you know, being able to see spots impacting net revenue per load, spots coming on will actually be a positive thing for us on net revenue per load because you'll see spot rates shift higher than what contractual rates are today, which would naturally be at a higher gross profit per load. You know, we view that when the market flex, that'll be a good thing. You've seen us shift our mix of business as much as 1,000 basis points quarter-over-quarter, so we're an agile group. We're ready to react with whatever the market throws at us, and we're prepared for when it inflects, and that will be a positive thing for us from a pricing standpoint. Hey, Jack, it's Jared. Also be mindful of the dynamics from Q4 to Q1, right? You're comparing to Q1 of 2022 when the market significantly loosened after the new contract rates had already gone into effect. It's a much harder comp in terms of year-over-year, and our comp is actually in order to Q2 when you think about Q2 of 2022. To reiterate what you said, we are absolutely not using price as lever. Ultimately, you know, profitable growth is in our DNA. That's how we run this company. I think it's mindful to think about that comp and also remember that length of haul was also a headwind on a year-over-year basis, which steps up relative to Q4 levels. Okay, Jared. I appreciate that, Drew. Thanks for that comment as well. I guess maybe kind of, you know, Drew, getting back to your point on being able to capture spot market activity when it materializes, you know, hopefully later this year or sometime in early next year. I guess I'd be curious to kind of get your thoughts on productivity gains. You guys have done such a great job maximizing productivity over the last, you know, three, four, five years, Drew, under your leadership. Sort of think about that and being able to really drive up the percentage of the load that you're matching digitally with carriers. You know, how do you really kind of move that ball forward here over the next Year or two to drive additional productivity opportunity. Two things to break down there. One's just the overall productivity. We did see an increase in productivity from our team quarter-over-quarter. That was a positive thing. Really, we look at the productivity gains that we got over the long term because there will be times that you see us invest in headcount, and you know, we look at the productivity gains more on a three to five-year basis from what we're doing. That, as we've said in the past, that trend has continues to be up and to the right. As far as the opportunity that we've got on the carrier side, we've got a ton of white space, as Jared mentioned in his prepared remarks, to be able to continue to grow on the carrier side from an integration standpoint. We've done a great job on the customer side, and integrating with large customers is a little bit easier than integrating with some of these smaller carriers. As we continue to be able to show them RXO Connect and the power of what RXO Connect can do, whether it's being able to keep them on continuous moves, whether it's being able to give them discounts on fuel and tires and maintenance, continuing to pull them back to the app, you know, once we get them on, we've got a high retention rate. One of the things that you saw is that when carriers come on to do business with RXO Connect, they come back 79% of the time. We've just got to continue to increase the adoption rate there. Okay, guys. Thanks again for the time. Really appreciate it. Thanks, Jackson. Thank you. Your next question comes from the line of Jason Seidl from TD Securities. Please go ahead. Thank you, operator. Good morning, gentlemen. Wanted to talk a little bit first about the comments you made about managed transport in terms of the synergy revenues that I think are one of the reasons that you guys are outperforming your peers in load growth. Can we dig into that a little bit? Sort of what's going on there. Has there been a shift in some of the customers? Is there just been, you know, a better job done internally about pushing some of that freight from one side to the other? There hasn't been a shift. One, we've continued to bring on new customers in managed transportation, and anytime there is a new customer that's brought on, one of the first places that the customer wants us to look at as far as how we're doling out freight is to ourselves because we are known as a reliable partner who's gonna be able to go in there and add value to their overall supply chain. We expect synergy loads to continue to increase, going forward, and think that we're really just getting started from that perspective. Managing close to $4 billion in freight under management, we've got a lot of opportunities to drive cross-selling across the company. If you look at us overall, you know, it's 62% of our revenue comes from customers who do business with more than one line of business. We're very integrated across the company. Okay. No, that's good color there. I also wanted to sort of circle back to Jack's question a little bit on the technology side. I, you know, he asked it, I think you sort of talked around it a bit. You said the loads created and covered digitally are 96%, and that's probably feels like it's getting close to topping out there. You say you have a lot of opportunity on the carrier side. Should we expect the loads created and covered digitally to grow from 1Q to 2Q, and when do you guys expect to start breaking out that number for us investors? Hey, Jason, it's Jared. Morning. What we talked about, 96% of loads created or covered loads, covered, created or covered digitally. From a created and covered perspective, that is a significant percentage of our loads, and that is growing. As we talked about a little bit, you know, we've done a really great job on the customer side. I think we've got a ton of white space ahead of us on the carrier side. The value proposition is clear. It's very sticky with our carriers, in terms of RXO Drive and RXO Connect. It really is about increasing the adoption rate with them, and then once we go ahead and increase that adoption rate, the carrier retention rate is very strong. Right? This quarter was up monthly Q-on-Q to 79%. We're certainly having those conversations in terms of when we're gonna go ahead and disclose to you the percentage of loads that are created and covered digitally. You know, certainly look forward to sharing that with you when the time's appropriate. No, we look forward to having it. It would be helpful. Appreciate the time as always. Thank you. Thank you. Your next question comes from the line of Jeff Kauffman from Vertical Research Partners. Please go ahead. Thank you very much. A lot of my questions have been answered. I'd like to delve into two expense line items, if I can. I think one of the surprises for me, given the revenue was down, was the direct operating expense line was up about $6 million year-on-year. I guess question one is, can we dig a little bit into what drove that? Is that something that sustains at this level, or is there something in 1Q that drove that higher and that cost comes down? Secondly, I want to follow up on Tim Hoexter's call. I think I understand the restructuring charge of things, but why the $6 million in transition and integration costs at this point? You know, can you help us understand what those are really covering at this point? You're not really rebranding, a lot of things, I would assume, but maybe I'm wrong. Just some clarity 'cause those were the two costs that kinda stood out versus what expectations were. Yeah. The OpEx number specifically, what runs through there is generally our expenses related to our managed transport business and our last mile business. When you see a direct OpEx, it's things like the cost of the facilities on the last mile hub. It's the direct labor to, you know, get product ready for staging for the transportation. We did see an uptick in some of those costs. Very little of our direct OpEx runs through our brokers because it's, you know, most of that's cost versus trans. Nothing significant there that stands out other than, you know, those kind of costs that support last mile and OpEx or last mile managed trans. In terms of the cost as it relates to restructuring, some of the things in our spin-related category, if you will, you mentioned rebranding. That's actually one of the biggies. As we transition from that being a division of XPO into a standalone public company, we did go out and rebrand a lot of our facilities. That's that was a cost that we started at the time pre-spin, but it carried on over into the Q1. As you would think, that will diminish as the year goes on. Other things, we had some retention, some retention dollars, some kind of non-compete dollars that are directly related to the spin. Those will also diminish, as you would expect. Talked earlier, we do expect the spin-related costs to diminish materially as the year concludes in late 2023. We'll have a few carryover items, but very little. Okay, great. Thank you for that answer. Thank you. That will be for our last question. I would like to turn the call back over to Mr. Wilkerson for any closing remarks. Thank you, Lara. Despite the weak macro environment, RXO took market share and maintained best-in-class brokerage margins. RXO is a differentiated business model with best-in-class technology and massive capacity, along with a deeply experienced leadership team. We're navigating the current economic climate well, and we're gonna remain focused on delivering results for our shareholders and for our customers, along with the carriers we partner with and our employees. Thank you all for your time today, and I look forward to seeing many of you at the upcoming investor conference. Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.