RXO, Inc.: Torque in motion: Supply rapidly out of market pushes spot up 40% y-y

Research evidence excerpt

RXO, Inc.: Torque in motion: Supply rapidly out of market pushes spot up 40% y-y

Other tid bits

- RXO noted at the end of 1Q26 its late-stage brokerage pipeline was up more than 50%

year-year (and it typically converts over 40% of its backlog into growth). With the

market tightening and RXO accelerating its spot exposure, EBITDA increased from $6

million in 1Q26 to its target for $27-$37 million in 2Q26 (we target $35 mil).

- RXO was able to shift 1000 bps from contract to spot market in 90-days after COVID

shut-downs, and believes it is well on its way to increasing its spot exposure and gaining

margin benefits

- RXO noted that inorganic growth is back on the table given improving share, margins,

and subsequent accelerating cash flow.

- The Federal Motor Carrier Safety Administration (FMCSA) has identified 200k non-

domiciled CDL’s, or approximately 13% of the fleet of 1.5 million for hire over-the-road

drivers (a subset of the 3-4 million CDLs), with about 20%-25% of the over-the-road

fleet currently shadow capacity.

- Mr. Weisfeld noted the housing market remains soft, which could be 15%-20% of the

freight market in a normal market. Every new home is about 6-8 truckloads. With rates

at 6%, the housing market remains soft.

- Nevertheless, Mr. Weisefeld noted some green shoots on the industrial economy side,

as well as data center growth, which is driving some flatbed growth (steel, HVAC, etc…).

- RXO acquired Coyote in September 2024, which they thought was the bottom of the

cycle, although volumes subsequently got worse for another year. As such, RXO

expedited its integration.

- It is spending $100 million on technology, guided by 4 principals: volume growth,

productivity, margin improvement, and service enhancements. It expects to accelerate