RXO

RXO, Inc. 10-Q Summary: Q2 2026

Business Context and Reporting Period

This filing covers the quarterly period ended June 30, 2026. RXO, Inc. operates as a brokered transportation platform with an asset-light business model, primarily focused on truck brokerage, complemented by managed transportation and last-mile services. The company reported as a single segment and is classified as a large accelerated filer.

Key Financial Metrics

Note: YTD Operating Cash Flow was $(47) million for the six months ended June 30, 2026, compared to $21 million provided in the prior year period.

Material Changes vs. Prior Period

• Revenue Growth: Q2 2026 revenue increased 25.0% year-over-year to $1.774 billion. This was driven by a 44% increase in revenue per load in the truck brokerage segment due to higher freight rates and fuel prices, alongside a 2% increase in load volume.
• Margin Compression: Cost of transportation and services rose to 83.0% of revenue in Q2 2026 (from 78.8% in Q2 2025). Management attributed this to a tight market where capacity exit caused buy rates to increase faster than contractual sell rates.
• Debt Restructuring: In Q1 2026, the company redeemed all outstanding 7.50% Notes due 2027 and issued $400 million in 6.375% Notes due 2031. This resulted in an $11 million debt extinguishment loss recorded in the first half of 2026.
• Working Capital: Accounts receivable increased by $218 million compared to year-end 2025, reflecting higher revenue volume. Accounts payable increased by $174 million due to higher third-party transportation costs.

Outlook, Risks, and Management Commentary

• Market Conditions: Management noted that the transportation market remained tight in Q2 2026, with capacity continuing to exit due to regulatory changes and enforcement. This environment pressured margins as fuel costs and carrier rates rose.
• Liquidity: The company maintains a $450 million Asset-Based Lending (ABL) facility with $335 million available as of June 30, 2026. Management believes existing liquidity is sufficient to support operations for the next 12 months and beyond.
• Restructuring: The company incurred $14 million in restructuring costs for the six months ended June 30, 2026, primarily for severance and operating lease impairments. A remaining liability of $25 million is expected to be paid out over the next 12 months (severance) and the remaining lease terms (facilities).
• Legal Risks: The company faces ongoing class action and collective action cases regarding worker misclassification in its last-mile business. While two cases were settled for immaterial amounts, others remain unresolved. The company has not accrued for these as a loss is not currently deemed probable, though an unfavorable resolution could materially impact results.

Investor Verification Checklist

• Margin Sustainability: Verify if the 3.8 percentage point increase in cost of transportation as a percentage of revenue is a temporary market anomaly or a structural shift in the brokerage model.
• Cash Flow Conversion: Analyze the shift from positive operating cash flow in H1 2025 ($21M) to negative in H1 2026 ($(47)M) to understand the working capital intensity required for current revenue levels.
• Debt Service: Confirm the impact of the new 6.375% Notes due 2031 on future interest expense and fixed charge coverage ratios.
• Legal Exposure: Monitor the status of the pending misclassification lawsuits in the last-mile segment, as these are not covered by insurance and could result in significant unanticipated liabilities.