Rxo, Inc. · NYSE:RXO
Rxo — Investor Day (October 2022)
82 slides from Rxo's investor day presentation, Oct 18, 2022
Slide 1: RXO Investor Day
RXO Investor Day October 18, 2022
Slide 2: Disclaimer and non-GAAP financial measures
Disclaimer and non-GAAP financial measures Disclaimer This presentation (this "Presentation") has been prepared solely for informational purposes by RXO, Inc. (together with subsidiaries, "RXO," "we," "us" or "our"). The information contained in this Presentation is subject to confidentiality. Accep
Slide 3: Forward-looking statements
Forward-looking statements This Presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to the planned spin-off and capital structur
Slide 4: Planned spin-off will separate XPO into two transportation powerhouses
Planned spin-off will separate XPO into two transportation powerhouses Leading tech-enabled brokered transportation platform Sector leader, including one of the largest less-than- truckload (LTL) networks in North America • Nimble, asset-light model with high ROIC • $51 billion industry, few large p
Slide 5: Key investment highlights
Key investment highlights 1 Large addressable market with secular tailwinds 5 Diverse exposure across attractive end markets 2 Market-leading platform with complementary transportation solutions 6 Tiered approach to sales drives multi-faceted growth opportunities 3 Proprietary technology drives effi
Slide 6: RXO overview
RXO overview (EI
Slide 7: Leading tech-enabled brokered transportation platform
Leading tech-enabled brokered transportation platform $750+ billion 58 ~10,000 of Fortune 100 addressable market1 customers2 are customers2 16 years 800K+ 80% average tenure of truck driver downloads of of brokerage loads created top 10 customers2 RXO Connect™ mobile app3 or covered digitally2 ~7,40
Slide 8: Large addressable market with secular tailwinds
1 Large addressable market with secular tailwinds Sector tailwinds driving sustainable growth RXO is well positioned in fast-growing markets Est. market growth rates (’21 – ’26E CAGR) Continued outsourcing of Supply side shortage of transportation services drivers and trucks Truck Brokerage 11% Mana
Slide 9: Market-leading platform with complementary transportation solutions
2 Market-leading platform with complementary transportation solutions Percentage of revenue by solution1 4th largest broker with ~4% share of full truckload freight transportation in US and ~100K carriers2 10% Truck Brokerage #6 in Managed Transportation, having grown 10% freight under management 1.
Slide 10: Proprietary technology drives efficiency, volume and margin expansion
3 Proprietary technology drives efficiency, volume and margin expansion Captures volume and revenue at lower cost-to-serve, with fewer touches Dynamic pricing algorithms use machine learning to optimize pricing Automated processes improve productivity per head, driving efficiency and margin expansio
Slide 11: Long-term relationships with blue-chip customers
4 Long-term relationships with blue-chip customers Selected customers Customers include market leaders and world-class brands across a diversified array of verticals Average tenure of top 10 customers is 16 years1 Combination of capacity, technology and agility in solving supply chain challenges dri
Slide 12: Diversified exposure across attractive end markets
5 Diversified exposure across attractive end markets 2021 revenue1 by major end markets Leading presence in attractive end markets Retail/E-Commerce 22% Industrial/Manufacturing 37% Food & Beverage Diversified exposure with revenue split evenly across industrial and consumer end markets 6% Logistics
Slide 13: Tiered approach to sales drives multi-faceted growth opportunities
6 Tiered approach to sales drives multi-faceted growth opportunities • Targets large enterprise customers 1 Strategic Account Manager Team • Key account managers have vertical-specific expertise • Tailored solutions to customer’s exact needs • Targets national customers across three geographic regio
Slide 14: Track record of above-market growth and high profitability
7 Track record of above-market growth and high profitability Revenue Pro forma adjusted EBITDA1 $5.1 billion $302 million $3.1 billion $131 million 2019 LTM 6/30/22 2019 LTM 6/30/22 Truck Brokerage has grown at ROIC of 42%2 ~3x the industry rate since 2013 1 Represents public company pro forma adjus
Slide 15: Experienced and proven leadership team
8 Experienced and proven leadership team Drew Wilkerson Chief Executive Officer 16 years Lou Amo Paul Boothe Fernando Rabel Demetri Venetis President, President, Managed Interim President, President, Truck Brokerage Transportation Last Mile Freight Forwarding 23 years 20 years 31 years 24 years Jami
Slide 16: Business overview
Business overview EEE:
Slide 17: Full-service platform uniquely capable of providing comprehensive transportation solutions
Full-service platform uniquely capable of providing comprehensive transportation solutions Solution UPS J.B. C.H. Uber Worldwide Offering (Coyote) Hunt Robinson Echo Freight Express TQL Landstar Truck Brokerage Managed Transportation COMPLEMENTARY SOLUTIONS Last Mile
Slide 18: Business overview: Truck Brokerage
Business overview Truck Brokerage 18
Slide 19: Transportation services industry ripe for technological disruption
Truck Brokerage Transportation services industry ripe for technological disruption >1.5 million shippers1 >1 million for-hire carriers3 >4 million drivers and Spend ~$400 billion on for-hire trucking2 97% with fleets of ≤10 trucks and drivers3 >3.5 million trucks3 Highly fragmented marketplace conne
Slide 20: Best-in-class truck broker in North America
Truck Brokerage Best-in-class truck broker in North America Business overview Key metrics • Fourth largest broker of full truckload freight transportation in the US, with best-in-class offering Total addressable market opportunity 1 ~$400 billion and technology • Long track record of outperforming t
Slide 21: RXO has grown truck brokerage at ~3x the industry rate
Truck Brokerage RXO has grown truck brokerage at ~3x the industry rate US truck brokerage industry growth from 2013 to 20211 RXO truck brokerage revenue growth from 2013 to 2021 $88 billion $2.7 billion $42 billion $397 million 2013 2021 2013 2021 Since 2013, less than 10% of our growth was derived
Slide 22: Brokerage industry penetration driving growth
Truck Brokerage Brokerage industry penetration driving growth Broker penetration of US truckload industry 28% 25% 25% 26% 24% 22% 20% 20% 21% 18% 14% 14% 15% 16% 11% 12% 12% 13% 13% 13% 9% 10% 10% 10% 7% 7% 8% 2000 2005 2010 2015 2020 2025 Outsourced freight transportation has been shifting from ass
Slide 23: 4th largest full truckload broker in US after just 10 years
Truck Brokerage 4th largest full truckload broker in US after just 10 years US gross revenue – 2021 full truckload brokerage ($ in billions) 4th largest broker of full truckload 11.4 freight transportation in US 7.3 (UPS) 2.9 2.7 2.4 ~4% share of brokered truckload 2.2 market 2.1 1.8 1.8 Critical sc
Slide 24: Strong carrier relationships drive first-class network
Truck Brokerage Strong carrier relationships drive first-class network Freight / Scale Carrier Ecosystem Carrier Rewards ~100k Carriers 1 11 trucks Average fleet size1 ~700 Average length of haul 1 miles Average 7-day carrier >70% retention 1 85% of Operate five or fewer trucks 1 carriers YoY growth
Slide 25: Powerful combination of solutions
Truck Brokerage Optimal mode for each customer need Powerful Full truckload Expedite Capacity for transloaded combination Dry van, refrigerated, hazmat Time-critical, special handling OTR containers of solutions Drop trailers Flatbed US cross-border Mexico, Canada 25
Slide 26: Demonstrated adaptability to flex contract and price mix to facilitate volume growth through cycles
Truck Brokerage Demonstrated adaptability to flex contract and price mix to facilitate volume growth through cycles Spot vs. contractual mix1 Load growth1 29% 31% 27% 36% 71% 69% 73% 64% 2019 2020 2021 LTM 6/30/22 2019 2020 2021 LTM 6/30/22 Contractual Spot 1 12-months ended December 31, 2019, 2020,
Slide 27: RXO has demonstrated the ability to succeed across market environments
Truck Brokerage RXO has demonstrated the ability to succeed across market environments If the market is poised to tighten, we… If the market is poised to loosen, we… • Review rates with our top customers • Look for opportunities to reduce carrier costs to expand margin • Hire to enable new capacity
Slide 28: Case study: industrial
Truck Brokerage Relationship origin / customer need • Customer needed help with flatbed solutions in 2013 • Due to the mission-critical nature of the company’s products, supply chain continuity is critical RXO solution • Progressed from small flatbed carrier to the largest brokered flatbed provider
Slide 29: Case study: retail (durable goods)
Truck Brokerage Relationship origin / customer need • Dry van service commenced in 2014 • Customer needs extensive project support RXO solution Case study: • RXO now provides flatbed, seasonal projects, transload services (helped with backlogs at ports) retail • Leading emergency freight provider (m
Slide 30: Case study: food and beverage
Truck Brokerage Relationship origin / customer need • Relationship originated in 2004 with Canadian bottling counterpart (later brought in-house) for cross-border freight • RXO committed to take every uncovered load Case study: RXO solution food and • Deep technology integration • Extensive drop tra
Slide 31: Business overview: Managed Transportation
Business overview Managed Transportation 31
Slide 32: Leading managed transportation platform
Managed Transportation Leading managed transportation platform Business overview Key metrics • Comprehensive transportation management services Industry size ~$23 billion ranging from load planning and procurement to tailored, complex solutions and performance monitoring Market share / position ~3%
Slide 33: Optimized solutions and capacity procurement
Managed Transportation Optimized solutions and capacity procurement Control tower solutions • $3.9 billion of freight under management1 • 2.8 million shipments processed through technology1 • Global network of control towers provides door-to-door visibility into order status and freight tracking Man
Slide 34: Continued momentum in driving higher freight under management
Managed Transportation Continued momentum in driving higher freight under management Freight under management $3.9 billion $2.9 billion $2.1 billion $2.1 billion 2019 2020 2021 LTM 6/30/22 RXO's freight under management provides network density to accelerate future growth Source: Third-party researc
Slide 35: Customer composition and retention
Managed Transportation Customer composition and retention Selected customers Well diversified customer base across a variety of industries 12-year average tenure of top-10 customers, with 97% overall customer retention rate1 Received supplier of the year awards from General Motors four years in a ro
Slide 36: Managed Transportation drives growth across RXO
Managed Transportation Managed Transportation drives growth across RXO Managed transportation cross-sell sales to RXO Proprietary technology used to enhance revenue synergies and cross-sell services Direct API connections for spot bids ensure maximum value for the customer and increased opportunitie
Slide 37: Case study: chemical manufacturer
Managed Transportation Relationship origin / customer need • A global chemical manufacturing and supply company and one of the largest manufacturers of chemicals and plastics with a 25+ year relationship • Customer was looking for a provider to manage their packaged goods network within North Americ
Slide 38: Case study: automotive OEM
Managed Transportation Relationship origin / customer need • Major automotive OEM sought partner to manage its supply chain, field transportation services and operations with a solution providing end-to-end visibility of its aftermarket service parts • Customer preferred a partner that could immedia
Slide 39: Business overview: Last Mile
Business overview Last Mile 39
Slide 40: RXO last mile provides superior service, national scale and customer brand protection
Last Mile RXO last mile provides superior service, national scale and customer brand protection Business overview Key metrics • #1 outsourced provider of last mile services for heavy goods in the US Industry size ~$16 billion • 90% of the US population is within 125 miles of Market share / position
Slide 41: Competitive landscape and e-commerce trends
Last Mile Competitive landscape and e-commerce trends Last mile heavy goods by revenue (US), 2021 Heavy & bulky % e-commerce penetration ~$1.0 billion 29% ~$0.7 billion 7% 5% ~$0.7 billion 4% 2% ~$0.3 billion 17% 2% ~$0.3 billion 9% 79% All Others 2015 2020 2025E Strong e-commerce penetration prefer
Slide 42: National scale with access to all major population centers
Last Mile National scale with access to all major population centers RXO’s last mile footprint is positioned within 125 miles of 90% of the US population, speeding fulfillment and enabling shippers to meet consumer expectations Access to largest capacity base in North America for last mile deliverie
Slide 43: RXO's technology personalizes the consumer experience
Last Mile RXO's technology personalizes the consumer experience • Connect® LM, RXO's last mile-specific technology, manages key levers that enhance the consumer experience • ~50% of eligible orders now consumer self-scheduled via the web, Alexa or automated call1 • 30% reduction in calls per deliver
Slide 44: Case study: consumer (last mile hub)
Last Mile Relationship origin / customer need • Relationship started in 2015 • Due to increasing demand they needed solution to fulfill orders quicker Case study: RXO solution consumer • RXO proposed solution to include forward stocking in Last Mile hubs to ensure speed to consumer, with RXO’s natio
Slide 45: Case study: retailer (dedicated)
Last Mile Relationship origin / customer need • 18-year relationship with large retailer that has outsourced deliveries with supply chain transformation since 2004 • Client sought to convert to third party logistics nationally to include flatbed deliveries as well as develop centralized deliveries r
Slide 46: Business overview: Freight Forwarding
Business overview Freight Forwarding 46
Slide 47: Leading freight forwarding network
Freight Forwarding Leading freight forwarding network Business overview Key metrics • Asset-light freight management solution for domestic, cross-border and international shipments LTM revenue 1 $509 million • Comprehensive suite of air, ocean, domestic and Locations 2 28 customs clearance • Scalabl
Slide 48: Strategic footprint in North America and Asia
Freight Forwarding Strategic footprint in North America and Asia 2,500+ domestic US and 400+ international carriers across an international footprint reaching 160 countries1 Centralized procurement and capacity management leverage economies of scale and carrier relationships Balanced network readily
Slide 49: Case study: automotive
Freight Forwarding Relationship origin / customer need • Automotive OEM required a round-trip, end-to-end solution for the movement of mission critical parts and materials from Latin America to plants in Southeastern US • Challenges included communication processes with local counterparts at point o
Slide 50: Technology overview
Technology overview wceoeeeee® 50
Slide 51: RXO is leading technological disruption
RXO is leading technological disruption Years in digital operation1 RXO Connect™ innovative ecosystem XPO 10 Transportation Management Systems Cargo… 9 • Proprietary operational systems Cargom… 8 • Launched October 2012 Trucker… 8 Coyote 8 • Digital freight marketplace Next… 6 • Launched April 2018
Slide 52: Optimized solutions and capacity procurement
Optimized solutions and capacity procurement What we built… Transportation Unified Proprietary Lane density Operations Comprehensive platform, built from system, fully machine learning with rewards driven integration the ground up, with integrated engines, program and technology offering with micros
Slide 53: High user adoption and retention rates
High user adoption and retention rates >800K +63% +74% +47% Total mobile YoY growth in YoY growth in weekly YoY growth in app downloads1 total downloads2 active users2 registered carriers2 +29% >70% ~100K 80% YoY growth in registered Average 7-day carrier & Carriers on the platform3 Loads created or
Slide 54: RXO Connect is a powerful, digital ecosystem
RXO Connect™ is a powerful, digital ecosystem Carriers Customers Real-time RXO Drive™ app tracking engine Demand Supply Customer Carrier interface interface Operational TMS systems Carrier Customer mobile interface integrations API SOLUTIONS ORIENTATION OPERATIONAL SYNERGIES DIGITAL CAPACITY MANAGEM
Slide 55: Freight Optimizer is the scalable freight management engine of RXO Connect
Freight Optimizer is the scalable freight management engine of RXO Connect™ • Decision support tool surfaces real-time data and trends • Huge capacity pool enables rapid load-matching and tendering • Analyzes data from multiple sources • Proprietary machine learning algorithms • Predictive pricing a
Slide 56: RXO Connect ecosystem generates efficiencies for all stakeholders
RXO Connect™ ecosystem generates efficiencies for all stakeholders Predictions Optimization Pricing Matching Carriers Shippers • Booking • Quoting • Payments • Ordering • Dispatching • Tracking • Tracking • Payments • Recommendations • Documents • Insights • Data Visualization • Rewards • Insights •
Slide 57: RXO Drive app benefits customers and carriers by helping to automate the procurement process
RXO Drive™ app benefits customers and carriers by helping to automate the procurement process • Transactional platform with Capacity Load Freight Carrier score mobile access is all-in-one posting booking management and rewards tracking solution • Intuitive tools for posting, bidding, negotiating, bo
Slide 58: RXO Connect is widely adopted and growing fast
RXO Connect™ is widely adopted and growing fast Total digital brokerage orders Total registered customer users Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2019 2019 2019 2019 2020 2020 2020
Slide 59: Financial overview
Financial overview (ES
Slide 60: Financial performance highlights
Financial performance highlights Track record of Proven ability to Highly variable Robust free Strong balance above-market drive long-term cost structure cash flow sheet to support growth margin expansion generation future growth 21% revenue CAGR1, 50% increase in Only 13% of costs are Asset-light,
Slide 61: Track record of above-market growth
Track record of above-market growth1 Revenue less purchased Revenue transportation2 Pro forma adjusted EBITDA3 $5.1 billion $302 million $1.1 billion $3.1 billion $727 million $131 million 2019 LTM 6/30/22 2019 LTM 6/30/22 2019 LTM 6/30/22 1 Represents brokered component of US for-hire truckload opp
Slide 62: Proven ability to drive long-term margin expansion
Proven ability to drive long-term margin expansion Loads per head per day1 Q4 2018 indexed to 100% Margin expansion levers • Consistently improving operating efficiencies to 50% increase in productivity achieve productivity gains and margin targets • RXO Connect™ technology amplifies ROIC – minimal
Slide 63: Highly variable cost structure provides operating flexibility across economic environments
Highly variable cost structure provides operating flexibility across economic environments Cost structure breakdown1 Key attributes • Highly variable cost structure driven by purchased transportation; only 13% fixed costs 13% • Ability to reduce costs when demand is soft and flex resources to bring
Slide 64: Low capital intensity drives robust cash flow conversion
Low capital intensity drives robust cash flow conversion • Guided by disciplined approach to capex, prioritizing $39 $38 $44 high-ROIC projects with near-term returns potential million million million • Continuous innovation supported by ongoing investments in technology, building on RXO’s position
Slide 65: Substantial free cash flow generation
Substantial free cash flow generation Free cash flow reconciliation $302 million ($37) million ($45) million ($51) million ($44) million $125 million Pro Forma Adj. EBITDA (-) Interest expense (-) Taxes (-/+) Change in NWC (-) Net capital Adj. Free Cash Flow (LTM 6/30/2022)1 expenditures (LTM 6/30/2
Slide 66: Strong balance sheet to support future growth
Strong balance sheet to support future growth Expected capital structure at time of spin-off Key highlights • No maturities due before 2027 • Expect total liquidity of $600 million Cash1 $100 million o Five-year revolving credit facility with $500 million capacity Total debt2 $442 million • Maintain
Slide 67: Disciplined capital allocation framework
Disciplined capital allocation framework Growth investments M&A Shareholder distributions • RXO initiatives focused on • Thoughtful evaluation of • Balanced approach to return deployment of capital on accretive M&A opportunities of capital, with flexibility to high-ROIC projects reevaluate policy ac
Slide 68: Financial targets
Financial targets 5-year EBITDA • $475 million – $525 million Capital expenditures • ~1% of revenue Depreciation & amortization • ~1% of revenue Interest expense • ~$37 million / year Tax rate • ~24% Shares outstanding • 117 million 68
Slide 69: Concluding remarks
Concluding remarks wceoeeeee® 69
Slide 70: Reasons to invest in RXO
Reasons to invest in RXO Large addressable market with secular tailwinds Market leading platform with complementary transportation solutions Long-term relationships with blue-chip customers across diverse end-markets Proprietary technology continuously improving customer outcomes Fast growing and hi
Slide 71: Supplemental materials
Supplemental materials ee ee aa | wceoeeeee® 71
Slide 72: RXO corporate governance highlights
• Committed to being a leader in strong corporate governance standards • RXO board to be led by a non-executive chairman • All other non-executive members of the board will be independent, including a RXO lead independent director, to ensure independent oversight and decision-making Additional corpo
Slide 73: RXO board members
RXO board members Brad Jacobs Non-Executive Chairman of the Board Drew Wilkerson AnnaMaria DeSalva Christie Breves Director; Chief Executive Director; Chair of Nominating, Director Officer Governance and Sustainability Committee Steve Renna Michelle Nettles Tom Szlosek Director Lead Independent Dire
Slide 74: Leadership in ESG initiatives
Leadership in ESG initiatives Our ESG philosophy… Environmental Social Governance RXO is committed to reducing empty miles Our diverse teams and suppliers solve the Our diverse board guides how we evolve our and helping our suppliers achieve their industry’s toughest challenges. Safety is at busines
Slide 75: Financial reconciliations
Financial reconciliations Reconciliation of net income to adjusted EBITDA and public company pro forma adjusted EBITDA ($ in millions) Twelve Months Six Months Ended June 30, Years Ended December 31, (Unaudited) Ended June 30, 2022 2022 2021 2021 2020 2019 Net income $158 $83 $75 $150 $43 $62 Intere
Slide 76: Financial reconciliations (cont'd)
Financial reconciliations (cont’d) The following table reconciles XPO’s revenue attributable to the remaining company after the planned spin-off of RXO1 and the divestiture of our North American intermodal operation for the trailing twelve months ended June 30, 2022, the six-month periods ended June
Slide 77: Financial reconciliations (cont'd)
Financial reconciliations (cont’d) Reconciliation of revenue less purchased transportation ($ in millions) Twelve Months Six Months Ended June 30, Years Ended December 31, (Unaudited) Ended June 30, 2022 2022 2021 2021 2019 Revenue $5,063 $2,538 $2,164 $4,689 $3,141 Cost of transportation and servic
Slide 78: Financial reconciliations (cont'd)
Financial reconciliations (cont’d) Reconciliation of capital expenditures to net capital expenditures ($ in millions) Twelve Months Ended Six Months Ended June 30, Years Ended December 31, (Unaudited) June 30, 2022 2022 2021 2021 2020 Payment for purchases of property and equipment ($44) ($24) ($19)
Slide 79: Financial reconciliations (cont'd)
Financial reconciliations (cont’d) Return on invested capital ($ in millions) Year Ended ($ in millions) As of December 31, (Unaudited) December 31, (Unaudited) Select income statement items 2021 Select balance sheet items 2021 2020 Public company pro forma adjusted EBITDA $261 Total assets per Form
Slide 80: Financial reconciliations (cont'd)
Financial reconciliations (cont’d) Reconciliation of cash provided by operating activities to free cash flow and adjusted free cash flow ($ in millions) Twelve Months Ended (Unaudited) June 30, 2022 Net cash provided by operating activities1 $236 Payment for purchases of property and equipment1 (44)
Slide 81: Financial reconciliations (cont'd)
Financial reconciliations (cont’d) Reconciliation of net debt and net leverage ($ in millions) (Unaudited) As of Reconciliation of Net Debt – Pro Forma June 30, 2022 Total debt1 $442 Less: Cash and cash equivalents2 (100) Net debt $342 Twelve months ended Reconciliation of Net Leverage – Pro Forma J
Slide 82: RXO
RXO