There we go. Guess we're live. Well, good, good morning, or almost good afternoon here. Welcome to day two of Barclays Industrial Select Conference. I'm Brandon Oglenski, airline and transport analyst. Next up, we have RXO. And joining us from the company is Jared Weisfeld, Chief Strategy Officer, and Kevin Sterling, Senior Market Strategist, Head of IR. And before we get into this, we'll just do the audience response questions really quick. I'm sure if you guys have been through a fireside, just pick up that little remote there. Sorry, Kevin, we don't have one for you, but if you can queue up question number one, please. Do you currently own RXO? Yes, overweight, market weight, three, underweight, or four, no. You can go ahead and vote. Appreciate everyone participating, too. Okay, and then question number two: What is your general bias towards RXO right now? Positive, negative, or neutral? All right, and then question number three, please. In your opinion, through cycle, EPS growth for RXO will be above peers, in line with peers, or below peers? All right. Well, Jared and Kevin, thank you guys so much for coming down. I know Drew Wilkerson tried to be here. I guess he's stuck in a karaoke session. The karaoke's ruined for me forever. But no, Drew is exactly where you want him right now, meeting with customers. So, appreciate the invite. Thanks for having us. Well, thank you again for coming down, and I guess the, the karaoke joke was really talking to, you know, the volatility that your stock and, and a lot of other asset-light transportation stocks saw last week, you know, with a supposed AI company has built code and gonna take over the world. But can you talk to maybe the reality on the ground and, and even how RXO is actually leveraging AI today? Absolutely. So the reality on the ground is that when we think about how we're leveraging technology and artificial intelligence, we fundamentally believe that leveraging AI and tech will go ahead and improve the structural margin profile of the company longer term, and we think about it in two ways: how we go ahead and improve productivity, how we go ahead and then unlock incremental revenue opportunities. But before I even go there, I just want to back up and talk about just the fundamental premise of our business model is predicated on relationships and service. If you think about the relationships that we have at RXO, we deal with the largest shippers in North America, Fortune 100, Fortune 500, Fortune 1000 shippers, and the top 20 customers, on average, have been with us for 16 years. When you think about the service level requirements, you think about dealing with high-tech vertical, you think about dealing with hazmat, you think about dealing with complex needs. The nature of the game is all about exception management and how you service your customer freight throughout market cycles. So we're gonna leverage technology aggressively, and we're gonna do it to the benefit of the P&L. We're gonna do it to the benefit of our customers and our shareholders. But at the fundamental core, if you do not go ahead and service your customers' freight exceptionally well, built on trust and those relationships, no amount of tech can solve for that. Okay. Can you talk about earnings that have been a little bit more challenging in the last two quarters, or at least in the fourth quarter, and the guidance for 1Q? Sure. It's pretty difficult, to be fair, but you guys are effectively saying that you're seeing the squeeze in the market as truckload rates have come up. Can you talk through that dynamic? Absolutely. I mean, so if you think about the underlying business model within RXO Brokerage, we've got our contractual book of business with the large shippers that I just talked about, and we're 70% plus contractual in nature on the truckload side, and we're dealing with enterprise-class shippers, generally 12-month contracts. We procure our cost to purchased transportation on a spot or transactional basis, and you think about the month of December alone, industry-wide buy rates were up 15% month-on-month from November to December. That's the largest buy rate movement we've seen in the last 16 years from November to December. So when you've got that book of business that's contractual in nature, and you've got that buy rates going up so dramatically, that squeezes the impact on our brokerage gross margin. But that's temporal. That happens at every point in the cycle. We're seeing the impacts of that, certainly in Q1, which is always the seasonally slowest quarter for RXO, but then you magnify that, to your point, from a squeeze perspective, which resulted in our Q1 outlook, $5 million-$12 million of adjusted EBITDA. But that's largely mechanical, and, you know, this is the squeeze that we've been waiting for for the last 3.5 years after we've spun out from, from XPO. We just didn't think we'd get here this way in terms of really a supply shock-driven squeeze. The one thing that's missing is an improvement in demand, 'cause if you think about a typical squeeze, you know, every cycle, you always see the contractual book of business profitability move lower, but you'll then have spot loads to help offset. But because this is effectively a supply shock, which we can talk about in terms of all of the recent policies and regulations coming out of the Department of Transportation, which overall is a very long-term positive, you don't have that demand in the near term to help offset. And Brandon, let me piggyback on that. You know, we're going through bid season, and so you wanna put your best foot forward with that customer, so you wanna make sure you're servicing that customer's freight. So we're approaching it from a position of strength, not weakness. You make sure you're there for that customer, service that customer's freight, and it kind of gives you that advantage going into bid season. And to Jared's point, you know, as the market inflects and turns, we're gonna be there to clean up on those spot opportunities. We're gonna be that first call 'cause the customer knows that, hey, we were there servicing that contractual freight. So it's a very important, particularly right now with bid season, to put your best foot forward. Okay, but you guys did guide to volumes being negative in the first quarter. Is that right? So from a Q1 perspective, we guided volumes down 5%-10% year-over-year. If you unpack that from Q4, we're down about 4% year-over-year. Truckload in Q4 and Q1 will be down about the same amount. We talked about down low double digits. It's really that LTL component where we are facing much tougher comps. In Q4, we talked about LTL being up 31% year-over-year. We onboarded a huge book of business in 2025, so when you think about the tougher comps, LTL will be up 5% year-over-year in Q1, plus or minus. So that really is driving the sequential move. I think the biggest takeaway I want to leave you with from the earnings call was that with the integration of Coyote materially behind us, we are entering 2026 in a much different position relative to 12 months ago. Our late-stage brokerage sales pipeline is up more than 50% year-over-year, and we wanted to give that stat out there, not something we typically talk about, because we also made the comment that we expect to resume truckload outperformance versus the market as early as the middle of the year. And that's a. You know, when you think about RXO for the last 15 years, we've been doing that every year except last year. So we wanted to give you some confidence when you think about where our pipeline is. Truckload has been underperforming for the last 12 months for a number of reasons, but we now have line of sight to resuming outperformance versus the broader market as early as the middle of the year. I guess what's giving you the confidence and driving or motivating you to share that stat with us? We didn't think it was fair to make the statement that we're going to go ahead and claim that we're going to resume outperformance without giving that composition of the backlog up our pipeline, up more than 50%. And when you unpack that pipeline, it's materially driven by truckload, and this is talking about new incremental business. This excludes all incumbency. We're talking about new business with existing customers and new business with new customers being up more than 50%. This is qualified. This is already in pricing. If you think about a broader pipeline, which includes pre-pipe, you know, that generally can have a win rate of low single-digit percentage. This historically is multiples of that. So the confidence level is high in terms of visibility on this new book of business. And when you think about it, you know, over the last 12 months, you know, the first six months of 2025, it did take a little bit longer than we expected to stabilize some of the legacy Coyote volume. But in Q3, it was truckload volume was up sequentially. In Q4, it was up sequentially. We'll be down seasonally into the first quarter. But building on that, you know, shippers have confidence that the integration is complete, the service levels are there, the technology is functioning to give us more business, and we're seeing that as a result in bid season. Jared, that's going to be starting in the second quarter, or when do we think? The language that we used is as early as the middle of the year. And when you think about just the strength of the pipeline, the success we're seeing in bid season, also think about it just from a comp standpoint, our comps on truckload start easing pretty significantly in April. So, you know, I think we want to build a framework to think about just outperformance versus the broader market as early as the middle of the year. And then building on that, as we think about just the growth algorithm for RXO, it's truck- freight brokerage is taking share from asset-based carriers. Penetration has gone from mid-single digit to 20%, and then RXO gaining a share from that overall pie, which we've been doing for the last 15 years, sort of resuming that growth algorithm with the integration complete is where we're focused right now. Well, I shouldn't assume, but I guess that that outlook is coming with higher profitability as well? Profitable growth is how we're thinking about this business. It's how we've always thought about this business. I think not only are we driving profitable growth in terms of pricing in line with market, procuring transportation effectively, driving strong margins, but then also making sure that we see real operating leverage. We've taken out more than $155 million of costs post-spin from XPO back in the back half of 2022. As we think about going ahead and driving incremental top-line growth, doing it in a way where volume growth is decoupled from headcount growth to really drive some strong contribution margins. Okay, and that could show up as early as mid this year? The big wild card that we don't know is demand, right? But there are certainly reasons to be optimistic heading into this year. You look at the ISM reading from two weeks ago, the new orders component, the highest level since 2022. You look at consumer confidence moving higher over the last couple of weeks. You look at any kind of stimulus that might happen as a result into midterms. Inventories are generally pretty lean across the supply chain. So I think it is a pretty healthy backdrop from a potential backdrop from a demand standpoint. But I go back to what we were just talking about earlier. We're not waiting for demand to improve. With the organization is moving full speed ahead in terms of driving growth in the business organically right now, and you look at what we have accomplished in terms of the strength of that pipeline growth from new and existing customers, we feel really good about the opportunity ahead of us. And, Brandon, think about it like this too, you know, post-Coyote, the foundation is set. We went very fast to integrate Coyote. Now we're pretty much fully integrated, and we're ready to capitalize on this market as it's turning. So it's like building a house. You got to build the foundation first. Okay. David, did you have a question? Yeah, I just, o ne question. You mentioned on the supply side earlier, if we assume the government regulations is going to hit kind of, you know, the lower end of the trucking market, maybe people that aren't as compliant with all the rules and regulations as most of your carriers are, do you feel like that's an opportunity for the larger brokers like RXO to take a little bit more share, and that, you know, you'll have more of your carriers available relative to what a smaller broker might? It's a great point, David, and the answer is absolutely yes. If you look at the RXO network, it's almost 120,000 carriers, and if you look over the last six months, industry-wide tender rejections went from mid-single digits to, as of this morning, 14%, and that is all in the backdrop of a muted demand environment, which I think speaks to how much capacity has come out structurally due to all of the changes that have happened at the Department of Transportation, which is a very long-term positive with respect to safety, fraud, and theft, and ultimately, just a healthier supply-demand balance. Then you look at one of the competitive advantages for a broker like RXO in terms of access to this massive amount of capacity, and you think about, 'cause it's, it's not just about having the massive amount of capacity, it's about having high-quality capacity, especially if you're dealing with verticals that are, you know, incredibly, in some cases, difficult to cover freight. When you think about high-value tech, you think about hazmat, you think about nuances associated with any particular type of freight. Our shippers, you know, wanna make sure that they're dealing with high-quality carriers. We'll have shippers that wanna make sure, you know, when they go ahead and we're covering freight, not only are we gonna go ahead and, you know, give them background on the carrier that we're using, they'll sometimes wanna see a license of the individual driver matching all the documentation. You know, you cannot go and drive for RXO with your first load digitally, just to give a sense in terms of the compliance procedures that we have internally. We wanna get to know our carrier. It's a trusted partnership across the board. Think about it, too, from a perspective of, like, maybe some smaller brokers who were using some of this capacity out there that, you know, wasn't quite legal per se. Whereas us and other large brokers, we're, it's more of a level playing field now. You know, we kinda have to use high-quality carriers and everything, but now, you know, the government is leveling the playing field by taking out some of this fringe capacity. That, that's also a great point. You think about some of the, I mean, there are 20,000 brokers that are out there, but the top nine represent almost half the market. So if you think about any of these smaller brokers that were leveraging this capacity that's no longer valid, their business models now go away. So I think it speaks to the moat that gets created, especially for the larger brokers that are out there. And then on the growth piece, I mean, previously, you talked about double-digit volume growth as being a kinda medium-term goal. Do you have a line of sight to getting back to that type of goal? So absolutely, in terms of how we think about the growth algorithm for the business. I think we think about it more, we think about it more from the standpoint of outperformance versus the market throughout market cycles, and historically, RXO has grown, you know, about 1,000 basis points above market. I think we've talked about with Coyote, you know, law of large numbers as the number three provider of brokerage transportation, maybe that comes down a little bit, but certainly from the where we are, right, in terms of outperformance versus the market. But from where, where we are right now, you look at our truckload volume in 2025 with respect to, you know, being down double digits, the base at which we're operating from, we've now stabilized the volume. The pipeline is incredibly strong and up more than 50% year-on-year. Line of sight to significant onboardings, existing and new customers, and then growing as a percentage of that. Because you look at RXO's share, and you look at overall freight brokerage share, both are still very low in what is an under-penetrated industry, and we are still in very early days in terms of adoption of brokerage as a service. Jared, I hate to harp on this, but I guess could there still be a circumstance where maybe your volumes aren't necessarily up but just outperforming the market later this year? Is that the message you're potentially sending? I think, the message we're sending is that we're gonna—we, we have very strong confidence in terms of outperformance versus the market. I can't tell you what demand's gonna do in three months from now, six months from now. I think we'll all look at the Cass Freight Index, which I think is a good barometer of what's going on out there. In Q3 and in Q4, RXO truckload outperformed, on a sequential basis, the Cass Freight Index. Overall volume growth outperformed, driven by the strength of LTL, and when we look at the strength of the pipeline, I think our confidence level is extremely high that we're gonna outperform the market. What the market is actually doing, I can't control, but, you know, when you think about the diversified book of business that we have, 20% industrial, 25% retail e-commerce, 20% food and beverage, automotive at high single digit, I think there's a lot of reasons to be optimistic heading into 2026. Kevin, from your perspective, the demand just hasn't improved yet in the current environment? It hasn't, and just think about, you and I have been doing this a long time. Have you ever seen an environment like this, where tender rejections, load-to-truck ratios go up like this without demand? It tells you it's all supply-driven, right? And so you think about some of the drivers of demand that could occur this year and why we're optimistic, and, you know, housing, what is it? 7-8, every new house that's built, seven-eight new truckloads of freight. You know, you saw the positive ISM, so if we get that demand on top of all the supply that comes out, it's not gonna take much on the demand side to really drive this market higher, and so that's exciting. You know, one other point, too, and, you know, I think when you go back and look at previous cycles, like for instance, in 2017, when ELDs hit it probably took out about 4%-5% of capacity. I think what you're seeing now is gonna take out a lot more than that. And 2018 was a great year for freight, a great year for stocks, but didn't last long because all this capacity came flooding into the market. Now, we realize it wasn't, you know, it was kind of this shadowy fringe capacity, but think about, like, 2004, 2005, 2006. That was a great, those were great freight years, you know, cycles that lasted a couple years. Truckers would tell me, you know, in the mid-1990s, cycles would last three and four years. Supply comes back, but it came back more rational. I think we're getting to a point where a lot of the supply that's coming out is more permanent in nature, and we will see a supply response, but it's gonna be more rational. So we get that demand, we could see cycles like we used to, you know, 20 years ago. Well, is this something where you can go to your customers, though, and say, "Look, the price for entry has changed, and w e need to get more from you or? Customers are very well aware of what's going on in terms of non-domiciled capacity, English language proficiency, and what that's resulting in in terms of the broader market. So, you know, we've talked about 2026 contract rates being up low- to mid-single digits year-over-year. You know, as bid season has progressed, I think it's safe to assume, you know, we're now more inflationary than not relative to three months ago because the market has changed in a pretty big way. And the fact that we're sitting here, you know, middle of February, to Kevin's point, in what is the weakest demand environment of the year seasonally, and we're sitting at 14, 15% tender rejections, speaks to how much capacity has come out. I think the language that we used a couple of weeks ago on the earnings call was the market is extremely fragile from a supply-demand standpoint. It will not take much demand to go ahead and really alter the state of supply versus demand and where that equilibrium is. So when we think about having those conversations with our shippers, we need to make sure that we're able to service their freight. We also need to make sure that we're earning a fair margin. So I think it's a very dynamic conversation. It's two ways. It's iterative, right? Our top 20 customers are not with us for 16 years on average. It's not a coincidence, right? We do that because it's a true partnership throughout all market cycles, working with customers to make sure that we can service their freight. You know, to that earlier point, when you think about a fragile balance between supply and demand, if there is any improvement in demand, you can certainly start to see some pressure on these waterfall routing guides, which we really haven't seen from a shipper standpoint in about four years. So it is, you know, certainly something that we need to make sure that we are educating our customers about, and we're working with them to make sure that we're creating solutions and services to be able to provide to them. All right. Can you talk to the results at Coyote? Because we had pretty big ambitions when you guys bought it, but obviously, we know where the earnings picture is today. And on top of that, I guess synergies have been realized, but can you talk through maybe some missteps there or how maybe you could have done it differently? So on the. I'll take the second part first. So we moved very quickly. Never let a good downturn go to waste, and we moved expeditiously with respect to the integration. So this is one of the largest integrations that's ever occurred within the asset-light space, and we were materially complete within 12 months. Operations, technology, people, pricing, all now on one system. So to be able to go ahead and operate in this environment and then potentially operating in a tighter environment, being on one system and having that behind us is a huge competitive advantage heading into 2026. So, you know, when you think about the integration, it's been a very strong result in terms of being able to do that so quickly, and retention of talent has also been strong in terms of voluntary turnover. We talked about being in the low- to mid-single-digit percentage. We've retained almost every individual that we want to be part of the combined organization, really going in eyes wide open. Doesn't matter if you're legacy RXO or legacy Coyote, who is the most talented individual that can help deliver stronger returns for customers and shareholders over time? That's really the approach that we took. So from a synergy standpoint, we talked about $60 million of operating expenses, out of, out of the model, that is fully, that is fully realized heading into 2026. The total synergy number was $70 million, split between $60 million operating expenses, $10 million CapEx. We did announce another new initiative in Q4 of last year, with the synergies being complete in terms of additional opportunities to take out more costs, about $30 million of operating expenses, of which there was a partial impact in Q4. You'll see the full run- rate of that realized in 2026 versus 2025. So we are really operating very efficiently right now to drive significant margin improvement when we do have better top-line growth. And, you know, even irrespective of the broader environment, the fact that our pipeline is up so strongly, we're going to be able to drive some really strong contribution margins. To the first part of your question in terms of overall results, no doubt about it, you know, as well as the operational integration has gone, financial results are behind where we thought they'd be. When you think about what's happened in the model, I think two things. One, we talked about how it took a little bit longer than we expected to stabilize the Coyote volume, but encouragingly, we saw sequential volume growth on the truckload side in Q3 and in Q4, and have done a really good job staying close to our customers to drive really strong pipeline. When we think about the gross profit per load, which is the other side of the equation, I mean, in the month of December, when you think about just how the book of business works, we talked about earlier, December buy rates were up 15% for the industry versus November, and you have a squeeze on your brokerage gross margin. Our truckload gross profit per load was 30% below our five-year average, excluding the highs from COVID. So when you get that kind of deleveraging in the model, you know, we do have below gross profit line, a pretty fixed cost structure where two-thirds of our costs are fixed or semi-fixed. So when you have gross profit that's declining because of, because of gross profit per load, you know, you can't cut enough costs, want to, because we want to make sure that we're able to service customers during the upturn. So that really was the-- those were the two main drivers. But all that deleveraging you've seen that Jared's talking about, it'll flip when the market turns. That's right. It'll be, we'll be on the upside of operating leverage. Okay. I think you guys have spoken to purchase transportation synergies as well. So how do you put that in context of, you know, that gross profit for a load being down 30%? Yep. So on the COPT, so if you think about some of the synergies we talked about as a result of the Coyote acquisition, number one was on the cost side, where we talked about $70 million of cash synergies that have been realized. And then you talked about purchase transportation, and purchase transportation is going to be, you know, not as explicit as cost because it's going to be a relative concept. So it depends on what's happening in the market. If you're in a tightening environment, like the one that we're in right now, it's more about cost avoidance, i.e., opportunity cost of or cost avoidance in terms of not flowing through the P&L. If you think about a loosening environment, you can bring down PT faster, and then you'll have that realized P&L flow through the P&L. So from a COPT standpoint, we talked about about 100 basis points of improvement, when we're all said and done. You know, I think we talked about a couple of quarters ago being at 30-50 basis points, since we did the carrier cut over on May 1st of last year. And I think we feel very confident in terms of the path towards that 100 basis points. But you also have to remember, it's also an iterative process where you think about the carrier reps at Legacy Coyote, who we decommissioned the old tech platform, Bazooka. We transitioned everyone to RXO Connect and Freight Optimizer, our internal proprietary system. There's a learning curve, right? If, you know, I were to take everyone's Bloomberg Terminal away in the audience and replace it with a different tool, it would take some time. So you just sort of think about that learning curve, getting to know the freight that's on the network, getting to learn the tools. And then we talked about last call, in particular, continuing to augment a lot of the capacity that we have. One of the great benefits associated with Coyote was their access to dedicated and private fleet capacity, which comes at a structural cost advantage. Continuing to augment capacity and bring that into the network, I think there's a lot of opportunity to continue to, to improve our PT and buy versus market. If we could queue up question number four for the audience. Only a few minutes left here. In the back, question four, please. In your opinion, what should RXO do with excess cash, both on M&A, larger M&A, share repurchases, dividends, debt pay down, or internal investment? And, Jared, while we get the response to this, you do run relatively higher CapEx compared to some of your competitors. Can you talk about the components of that? Sure. So if you think about our capital expenditure profile, last year, we gave a range of $65 million-$75 million. We actually came in nicely below the range of, at $57 million. This year, we got it to a further reduction, to $50 million-$55 million in CapEx. You think about the business of our, of our scale to be, you know, the, the beautiful part about the model is that we're going to spend about $50 million-$55 million in CapEx this year. Through cycle, $50 million is probably the right way to think about it, and I think you got to look at it in the context of normalized earnings, where, you know, whether or not we're doing $200 million of EBITDA or whether we're doing $500 million or $600 million of EBITDA, that CapEx profile is not going to differ materially. You know, it'll go up a little bit, certainly with the higher profitability levels as we invest into the business. But that speaks to the free cash flow generation characteristics of the company, where, you know, you think about a $500 million type EBITDA number in the context of our fixed cash outflows between $50 million of CapEx and $30 million of interest expense, that can generate a lot of cash flow. To Kevin's earlier point, we get to a world where, you know, cycles are lasting for more than 12 months. That's a lot of cumulative cash flow that can build, build on the balance sheet. Okay. In the back, question number 5, if the audience doesn't mind here. In your opinion, what multiple of 2026 earnings should RXO trade? We have the ranges there. You all can vote. Unfortunately, there's not a lot of EPS this year, I think. But I guess we're trying to turn that around, right? Okay, and then question number 6, please. What do you see as the most significant share price headwind facing RXO: core growth, margin performance, capital deployment, or execution and strategy? All right. Well, gentlemen, thank you for coming, and Jared, we just have 1 minute left here. I don't know, what can you leave us with? It sounds like things are looking better as we get through 2026 for RXO. Is that fair? Yeah, I mean, if I had to leave you with one impression, we are, we are entering in 2026 with significant momentum in the core brokerage business. Our pipeline is up more than 50% year-over-year. That's late-stage pipeline that's attributable to incremental growth above and beyond the base business. The integration is behind us. We are focused on growth that can allow for significant margin improvement. So when you think about just the core algorithm for RXO, it's profitable growth and driving significant cash flow and earnings growth over the long term, and we're pretty well positioned, heading into this year and beyond. All right. Well, thank you both for coming down. Appreciate you being here. Appreciate it. Thank you.