How does RXO balance its significant AI and technology investments with the importance of people and customer relationships, especially at this point in the cycle?

Drew Wilkerson stated that relationships are paramount, as RXO is a relationship business. Technology is used to enhance productivity and improve relationships, not replace them. He noted a 15% increase in productivity and a 15% increase in volume for reps using the new quoting tool. “We value the relationship first. We are a relationship business. We win because of the relationships that we have with customers.”

Given Q2 guidance still shows earnings down year-over-year despite increased spot mix, what is the right normalized earnings power for this business?

Drew Wilkerson reiterated that at a midpoint in the cycle, RXO is a mid-single-digit EBITDA business, and at an up cycle, it's a high single to low double-digit EBITDA business. He acknowledged Q2 is still below normalized earnings but sees a clear path to improvement. “At a midpoint in the cycle, this is a mid-single-digit EBITDA business. And at an up cycle, it's a high single to low double-digit EBITDA business.”

What are RXO's views on the potential impact of the Montgomery case on the brokerage industry, particularly regarding small brokers, and how it could be both a risk and opportunity for RXO?

Drew Wilkerson believes the industry is on the right side of the law. If the case rules against the industry, it would drive out smaller brokers due to increased insurance costs and higher shipper requirements for carrier vetting. This would create opportunities for organic growth and M&A for RXO, which has scale, technology, and financial stability. “If the case goes on the Montgomery side, I think that will drive out the tail on brokers and will create a lot of opportunity for organic growth very quickly in our business, and it also creates some opportunities on the M&A side for consolidations.”

RXO

RXO (RXO) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Industrials· May 7, 2026

Source: earnings call transcript

Executive summary

RXO Q1 FY26 — Supply-Driven Recovery and AI-Powered Growth

RXO is navigating a supply-driven freight market recovery, marked by capacity tightening due to regulatory changes. The company demonstrated strong momentum in Q1 FY26, particularly in brokerage spot opportunities and managed transportation wins, while aggressively deploying Agentic AI solutions to enhance productivity and service. Despite Q1 EBITDA being at the low end of expectations due to weather, RXO anticipates significant sequential EBITDA growth in Q2, driven by improved volume, higher spot mix, and increased contract rates, positioning itself for sustained long-term earnings power.

Highlights

Brokerage full truckload volume improved every month throughout Q1 FY26.
Spot mix increased by 500 basis points sequentially in Q1 FY26, leading to strong gross profit per load improvement.
Awarded over $100 million in freight under management in Q1 FY26, with late-stage sales pipeline increasing by over $200 million sequentially.
Full-year 2026 contract rates are now expected to increase by high single digits, an improvement from the prior low-to-mid single-digit expectation.
Reps adopting the new AI spot agent are seeing a 15% increase in both volume and gross profit per load.

Concerns

Adjusted EBITDA was $6 million in Q1 FY26, at the low end of guidance, primarily due to an approximate $3 million impact from severe weather.
Reported an adjusted loss per share of $0.09 in Q1 FY26.
Complementary Services revenue was $388 million, down 7% year-over-year in Q1 FY26.
Last Mile stops declined by 8% year-over-year in Q1 FY26, impacted by severe weather and continued weak demand for big and bulky goods.
Adjusted free cash flow was negative $15 million in Q1 FY26, affected by lower profitability and timing considerations.
Net leverage stood at 3.7x LTM bank adjusted EBITDA at quarter-end due to lower profitability levels.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 contract rates	high single digits high materiality	FY26	High
Adjusted EBITDA	$27 million to $37 million high materiality	Q2 · FY26	High
Brokerage volume	about flat year-over-year medium materiality	Q2 · FY26	Medium
Truckload volume outperformance vs. market	resume as early as the middle of the year medium materiality	Mid-year FY26	Medium
LTL volume growth	returning to year-over-year volume growth medium materiality	H2 FY26	Medium
Last Mile stops	down a low single-digit percent year-over-year medium materiality	Q2 · FY26	Medium
Leverage ratio	move lower medium materiality	H2 FY26	Medium
Free Cash Flow conversion	40% to 60% medium materiality	Long term	High
Capital expenditures	decline approximately 30% medium materiality	H2 FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Brokerage Revenue growth driven by increased freight rates, truckload length of haul, and higher fuel prices. Gross margin impacted by tightening market and higher fuel prices (20-30 bps headwind). Truckload volume improved every month throughout Q1. Percentage of total revenue: 74%LTL volume growth: 5% YoYLTL volume as percentage of brokerage volume: 28%Truckload volume decline: 12% YoYTruckload volume as percentage of brokerage volume: 72%Spot mix as percentage of truckload volume: 33%Spot mix sequential increase: 500 bpsSpot mix year-over-year increase: 600 bpsContract volume as percentage of truckload volume: 67%Truckload revenue per load increase: 8% YoY (excluding fuel and length of haul)Truckload gross profit per load increase: 9% sequentially	$1.1 billion	3%	—	11.4%
Complementary Services Most of the sequential gross margin decline was due to weather impact. Includes Managed Transportation and Last Mile businesses. Percentage of total revenue: 26%Gross margin sequential decline: 40 bpsGross margin year-over-year decline: 120 bps	$388 million	-7%	—	19.8%
Managed Transportation Year-over-year revenue decline primarily due to restructuring of express service offering. Automotive business increased slightly year-over-year.	$123 million	-10%	—	—
Last Mile Revenue and stops were lower than expectations due to severe weather impact and continued weak demand for big and bulky goods. Seeing more favorable trends to start Q2. Stops decline: 8% YoY	$265 million	-5%	—	—

RXO operating KPIs by quarter

RXO operating KPIs stated on its earnings calls, by fiscal quarter
KPI	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Available liquidity	$386M At the end of the first quarter, our total available liquidity was $386 million. Source: earnings call transcript	$350M At the end of the second quarter, our total available liquidity was $350 million. Source: earnings call transcript	-9.3%
Spot volume mix Truckload	33% Spot represented 33% of our truckload volume in the quarter, increasing by 500 basis points sequentially and 600 basis points year-over-year. Source: earnings call transcript	42% We had the largest sequential increase in the gross profit per load growth rate in 4 years, driven by our spot mix, which was 42% in the quarter. Source: earnings call transcript	+9 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline
Middle Mile Solutions	launch	February
AI spot agent	launch	late Q1 FY26
AI fraud protection agent	launch	Q1 FY26

Risks & headwinds

Severe weather impact on EBITDA Q1 FY26

approximately $3 million

Soft demand and macroeconomic uncertainty Q1 FY26, ongoing

No sustained increase in demand for goods

Mitigation:Focus on winning spot, project, and mini-bid business; leveraging strong customer relationships and service.

Tightening full truckload market and higher fuel prices Q1 FY26, ongoing

20-30 bps headwind to Brokerage gross margin from higher fuel prices

Mitigation:Capitalizing on spot opportunities, implementing higher contract rates, leveraging AI for efficiency.

Weak demand for big and bulky goods Q1 FY26

Last Mile stops down 8% YoY

Mitigation:Seeing more favorable trends to start Q2; focus on gaining profitable market share through exceptional service and scale.

Potential negative outcome of Montgomery case Future (Supreme Court decision pending)

Could drive out the tail on brokers, increase insurance costs for smaller players

Mitigation:Prepared for anything; potential for organic growth and M&A opportunities for RXO due to scale, technology, and financial stability.

Geopolitical concerns and higher oil prices Q1 FY26, ongoing

Consumer confidence recently decreased

What to watch in Q2 FY26

Truckload volume outperformance vs. market

as early as mid-year

Current down 12% YoY in Q1, down 2% YoY in April

Target resume outperformance

Why it matters

Indicates RXO's ability to gain market share and capitalize on improving freight market conditions.

We expect brokerage volume to be about flat year-over-year in the second quarter and truckload volume to resume its outperformance versus the market as early as the middle of the year.

Find out whether RXO delivers this. Inve re-checks your case every morning.

Q&A highlights

RXO's spot mix is up significantly, contrasting with a major competitor's increased contract exposure. What's driving RXO's strategy and ability to execute on increased spot volumes?

Drew Wilkerson emphasized RXO's service-built model, strong customer relationships (top customers with RXO for 16 years), and ability to win spots, projects, and mini-bids during market disruptions. He highlighted the conversion of a larger sales pipeline and the use of AI for efficiency.

“We've been very clear for the last several years that this is the part of the market that we win in. We've got a model that's built on service.”

asked by Stephanie Benjamin Moore · answered by Drew Wilkerson

2 min read 5 chapters

Detailed narrative

Freight Market Dynamics and Supply-Driven Recovery

The freight market is showing clear signs of improvement, primarily driven by supply-side tightening, despite overall soft demand, typical seasonality, and severe Q1 weather. Capacity continues to exit the market, a trend accelerating due to regulatory changes and enforcement, which RXO believes are structural. This sets the market up for a multi-year recovery when demand eventually improves, though demand remains soft due to macroeconomic uncertainty.

Customer Wins and Bid Season Success

Shippers are increasingly selective, choosing scaled brokers like RXO, evidenced by Carrier of the Year awards from Heineken USA, Graphic Packaging, and Rise Baking. RXO's bid season strategy has been successful, with contract renewal rates (excluding fuel) up mid- to high single digits.

Contract rates awarded in the last month have increased by low double-digit percentages, leading to an updated expectation of high single-digit growth for full-year 2026 contract rates.

Momentum in Brokerage and Complementary Services

Brokerage full truckload volume improved every month in Q1, and spot mix increased by 500 basis points sequentially, contributing to improved gross profit per load. In Managed Transportation, RXO was awarded over $100 million in freight under management in Q1, and the late-stage sales pipeline grew by over $200 million.

The new Middle Mile Solutions offering, launched in February, has already secured over $20 million in wins and built a sales pipeline exceeding $70 million.

Technology and AI Deployment

RXO is aggressively deploying Agentic AI, focusing on moving beyond repetitive tasks to smart, proactive decision-making. A new AI spot agent, rolled out late in Q1, is showing promising early results, with adopting reps seeing a 15% increase in volume and gross profit per load.

The company also automated over 500,000 phone calls in Q1 and introduced an AI fraud protection agent, aiming to structurally improve long-term margin profile and productivity.

Capital Structure and Liquidity

RXO refinanced its 2027 senior notes with new notes maturing in May 2031 at a 6.38% coupon. Total available liquidity at quarter-end was $386 million, providing flexibility for investment and growth. Despite lower profitability impacting the net leverage ratio to 3.7x LTM bank adjusted EBITDA, the company anticipates this ratio will move lower in the second half of the year.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.