1 00:00:06,480 --> 00:00:11,080 Speaker 1: Hello everyone, Welcome to Bloomberg Intelligence Talking Transports Podcasts. I'm 2 00:00:11,119 --> 00:00:15,200 Speaker 1: your host Lee Glasgow, Senior freight, transportation and logistics analysts 3 00:00:15,280 --> 00:00:19,599 Speaker 1: at Bloomberg Intelligence, Bloomberg's in house research arm. We're delighted 4 00:00:19,680 --> 00:00:24,000 Speaker 1: to have Drew Wilkerson, rxo's CEO as our guest on 5 00:00:24,079 --> 00:00:29,400 Speaker 1: the podcast, a role he's held since OURXOS spun out 6 00:00:29,440 --> 00:00:32,559 Speaker 1: of XPO in October. RXO is listed on the New 7 00:00:32,640 --> 00:00:36,120 Speaker 1: York Stock Exchange under the ticker RXO and as a 8 00:00:36,120 --> 00:00:39,720 Speaker 1: market cap around two point three billion dollars. Drew is 9 00:00:39,720 --> 00:00:43,479 Speaker 1: a transportation industry veteran with sixteen years of experience in 10 00:00:43,520 --> 00:00:48,520 Speaker 1: brokerage operations. He joined rxo's predecessor company, XPO in May 11 00:00:48,520 --> 00:00:51,519 Speaker 1: of twenty twelve to spearhead the growth of the company's 12 00:00:51,560 --> 00:00:56,360 Speaker 1: flagship truck brokerage hub in Charlotte, North Carolina. In May 13 00:00:56,360 --> 00:00:59,640 Speaker 1: of twenty fourteen, he was promoted to regional vice president 14 00:01:00,040 --> 00:01:04,759 Speaker 1: with responsibility for major brokerage operations and strategic accounts. In 15 00:01:04,760 --> 00:01:08,240 Speaker 1: March of twenty seventeen, he was named president of XPO's 16 00:01:08,280 --> 00:01:11,800 Speaker 1: North American brokerage business, and in February twenty twenty, he 17 00:01:11,920 --> 00:01:15,640 Speaker 1: was named president of XPO's North America Transportation division with 18 00:01:15,760 --> 00:01:19,920 Speaker 1: P and L responsible for truck brokerage, expedite, intermodal drayage, 19 00:01:20,200 --> 00:01:25,640 Speaker 1: managed transportation, last mile and freight forwarding. Drew served in 20 00:01:25,680 --> 00:01:29,479 Speaker 1: this role until the company separated from XPO. Prior to XBO, 21 00:01:29,560 --> 00:01:33,360 Speaker 1: Drew was in leadership positions and sales operations and customer 22 00:01:33,400 --> 00:01:37,959 Speaker 1: and carrier relationship management with H. Robinson Worldwide. He graduated 23 00:01:37,959 --> 00:01:41,520 Speaker 1: from University of South Carolina with a degree in public relations. 24 00:01:41,520 --> 00:01:45,560 Speaker 1: So I guess go gamecocks. Welcome to talking transports, Drew, 25 00:01:47,040 --> 00:01:47,680 Speaker 1: thanks for having me. 26 00:01:47,800 --> 00:01:50,240 Speaker 2: Lea's great to be here, and I agree, go game cocks. 27 00:01:50,800 --> 00:01:53,480 Speaker 1: So you've had a really busy year these last twelve 28 00:01:53,520 --> 00:01:56,080 Speaker 1: months with the lead up and then the spinout from 29 00:01:56,240 --> 00:01:59,640 Speaker 1: XPO at a time when freight market conditions are becoming 30 00:01:59,680 --> 00:02:04,320 Speaker 1: a lot more challenging. Can you talk about the process 31 00:02:04,360 --> 00:02:07,360 Speaker 1: of spinning out from a company and you know, being 32 00:02:07,400 --> 00:02:11,560 Speaker 1: part of a larger, diversified company and now being just purely, 33 00:02:11,680 --> 00:02:13,520 Speaker 1: purely focused on the brokerage business. 34 00:02:15,120 --> 00:02:17,560 Speaker 2: Yeah. So, if you go back to the first part 35 00:02:17,639 --> 00:02:23,400 Speaker 2: of twenty twenty, XPO announced a plan to sell or 36 00:02:24,120 --> 00:02:27,880 Speaker 2: spend four of our five business units and North American 37 00:02:27,880 --> 00:02:30,520 Speaker 2: Transportation was one of those. We also had two supply 38 00:02:30,680 --> 00:02:34,520 Speaker 2: chain business units, one in Europe, one in North America, 39 00:02:35,000 --> 00:02:40,120 Speaker 2: as well as our LTL business. And so for us, 40 00:02:40,440 --> 00:02:43,200 Speaker 2: you know, what we really saw was a couple of things. First, 41 00:02:43,280 --> 00:02:46,160 Speaker 2: on the customer side, there wasn't a ton of syenergies. 42 00:02:46,160 --> 00:02:48,320 Speaker 2: We were sending in multiple sales reps. We had our 43 00:02:48,360 --> 00:02:51,680 Speaker 2: technology that was separated by different business units. Even HR 44 00:02:51,840 --> 00:02:54,200 Speaker 2: was set up to support within different business units. So 45 00:02:54,240 --> 00:02:57,600 Speaker 2: the customer synergy wasn't as strong as what we had 46 00:02:57,639 --> 00:02:59,960 Speaker 2: hoped it would be. And then the second thing was, 47 00:03:00,400 --> 00:03:02,800 Speaker 2: you know, when we started to talk to investors, they 48 00:03:02,800 --> 00:03:05,000 Speaker 2: would tell us, hey, you know, I'm not really looking 49 00:03:05,040 --> 00:03:08,720 Speaker 2: for an asset light transportation, this kind of heavy asset LTL, 50 00:03:08,800 --> 00:03:10,960 Speaker 2: and we're really hoping that you had a European arm 51 00:03:11,000 --> 00:03:15,440 Speaker 2: of European transportation plus this supply chain business was it 52 00:03:15,480 --> 00:03:17,640 Speaker 2: was too clunky for some of the investors to be 53 00:03:17,639 --> 00:03:19,920 Speaker 2: able to put it together and come up with what 54 00:03:20,240 --> 00:03:22,960 Speaker 2: was a fair evaluation. And so, you know, while we 55 00:03:22,960 --> 00:03:25,399 Speaker 2: weren't able to achieve it. In twenty twenty, you had 56 00:03:25,480 --> 00:03:28,000 Speaker 2: GXO that was a spin out of XPO. Now you 57 00:03:28,040 --> 00:03:30,720 Speaker 2: have RXO, and you have XPO. This left with LTL 58 00:03:30,760 --> 00:03:34,160 Speaker 2: and European Transportation. So we achieved what we set out 59 00:03:34,200 --> 00:03:36,480 Speaker 2: to achieve in twenty twenty, just by a different way 60 00:03:36,520 --> 00:03:39,640 Speaker 2: of going about it. Obviously COVID had some disruption there 61 00:03:40,080 --> 00:03:42,560 Speaker 2: and for us, you know, the biggest thing that has 62 00:03:42,640 --> 00:03:46,839 Speaker 2: changed is my time is now spent solely focused on 63 00:03:47,120 --> 00:03:50,320 Speaker 2: RXO and our lines of business we're beforehand, it was 64 00:03:50,400 --> 00:03:53,240 Speaker 2: great from a leadership development standpoint to get to learn 65 00:03:53,280 --> 00:03:56,800 Speaker 2: from some great leaders like Malcolm Wilson who runs GXO 66 00:03:56,880 --> 00:04:00,360 Speaker 2: as a supply chain and Mario o'harack who's within L. 67 00:04:00,760 --> 00:04:03,920 Speaker 2: But after a while, you know you've tapped into the knowledge, 68 00:04:04,080 --> 00:04:06,320 Speaker 2: you've had the relationship, and you're better off spending your 69 00:04:06,360 --> 00:04:08,680 Speaker 2: time focusing on the business. And for me to be 70 00:04:08,760 --> 00:04:10,960 Speaker 2: able to spend the time and my leadership team to 71 00:04:10,960 --> 00:04:13,600 Speaker 2: be able to spend the time solely focused on RXO 72 00:04:13,680 --> 00:04:16,240 Speaker 2: has been a huge win. The second thing that I'd 73 00:04:16,240 --> 00:04:20,240 Speaker 2: point out is our deployment of capital. You know, we had, 74 00:04:20,320 --> 00:04:22,760 Speaker 2: as I mentioned, we had five business units at XPO. 75 00:04:23,440 --> 00:04:26,440 Speaker 2: We've got four different lines of business at RXO, but 76 00:04:26,520 --> 00:04:30,279 Speaker 2: our ROC is extremely high. It's over forty two percent 77 00:04:30,800 --> 00:04:34,080 Speaker 2: and for us. You know how we deploy capital. There's 78 00:04:34,120 --> 00:04:36,840 Speaker 2: not as much red tape, there's a there's no competition 79 00:04:37,000 --> 00:04:38,920 Speaker 2: within it. We're looking at what's going to create the 80 00:04:38,960 --> 00:04:40,240 Speaker 2: most value within our twer. 81 00:04:40,240 --> 00:04:42,680 Speaker 1: You're spending most of that capital on what technology? 82 00:04:43,160 --> 00:04:45,720 Speaker 2: We spend a lot of it on technology. We do 83 00:04:45,760 --> 00:04:49,000 Speaker 2: spend some on people, and then we also have some 84 00:04:49,040 --> 00:04:52,920 Speaker 2: where we've leased some trailers and we've got a drop 85 00:04:52,960 --> 00:04:55,359 Speaker 2: trailer program that we do with several of our top 86 00:04:55,480 --> 00:05:00,360 Speaker 2: large customers. So there's a multitude of ways that we're spending. 87 00:05:00,360 --> 00:05:03,160 Speaker 2: But you're right, technology is the bread and butter is 88 00:05:03,240 --> 00:05:06,120 Speaker 2: what our biggest differentiator is. You know, when we founded 89 00:05:06,120 --> 00:05:10,040 Speaker 2: the company in twenty eleven, we started investing in technology 90 00:05:10,080 --> 00:05:13,080 Speaker 2: from day one and we've built a great infrastructure with 91 00:05:13,360 --> 00:05:17,120 Speaker 2: RXO Connect that now services are customers, our carriers, and 92 00:05:17,160 --> 00:05:17,839 Speaker 2: our employees. 93 00:05:18,279 --> 00:05:22,240 Speaker 1: Yes, so you know your predecessor company XPO, which really 94 00:05:22,279 --> 00:05:24,960 Speaker 1: I guess our XO is the original XPO if you 95 00:05:24,960 --> 00:05:27,359 Speaker 1: think about it, because it started as a brokerage company. 96 00:05:27,680 --> 00:05:32,200 Speaker 1: So so are you as far as XPO is part 97 00:05:32,240 --> 00:05:35,280 Speaker 1: of your strategy, the role up strategy or you are 98 00:05:35,279 --> 00:05:37,360 Speaker 1: you kind of more done with that and it's more 99 00:05:37,360 --> 00:05:38,440 Speaker 1: about organic growth. 100 00:05:38,480 --> 00:05:43,440 Speaker 2: For OURXO, we're mostly focused on organic growth, but we're 101 00:05:43,480 --> 00:05:46,160 Speaker 2: not walking around with blinders on either and blind to 102 00:05:46,200 --> 00:05:48,280 Speaker 2: what's going on within the M and A market. If 103 00:05:48,320 --> 00:05:51,200 Speaker 2: you look over the last five six years, one hundred 104 00:05:51,240 --> 00:05:53,640 Speaker 2: percent of our growth has been organic, and if you 105 00:05:53,680 --> 00:05:57,000 Speaker 2: look over the last ten eleven years, you know ninety 106 00:05:57,040 --> 00:06:01,039 Speaker 2: plus percent of our growth has been organic. In the 107 00:06:01,160 --> 00:06:02,960 Speaker 2: M and A market, you've really got to make sure 108 00:06:03,000 --> 00:06:05,919 Speaker 2: that first, it's a cultural fit. We've got a great culture. 109 00:06:06,000 --> 00:06:09,599 Speaker 2: We're in an industry that's growing extremely fast. From twenty 110 00:06:09,640 --> 00:06:12,320 Speaker 2: thirteen to twenty twenty one, the brokerage industry grew it 111 00:06:12,360 --> 00:06:16,039 Speaker 2: over a nine percent compound annual growth rate and for us, 112 00:06:16,120 --> 00:06:18,640 Speaker 2: we grew it over a twenty seven percent during that 113 00:06:18,680 --> 00:06:21,400 Speaker 2: same time period. So we've got a winning culture and 114 00:06:21,440 --> 00:06:23,760 Speaker 2: we're able to go out and take share in an 115 00:06:23,800 --> 00:06:26,320 Speaker 2: industry that is taking share. So from an M and 116 00:06:26,400 --> 00:06:29,520 Speaker 2: A perspective, we want to be extremely disciplined to make 117 00:06:29,520 --> 00:06:31,120 Speaker 2: sure if there was something we were going to do, 118 00:06:31,200 --> 00:06:33,520 Speaker 2: it would be very addedive to the culture that we've 119 00:06:33,560 --> 00:06:34,680 Speaker 2: built here. 120 00:06:34,720 --> 00:06:37,720 Speaker 1: And in today's environment, are you seeing bankers bring you 121 00:06:37,760 --> 00:06:40,480 Speaker 1: more deals less deals? What is the M and A 122 00:06:40,640 --> 00:06:41,560 Speaker 1: environment right now. 123 00:06:41,600 --> 00:06:45,760 Speaker 2: From your perspective, it's picked up from where it was 124 00:06:46,640 --> 00:06:48,800 Speaker 2: as we ended last year and we've started this year. 125 00:06:49,000 --> 00:06:53,919 Speaker 2: You've definitely seen more activity out there, But for us, 126 00:06:54,000 --> 00:06:56,880 Speaker 2: we haven't found anything that we feel like we can't 127 00:06:56,960 --> 00:06:59,560 Speaker 2: do ourselves at this point or something that would really 128 00:06:59,600 --> 00:07:02,280 Speaker 2: change the landscape of the company. It allows us to 129 00:07:02,320 --> 00:07:05,279 Speaker 2: grow even faster. If we were to do M and A, 130 00:07:05,400 --> 00:07:06,880 Speaker 2: I think, well, you know where you would think about 131 00:07:06,880 --> 00:07:09,279 Speaker 2: it would be first in the man's transportation space. We 132 00:07:09,520 --> 00:07:13,880 Speaker 2: love the managed transportation business and it provides so much 133 00:07:13,920 --> 00:07:16,640 Speaker 2: synergy to our other lines of business as a customer, 134 00:07:16,720 --> 00:07:20,080 Speaker 2: specifically our truck broker's business. So if there was something 135 00:07:20,120 --> 00:07:23,880 Speaker 2: in the manus transportation space, or if there was a 136 00:07:23,920 --> 00:07:26,440 Speaker 2: mode of transportation and brokeras that was going to allow 137 00:07:26,520 --> 00:07:29,360 Speaker 2: us to put on our RXO Connect platform and grow 138 00:07:29,400 --> 00:07:32,040 Speaker 2: it even faster, then we would pay attention to it. 139 00:07:32,240 --> 00:07:34,520 Speaker 2: But again, you know, I spent a whole lot more 140 00:07:34,520 --> 00:07:38,120 Speaker 2: time focused on organic growth, time with our customers here today, 141 00:07:38,120 --> 00:07:41,080 Speaker 2: and time focused on creating solutions for our customers than 142 00:07:41,120 --> 00:07:42,120 Speaker 2: I do versus M and A. 143 00:07:42,440 --> 00:07:45,440 Speaker 1: And you know, roughly speaking, you know, how how big 144 00:07:45,520 --> 00:07:50,240 Speaker 1: is the managed transportation part of RXO either a revenue 145 00:07:50,360 --> 00:07:51,960 Speaker 1: or an ebit standpoint. 146 00:07:53,280 --> 00:07:57,400 Speaker 2: We manage that business off of the freight under management. 147 00:07:57,440 --> 00:07:59,679 Speaker 2: The revenue has done more off of a net revenue 148 00:07:59,680 --> 00:08:03,400 Speaker 2: bass and so for us, the freight under management is 149 00:08:03,560 --> 00:08:06,680 Speaker 2: whenever we're taking the total revenue that we're managing for 150 00:08:06,720 --> 00:08:09,800 Speaker 2: our customers. And when we spun out that was around 151 00:08:09,880 --> 00:08:13,520 Speaker 2: four billion. We picked up some new business. Obviously, truckload 152 00:08:13,600 --> 00:08:16,000 Speaker 2: rates have come down a good bit since then, so 153 00:08:16,040 --> 00:08:18,680 Speaker 2: it's a little bit under four billion now. But the 154 00:08:18,680 --> 00:08:21,480 Speaker 2: trajectory of that business, the new wins that we've had 155 00:08:21,520 --> 00:08:23,200 Speaker 2: in that business, the growth that we've had with some 156 00:08:23,280 --> 00:08:26,600 Speaker 2: of our current broker's customers who have transitioned to become 157 00:08:26,720 --> 00:08:30,640 Speaker 2: Manus Transportation, has been strong. And that pipeline has got 158 00:08:30,720 --> 00:08:33,600 Speaker 2: me more excited about the future than what I've ever 159 00:08:33,640 --> 00:08:35,680 Speaker 2: been at any point of having been a part of 160 00:08:35,679 --> 00:08:36,600 Speaker 2: the Manus Transportation. 161 00:08:36,760 --> 00:08:38,839 Speaker 1: And can you can you define for our listeners what 162 00:08:39,240 --> 00:08:41,760 Speaker 1: net revenue is in your world, because it is different 163 00:08:41,760 --> 00:08:44,600 Speaker 1: for different industries, that's right. 164 00:08:44,640 --> 00:08:47,760 Speaker 2: So net revenue is more of the margin off of 165 00:08:47,800 --> 00:08:48,880 Speaker 2: the revenue that you're doing. 166 00:08:49,160 --> 00:08:52,679 Speaker 1: All right, great, So let's switch gears a little bit 167 00:08:52,720 --> 00:08:54,880 Speaker 1: and let's actually talk about the freight markets, something that 168 00:08:55,040 --> 00:08:58,199 Speaker 1: I love to talk about. You know, from your perspective, 169 00:08:58,200 --> 00:09:00,640 Speaker 1: what is the state of the North America rate market. 170 00:09:02,480 --> 00:09:07,520 Speaker 2: It's still a soft environment right now. You're not seeing 171 00:09:07,559 --> 00:09:10,640 Speaker 2: a ton of spot loads, and it's been a soft 172 00:09:10,720 --> 00:09:14,600 Speaker 2: environment really since the end of Q one last year. 173 00:09:16,000 --> 00:09:18,680 Speaker 2: There are some green shoots that we've seen that have 174 00:09:18,840 --> 00:09:21,400 Speaker 2: us excited and think that it could be turning a 175 00:09:21,400 --> 00:09:24,560 Speaker 2: little bit. Load to truck ratio is a metric that 176 00:09:24,600 --> 00:09:27,120 Speaker 2: we measure in the business, and as we ended the 177 00:09:27,120 --> 00:09:30,199 Speaker 2: first quarter this year, it was sitting around one point 178 00:09:30,200 --> 00:09:34,640 Speaker 2: eight to one, which is an extremely load to truck ratio. 179 00:09:35,240 --> 00:09:37,280 Speaker 2: I haven't seen it very many times in my career 180 00:09:37,360 --> 00:09:40,360 Speaker 2: go under two to one for an extended period of time. 181 00:09:40,800 --> 00:09:43,080 Speaker 2: It's now jumped towards three and a half to one. 182 00:09:43,679 --> 00:09:46,560 Speaker 2: And typically whenever that ratio gets around six or seven 183 00:09:46,640 --> 00:09:49,640 Speaker 2: to one, you start seeing spot business turned down and 184 00:09:49,760 --> 00:09:53,760 Speaker 2: you start seeing that come out because carriers start rejecting tenders, 185 00:09:53,760 --> 00:09:57,840 Speaker 2: and specifically asset based carriers start putting their assets on 186 00:09:57,920 --> 00:10:01,880 Speaker 2: the most profitable freight, so you see tender rejections rise up. 187 00:10:02,280 --> 00:10:04,480 Speaker 2: And so that's another trend that we've seen is we've 188 00:10:04,520 --> 00:10:07,440 Speaker 2: seen our tender rejections rise up to where it's around 189 00:10:07,480 --> 00:10:10,080 Speaker 2: five or six percent in the industry, and six months 190 00:10:10,080 --> 00:10:13,199 Speaker 2: ago it was at zero percent, So you know, you've 191 00:10:13,320 --> 00:10:15,679 Speaker 2: seen some green shoots from that perspective. And then the 192 00:10:15,760 --> 00:10:19,520 Speaker 2: last one that I'll mention is we've seen capacity exiting 193 00:10:19,520 --> 00:10:21,800 Speaker 2: the market. And it's been exiting the market really all 194 00:10:21,920 --> 00:10:24,600 Speaker 2: year as we've gone through twenty twenty three, but it's 195 00:10:24,640 --> 00:10:27,959 Speaker 2: been a slow and steady drip. It has picked up 196 00:10:28,040 --> 00:10:30,840 Speaker 2: a little bit over the last couple of months. And 197 00:10:31,160 --> 00:10:34,120 Speaker 2: the more capacity that exits the market, the more it 198 00:10:34,240 --> 00:10:37,760 Speaker 2: changes the supply and demand dynamics, which increases that loaded 199 00:10:37,800 --> 00:10:38,360 Speaker 2: truck raco. 200 00:10:38,400 --> 00:10:41,200 Speaker 1: Yeah, when you talk about loaded truck ratio, you know, 201 00:10:41,280 --> 00:10:45,240 Speaker 1: back during the pandemic, when conditions were really tight, how 202 00:10:45,320 --> 00:10:46,360 Speaker 1: high did that go? 203 00:10:48,320 --> 00:10:51,080 Speaker 2: In some cases it was sixteen seventeen to one, and 204 00:10:51,160 --> 00:10:53,440 Speaker 2: if you looked at specific parts of the country, in 205 00:10:53,440 --> 00:10:55,000 Speaker 2: some cases it was thirty to one. 206 00:10:55,280 --> 00:10:57,679 Speaker 1: And are you getting a sense because you know, we're 207 00:10:57,720 --> 00:11:00,600 Speaker 1: coming up on peak season and a couple weeks here 208 00:11:00,960 --> 00:11:04,520 Speaker 1: it might be starting for some industries right now, you know, 209 00:11:04,840 --> 00:11:08,760 Speaker 1: what are your expectations for peak season from you know, 210 00:11:08,800 --> 00:11:11,079 Speaker 1: your vantage point from what you're seeing from your customers. 211 00:11:12,559 --> 00:11:15,000 Speaker 2: We spend a lot of time talking to our customers, 212 00:11:15,000 --> 00:11:17,000 Speaker 2: and you know, the one thing that we've heard is 213 00:11:17,760 --> 00:11:21,320 Speaker 2: the inventory levels are in a much better position versus 214 00:11:21,320 --> 00:11:23,760 Speaker 2: where they were at last year. Last year, all of 215 00:11:23,800 --> 00:11:27,640 Speaker 2: our conversations were about de stocking of the inventory. We're 216 00:11:27,720 --> 00:11:31,800 Speaker 2: right now, inventories are in a pretty stable position overall. 217 00:11:31,920 --> 00:11:35,480 Speaker 2: I think the one unknown is what's going to happen 218 00:11:35,559 --> 00:11:38,360 Speaker 2: with consumer demand. Are they going to spend their money 219 00:11:38,400 --> 00:11:42,040 Speaker 2: on services and travel or are they going to spend 220 00:11:42,040 --> 00:11:44,800 Speaker 2: it on goods and products during during peak season. I 221 00:11:44,840 --> 00:11:47,160 Speaker 2: think that's still a little bit of an unknown. So 222 00:11:47,200 --> 00:11:51,120 Speaker 2: we're prepared for a peak season, but we don't have 223 00:11:51,160 --> 00:11:52,839 Speaker 2: the crystal ball that's going to tell us what the 224 00:11:52,840 --> 00:11:54,240 Speaker 2: consumer demand is going to be yet. 225 00:11:54,320 --> 00:11:57,280 Speaker 1: And then on the on the truck supply side, you know, 226 00:11:57,360 --> 00:12:01,440 Speaker 1: you mentioned you are seeing some you know, companies exit 227 00:12:01,640 --> 00:12:04,439 Speaker 1: the market. You know, we saw it during the pandemic, 228 00:12:04,559 --> 00:12:07,680 Speaker 1: a lot of folks jumping into the spot market with 229 00:12:07,800 --> 00:12:10,120 Speaker 1: higher cost equipment, and you know, now they're just not 230 00:12:10,200 --> 00:12:13,000 Speaker 1: making any money. They're maybe barely able to pay their bills, 231 00:12:13,480 --> 00:12:16,600 Speaker 1: so they're either parking that equipment or just doing something different. 232 00:12:17,480 --> 00:12:21,120 Speaker 1: You know, how how has it changed to kind of 233 00:12:21,440 --> 00:12:24,960 Speaker 1: secure capacity on your side? Is easier is it? Is 234 00:12:25,000 --> 00:12:27,640 Speaker 1: it getting harder? Talk about that a little bit, if 235 00:12:27,640 --> 00:12:27,960 Speaker 1: you would. 236 00:12:29,400 --> 00:12:33,120 Speaker 2: The looser the environment gets, meaning that there there is 237 00:12:33,640 --> 00:12:37,680 Speaker 2: more than enough capacity, the easier it is to procure transportation. 238 00:12:38,280 --> 00:12:40,920 Speaker 2: So for us, as I talked about earlier, that you 239 00:12:41,000 --> 00:12:43,839 Speaker 2: started to see that shift of a loosening and transportation 240 00:12:43,960 --> 00:12:47,000 Speaker 2: around the end of Q one last year. What made 241 00:12:47,440 --> 00:12:50,319 Speaker 2: twenty twenty two set up well is because you had 242 00:12:50,360 --> 00:12:52,640 Speaker 2: customer rates that had already been negotiated and you were 243 00:12:52,679 --> 00:12:55,240 Speaker 2: able to pull down purchase transportation. So even though you 244 00:12:55,280 --> 00:12:58,080 Speaker 2: didn't have the spots that normally would help offset your 245 00:12:58,120 --> 00:13:02,840 Speaker 2: grosser profit per load the on the on the truckload margin, 246 00:13:03,320 --> 00:13:05,600 Speaker 2: we were able to pull down purchase transportation and that 247 00:13:05,640 --> 00:13:07,880 Speaker 2: was a lever that we've used in twenty twenty two. 248 00:13:08,200 --> 00:13:10,800 Speaker 2: As you start to see demand change and load to 249 00:13:10,840 --> 00:13:13,240 Speaker 2: truck ratio gets around at six to seven to one, 250 00:13:13,720 --> 00:13:17,079 Speaker 2: what you'll see happen is your spot gross profit per 251 00:13:17,120 --> 00:13:20,000 Speaker 2: load will actually start out pacing what's happened on your 252 00:13:20,000 --> 00:13:23,160 Speaker 2: contractual gross profit per load. But the key here is 253 00:13:23,280 --> 00:13:26,640 Speaker 2: you actually don't get opportunities for the spotloads if you 254 00:13:26,640 --> 00:13:29,760 Speaker 2: don't have strong relationships in great service with your customers. 255 00:13:29,800 --> 00:13:32,440 Speaker 2: And you know, for our top customers, they've been with 256 00:13:32,520 --> 00:13:35,880 Speaker 2: us for fourteen years on average, and they're coming back 257 00:13:35,920 --> 00:13:38,720 Speaker 2: to us year after year, and we continue to take 258 00:13:38,760 --> 00:13:41,480 Speaker 2: on more contractual volume, we take on the hard freight 259 00:13:41,559 --> 00:13:44,360 Speaker 2: for them. And because of that, when there's the first 260 00:13:44,400 --> 00:13:48,360 Speaker 2: signs of spot loads projects, mini bids, we're the first 261 00:13:48,400 --> 00:13:50,520 Speaker 2: place that customers are coming to then, right. 262 00:13:50,320 --> 00:13:52,600 Speaker 1: And you know, and for those that are unfamiliar with 263 00:13:52,640 --> 00:13:55,280 Speaker 1: the freight brokerage industry, you know, you guys make money. 264 00:13:55,640 --> 00:13:58,400 Speaker 1: You secure capacity at a price and then you try 265 00:13:58,440 --> 00:14:01,840 Speaker 1: to mark that up and that's your margin. Can you 266 00:14:01,880 --> 00:14:03,880 Speaker 1: talk about, you know, where your margin is going to 267 00:14:03,880 --> 00:14:08,240 Speaker 1: be going from here? Given the soft environment that in 268 00:14:08,280 --> 00:14:11,280 Speaker 1: my perspective, it seems like we're bottoming and you know 269 00:14:11,440 --> 00:14:14,560 Speaker 1: it should should improve going forward. But can you talk about, 270 00:14:14,559 --> 00:14:19,080 Speaker 1: you know, where you see rxo's margins and broker margins 271 00:14:19,080 --> 00:14:19,560 Speaker 1: in general. 272 00:14:21,200 --> 00:14:24,200 Speaker 2: Yeah, we talked about this on our second quarter earnings call, 273 00:14:24,240 --> 00:14:26,240 Speaker 2: and we agree with you. We said on that call 274 00:14:26,360 --> 00:14:29,240 Speaker 2: that we were approaching the bottom of this freight cycle, 275 00:14:29,280 --> 00:14:33,440 Speaker 2: specifically on a gross profit per load, And what you 276 00:14:33,480 --> 00:14:36,000 Speaker 2: saw in the second quarter was kind of the opposite 277 00:14:36,040 --> 00:14:37,880 Speaker 2: of what I talked about in twenty twenty two. The 278 00:14:37,920 --> 00:14:40,280 Speaker 2: carrier costs that you were talking about are rising, and 279 00:14:40,320 --> 00:14:42,760 Speaker 2: you've got a lower customer rate on a year of 280 00:14:42,760 --> 00:14:44,600 Speaker 2: a year basis, So you start to see those two 281 00:14:44,600 --> 00:14:47,480 Speaker 2: bump up against each other, which led us to have 282 00:14:47,520 --> 00:14:51,800 Speaker 2: a fifteen percent gross profit percentage in the second quarter. Now, 283 00:14:51,800 --> 00:14:53,560 Speaker 2: what you'll see is you'll see a little bit of 284 00:14:53,600 --> 00:14:57,560 Speaker 2: a squeeze whenever you start to see that influx of 285 00:14:57,640 --> 00:15:00,000 Speaker 2: load to truck ratio. But then you'll start to see 286 00:15:00,200 --> 00:15:04,840 Speaker 2: that's starting to rise as the tighter capacity gets because 287 00:15:05,040 --> 00:15:07,880 Speaker 2: your spot gross profit per loads will become higher than 288 00:15:07,920 --> 00:15:09,520 Speaker 2: your contract gross profit. 289 00:15:09,840 --> 00:15:13,800 Speaker 1: And you know in past cycles, you know where has 290 00:15:13,840 --> 00:15:17,760 Speaker 1: been that margin. You know, during tight markets and during 291 00:15:17,800 --> 00:15:19,600 Speaker 1: really loose markets. 292 00:15:20,200 --> 00:15:22,800 Speaker 2: Mid teens is a good place to pitcher. It has 293 00:15:22,840 --> 00:15:25,760 Speaker 2: been down as low as twelve at times, and it's 294 00:15:25,760 --> 00:15:26,840 Speaker 2: been as high as twenty one. 295 00:15:27,200 --> 00:15:28,800 Speaker 1: Well, twenty one to be nice, right. 296 00:15:30,120 --> 00:15:32,480 Speaker 2: Twenty one would be nice. But we understand that we 297 00:15:33,040 --> 00:15:36,640 Speaker 2: operate in the cyclical industry and for us, it's about 298 00:15:36,920 --> 00:15:39,320 Speaker 2: outperforming at each part of the cycle. 299 00:15:39,440 --> 00:15:42,360 Speaker 1: Yeah, I was looking at consensus estimates for your for 300 00:15:42,480 --> 00:15:46,680 Speaker 1: expectations for OURXO on an earnings per share basis, and 301 00:15:46,960 --> 00:15:49,240 Speaker 1: they're expected to be down eighty three percent this year. 302 00:15:49,320 --> 00:15:53,920 Speaker 1: And that's you know, based on a very unsustainable peak 303 00:15:53,920 --> 00:15:56,200 Speaker 1: that we reached last year in the industry. And then 304 00:15:56,280 --> 00:15:59,960 Speaker 1: twenty twenty four, folks are expecting EPs to surge about 305 00:16:00,000 --> 00:16:03,160 Speaker 1: one hundred and fifty nine percent. It's pretty interesting because 306 00:16:03,360 --> 00:16:06,680 Speaker 1: that one hundred and fifty nine percent surge in EPs 307 00:16:06,760 --> 00:16:10,640 Speaker 1: is only based on ten percent jump in revenue based 308 00:16:10,640 --> 00:16:13,840 Speaker 1: on consensus expectations, So a highly leveraged business. And you 309 00:16:13,880 --> 00:16:16,160 Speaker 1: know that's kind of why you get that high roic. 310 00:16:16,960 --> 00:16:19,280 Speaker 1: I'm gathering that's exactly right. 311 00:16:19,320 --> 00:16:22,080 Speaker 2: And what you see that folks are modeling in there 312 00:16:22,160 --> 00:16:26,160 Speaker 2: is not necessarily a big jump in revenue, but you're 313 00:16:26,160 --> 00:16:29,200 Speaker 2: seeing uptick and your gross profit per load, right. 314 00:16:29,840 --> 00:16:33,040 Speaker 1: You know you mentioned you're seeing some green shoots. Are 315 00:16:33,080 --> 00:16:36,200 Speaker 1: you seeing are some modes better than others, like you know, 316 00:16:36,280 --> 00:16:40,280 Speaker 1: like less than truckload or LTL. Obviously, people that pay 317 00:16:40,280 --> 00:16:43,320 Speaker 1: attention to the space they saw Yellow went bankrupt the 318 00:16:43,440 --> 00:16:45,440 Speaker 1: end of July, I think that was the end of July. 319 00:16:46,760 --> 00:16:48,440 Speaker 1: Has that impacted your business at all. 320 00:16:48,760 --> 00:16:52,000 Speaker 2: Yeah, So we built our business off of fifty three 321 00:16:52,040 --> 00:16:54,640 Speaker 2: foot drovemans with swing doors. That's been our bread and 322 00:16:54,680 --> 00:16:59,400 Speaker 2: butter since day one. But we do all modes of transportation, 323 00:17:00,440 --> 00:17:04,080 Speaker 2: and LTL is definitely a vertical that has been growing 324 00:17:04,080 --> 00:17:06,479 Speaker 2: for us over the last twelve to twenty four months, 325 00:17:06,960 --> 00:17:09,320 Speaker 2: and we're really growing in a different way than what 326 00:17:09,359 --> 00:17:13,160 Speaker 2: I thought we would have ten plus years ago. Ten 327 00:17:13,240 --> 00:17:16,600 Speaker 2: years ago, I thought, well, we're LTL, We'll get the transactional, 328 00:17:16,760 --> 00:17:20,359 Speaker 2: small to mid sized customers that will come on and 329 00:17:20,359 --> 00:17:22,919 Speaker 2: be our base in LTL. But what's actually happened is 330 00:17:23,240 --> 00:17:25,840 Speaker 2: we built the business off of fifty three foot drive 331 00:17:25,920 --> 00:17:29,040 Speaker 2: ins for some of the largest companies in the country, 332 00:17:29,520 --> 00:17:31,800 Speaker 2: and what we've seen is those customers have come to 333 00:17:31,880 --> 00:17:34,080 Speaker 2: us and said, hey, for us, can you just take 334 00:17:34,119 --> 00:17:36,560 Speaker 2: over and can you outsource and manage all of our 335 00:17:36,680 --> 00:17:39,880 Speaker 2: LTL or a portion of our LTL or a different market. 336 00:17:40,320 --> 00:17:42,760 Speaker 2: And so the LTL has been growing for us at 337 00:17:42,760 --> 00:17:45,560 Speaker 2: a very very steady clip off of a small base, 338 00:17:45,960 --> 00:17:48,520 Speaker 2: but it is something that we do expect to continue 339 00:17:48,520 --> 00:17:52,360 Speaker 2: to see growth in over the next several years. Specifically 340 00:17:52,400 --> 00:17:57,800 Speaker 2: for the disruption in the LTL industry. Anytime there is disruption. 341 00:17:57,920 --> 00:18:02,800 Speaker 2: Typically that's a good thing for large brokers, and especially 342 00:18:02,920 --> 00:18:06,199 Speaker 2: large brokers that have good relationships with their customers like 343 00:18:06,240 --> 00:18:08,560 Speaker 2: what we do. So we've seen a little bit of 344 00:18:08,560 --> 00:18:11,800 Speaker 2: an uptick off of the lt L, but again it's 345 00:18:11,880 --> 00:18:14,160 Speaker 2: not as much of the transactional nature for us. It's 346 00:18:14,200 --> 00:18:17,080 Speaker 2: more of whenever customers are coming to us for managing 347 00:18:17,119 --> 00:18:19,400 Speaker 2: a piece of the LTL business or all of it. 348 00:18:20,400 --> 00:18:24,200 Speaker 1: Okay, And you know you mentioned, you know, managed transportation 349 00:18:24,560 --> 00:18:29,400 Speaker 1: as a place of M and A possibilities would LTL 350 00:18:29,520 --> 00:18:32,800 Speaker 1: be I guess the mode that you would you would 351 00:18:32,920 --> 00:18:36,639 Speaker 1: maybe look at growing through M and A because you know, 352 00:18:36,640 --> 00:18:38,800 Speaker 1: at the end of the day, the freight broker industry 353 00:18:38,800 --> 00:18:42,560 Speaker 1: are huge customers of LTL carriers nowadays they account for 354 00:18:42,600 --> 00:18:46,040 Speaker 1: a lot of their sales. So just interesting to hear 355 00:18:46,080 --> 00:18:47,440 Speaker 1: what your perspective is on that. 356 00:18:49,080 --> 00:18:51,040 Speaker 2: Yeah, if there's something out there that made sense, then 357 00:18:51,280 --> 00:18:53,720 Speaker 2: again we wouldn't walk around with blinders on. We'd pay 358 00:18:53,720 --> 00:18:55,840 Speaker 2: attention to it. We'd look at the cultural and the 359 00:18:55,880 --> 00:19:00,840 Speaker 2: strategic fit that it would have for RXO. But LTL 360 00:19:00,960 --> 00:19:03,560 Speaker 2: is also right now growing at a very good clip 361 00:19:03,560 --> 00:19:06,640 Speaker 2: for us organically, and you know, we've talked about starting 362 00:19:06,640 --> 00:19:10,040 Speaker 2: to disclose that number more publicly, and one of our 363 00:19:10,080 --> 00:19:11,000 Speaker 2: future earnings. 364 00:19:10,680 --> 00:19:14,040 Speaker 1: Calls, Okay, do you break out your and markets by 365 00:19:14,240 --> 00:19:15,920 Speaker 1: industries broad industries? 366 00:19:17,240 --> 00:19:20,600 Speaker 2: We do not. Again, like the truckload piece of the 367 00:19:20,600 --> 00:19:23,200 Speaker 2: business was such a big piece. We talked about at 368 00:19:23,240 --> 00:19:26,520 Speaker 2: the time of spend that it was ninety percent of 369 00:19:26,560 --> 00:19:28,800 Speaker 2: our volume was on the truckload side, around ten percent 370 00:19:28,920 --> 00:19:31,879 Speaker 2: was on the LTL side. LTL has taking up a 371 00:19:31,960 --> 00:19:33,679 Speaker 2: little bit more, so I think you could assume that 372 00:19:33,720 --> 00:19:36,920 Speaker 2: it was in that fifteen percent range right right now, 373 00:19:36,960 --> 00:19:39,919 Speaker 2: But we have talked about disclosing that more in future 374 00:19:39,920 --> 00:19:40,560 Speaker 2: earnings calls. 375 00:19:40,640 --> 00:19:43,600 Speaker 1: You know, we're hearing more and more from transportation companies 376 00:19:43,600 --> 00:19:48,840 Speaker 1: that are providing trailers for shippers and truckers. You know, 377 00:19:49,200 --> 00:19:51,880 Speaker 1: everyone kind of seems to like it. And you kind 378 00:19:51,880 --> 00:19:54,960 Speaker 1: of mentioned it earlier in the conversation. Could you talk 379 00:19:54,960 --> 00:19:57,520 Speaker 1: about what you're doing with the trailing fleet, like like 380 00:19:58,560 --> 00:20:00,560 Speaker 1: are you are you leasing size? 381 00:20:00,720 --> 00:20:01,520 Speaker 2: What was your fleet? 382 00:20:01,680 --> 00:20:04,080 Speaker 1: Like where a growth opportunity is there? 383 00:20:05,760 --> 00:20:09,480 Speaker 2: Yeah? So for us, we started doing drop trailers for 384 00:20:09,600 --> 00:20:13,119 Speaker 2: customers a decade ago. And you know, whenever I started 385 00:20:13,160 --> 00:20:16,159 Speaker 2: in the industry, drop trailer was typically something that was 386 00:20:16,200 --> 00:20:20,240 Speaker 2: only done by asset based carriers. But what we started doing, 387 00:20:20,320 --> 00:20:23,080 Speaker 2: and we started this with retail and e commerce customers, 388 00:20:23,600 --> 00:20:25,880 Speaker 2: was we developed a trailer pool and it was from 389 00:20:25,960 --> 00:20:29,480 Speaker 2: least trailers and we would work with smaller carriers to 390 00:20:29,520 --> 00:20:33,560 Speaker 2: create bigger fleets for customers. And now drop trailer makes 391 00:20:33,640 --> 00:20:37,320 Speaker 2: up roughly ten percent of our business overall on the 392 00:20:37,400 --> 00:20:41,080 Speaker 2: on the truckload side, and has been growing at a 393 00:20:41,240 --> 00:20:43,919 Speaker 2: very good clip. Is something that when you've got the 394 00:20:44,040 --> 00:20:47,959 Speaker 2: asset there at the customer, it makes you more strategic 395 00:20:48,000 --> 00:20:50,480 Speaker 2: and more likely for them to be able to award 396 00:20:50,520 --> 00:20:53,879 Speaker 2: you more contractual volume. It's also something that the carriers 397 00:20:53,960 --> 00:20:56,760 Speaker 2: love because on the carrier side, you know, they've got 398 00:20:56,760 --> 00:20:59,400 Speaker 2: a trailer that is already loaded, or they can drop 399 00:20:59,440 --> 00:21:02,160 Speaker 2: it off at the consignee the receiver and just leave 400 00:21:02,200 --> 00:21:04,080 Speaker 2: it there and they can spend more of their time. 401 00:21:04,440 --> 00:21:07,760 Speaker 2: There are hours of operating just driving versus spending it 402 00:21:07,840 --> 00:21:11,320 Speaker 2: getting loaded and unloaded at the shipper in consigne. So 403 00:21:11,800 --> 00:21:14,199 Speaker 2: it's been a great part of the business. We started 404 00:21:14,200 --> 00:21:16,439 Speaker 2: it off with retail and e commerce, but now it 405 00:21:16,480 --> 00:21:19,359 Speaker 2: touches every vertical and we're doing it for some of 406 00:21:19,400 --> 00:21:20,840 Speaker 2: the largest companies in the country. 407 00:21:21,560 --> 00:21:24,159 Speaker 1: Great you know, we talked earlier kind of about like 408 00:21:24,200 --> 00:21:26,600 Speaker 1: the crazy peak that we had last year, and you know, 409 00:21:26,640 --> 00:21:29,720 Speaker 1: it's been great for anyone that was involved in transportation 410 00:21:29,920 --> 00:21:33,680 Speaker 1: from a profitability standpoint. You guys generate around two hundred 411 00:21:33,680 --> 00:21:37,600 Speaker 1: and twenty million and adjusted EBIT in twenty twenty two. 412 00:21:37,920 --> 00:21:40,159 Speaker 1: This year consensus has you at one hundred and thirty. 413 00:21:40,720 --> 00:21:45,080 Speaker 1: Obviously that's really just marketing conditions. How long do you 414 00:21:45,119 --> 00:21:46,879 Speaker 1: think it's going to take you to get back to 415 00:21:46,960 --> 00:21:52,520 Speaker 1: twenty twenty two levels? Is that like a we is 416 00:21:52,560 --> 00:21:54,280 Speaker 1: that real far out or is that something that you 417 00:21:54,320 --> 00:21:57,800 Speaker 1: guys can do in the next three years? 418 00:21:58,960 --> 00:22:02,040 Speaker 2: In the next three years, Yeah, yes, absolutely. We said 419 00:22:02,160 --> 00:22:05,720 Speaker 2: at our investor day that we expect our Ibada in 420 00:22:05,800 --> 00:22:08,679 Speaker 2: twenty twenty seven to be between four hundred and seventy 421 00:22:08,680 --> 00:22:10,680 Speaker 2: five and five hundred and twenty five million, and we're 422 00:22:10,760 --> 00:22:13,520 Speaker 2: still right on track to be able to achieve that. 423 00:22:14,040 --> 00:22:16,640 Speaker 2: And it starts by building a stronger base. Whenever you're 424 00:22:16,640 --> 00:22:19,280 Speaker 2: at this part of the market that it has stayed 425 00:22:19,320 --> 00:22:22,119 Speaker 2: down for a sustained period of time, what are you 426 00:22:22,240 --> 00:22:25,560 Speaker 2: doing to build the foundation? And if you look back 427 00:22:25,600 --> 00:22:28,840 Speaker 2: to just last quarter, we grew volumes about ten percent 428 00:22:28,920 --> 00:22:30,719 Speaker 2: on a year of year basis. This is at a 429 00:22:30,760 --> 00:22:34,439 Speaker 2: time in the industry when volumes were down mid single 430 00:22:34,480 --> 00:22:37,640 Speaker 2: digits on a year of a year basis. So for us, 431 00:22:37,800 --> 00:22:40,960 Speaker 2: it's about expanding the relationships with the customer, building a 432 00:22:41,000 --> 00:22:44,880 Speaker 2: stronger foundation, so when the market does inflect, we are 433 00:22:44,920 --> 00:22:46,720 Speaker 2: the first call that they make. And you know, you 434 00:22:46,840 --> 00:22:50,920 Speaker 2: talked about the market inflection earlier from the early parts 435 00:22:50,920 --> 00:22:53,919 Speaker 2: of COVID in twenty twenty and during that time period 436 00:22:53,960 --> 00:22:56,480 Speaker 2: we were growing volumes twenty and thirty percent on a 437 00:22:56,560 --> 00:22:58,840 Speaker 2: year of year basis because not only do we have 438 00:22:58,880 --> 00:23:02,919 Speaker 2: the contractual business, we were also rewarded because of our 439 00:23:02,920 --> 00:23:06,400 Speaker 2: great service with the spot business as well. And when 440 00:23:06,440 --> 00:23:09,520 Speaker 2: the market and flex, I'm confident that RHO is going 441 00:23:09,560 --> 00:23:12,320 Speaker 2: to be one of the first calls that our customers make. 442 00:23:12,680 --> 00:23:15,280 Speaker 1: Right okay, And I want to switch gears a little bit, 443 00:23:15,320 --> 00:23:17,520 Speaker 1: you know. So I had the opportunity, I don't remember 444 00:23:17,520 --> 00:23:19,200 Speaker 1: what it was, it might have been two years ago 445 00:23:19,280 --> 00:23:21,160 Speaker 1: or three years ago, to come down to your offices 446 00:23:21,200 --> 00:23:23,320 Speaker 1: and sit with a couple of your employees and check 447 00:23:23,359 --> 00:23:24,360 Speaker 1: out the technology. 448 00:23:24,640 --> 00:23:24,840 Speaker 2: You know. 449 00:23:24,880 --> 00:23:26,480 Speaker 1: You know, when I think of you know, when most 450 00:23:26,480 --> 00:23:30,760 Speaker 1: people think of freight brokers, they think of phones, Rolodex, chainsmokers, 451 00:23:31,080 --> 00:23:34,320 Speaker 1: frat boys. But like you know, the reality is there's 452 00:23:34,359 --> 00:23:37,400 Speaker 1: a lot of technology that goes into the brokerage industry 453 00:23:38,280 --> 00:23:41,800 Speaker 1: and the successful ones are investing in technology and a 454 00:23:41,840 --> 00:23:44,600 Speaker 1: lot of that is proprietary technology. Can you talk about, 455 00:23:44,640 --> 00:23:48,800 Speaker 1: you know, what your technology does, how it makes your 456 00:23:48,800 --> 00:23:53,480 Speaker 1: brokers more productive, how it benefits the customers, and how 457 00:23:53,520 --> 00:23:55,480 Speaker 1: it's going to drive growth going forward. 458 00:23:57,560 --> 00:24:00,800 Speaker 2: So we've built our technology from the ground up over 459 00:24:00,840 --> 00:24:04,560 Speaker 2: a decade ago, and we focused on three things and 460 00:24:04,600 --> 00:24:09,080 Speaker 2: we kept to very simple Customers, carriers, and employees. So 461 00:24:09,200 --> 00:24:12,359 Speaker 2: for customers, what we've done is we've taken a lot 462 00:24:12,359 --> 00:24:16,040 Speaker 2: of their data combined up with our data as well 463 00:24:16,080 --> 00:24:18,840 Speaker 2: as external data, and we use that to help create 464 00:24:18,920 --> 00:24:21,720 Speaker 2: solutions for them. So we're telling them things like what 465 00:24:21,800 --> 00:24:23,919 Speaker 2: day of the week they could potentially ship something, do 466 00:24:23,960 --> 00:24:27,320 Speaker 2: you have the opportunity to consolidate freight, is there an 467 00:24:27,359 --> 00:24:30,720 Speaker 2: opportunity for a mode conversion? And even for some of 468 00:24:30,720 --> 00:24:33,720 Speaker 2: our large customers, we've helped them decide where they're going 469 00:24:33,760 --> 00:24:38,640 Speaker 2: to place warehouses that best allow them to route their transportation. 470 00:24:39,240 --> 00:24:43,080 Speaker 2: So for us, technology is very key at creating solutions 471 00:24:43,119 --> 00:24:46,960 Speaker 2: for customers. The second piece with customers comes the visibility 472 00:24:47,359 --> 00:24:50,520 Speaker 2: and are they able to see from beginning of the 473 00:24:50,640 --> 00:24:54,600 Speaker 2: end to the order how well it is performing. Are 474 00:24:54,600 --> 00:24:56,800 Speaker 2: they getting an update if something has gone wrong? And 475 00:24:57,200 --> 00:25:01,480 Speaker 2: RXO Connect does that proactively for for our customers. The 476 00:25:01,480 --> 00:25:04,120 Speaker 2: second piece is for the carriers that we partner with, 477 00:25:04,600 --> 00:25:07,080 Speaker 2: and so the biggest thing for carriers is we wanted 478 00:25:07,080 --> 00:25:10,879 Speaker 2: to build something that was easy to use and you know, 479 00:25:11,000 --> 00:25:13,359 Speaker 2: they can pick up their cell phone, they can book 480 00:25:13,400 --> 00:25:15,959 Speaker 2: a load, they can negotiate, they can do all of 481 00:25:16,000 --> 00:25:20,159 Speaker 2: that with no human interaction. And we've also created a 482 00:25:20,200 --> 00:25:24,240 Speaker 2: flywheel that keeps them coming back to our drive RXO 483 00:25:24,800 --> 00:25:27,240 Speaker 2: app that they're that they use and on drive r XO, 484 00:25:27,840 --> 00:25:31,440 Speaker 2: you know, they get access to fuel discounts, tired discounts, 485 00:25:31,560 --> 00:25:35,159 Speaker 2: roadside maintenance discounts, hotel discounts, all the things that a 486 00:25:35,240 --> 00:25:38,719 Speaker 2: trucker uses in their day to day life that they 487 00:25:38,760 --> 00:25:41,280 Speaker 2: would be rewarded on. And we base the discounts off 488 00:25:41,280 --> 00:25:43,600 Speaker 2: of the service and the volume that they're hauling with us. 489 00:25:43,600 --> 00:25:47,040 Speaker 2: And so for us, we've seen a huge benefit with 490 00:25:47,080 --> 00:25:49,879 Speaker 2: our with our RXO Extra platform that we work with 491 00:25:49,920 --> 00:25:52,480 Speaker 2: the carriers on. And then the last piece is on 492 00:25:52,560 --> 00:25:56,000 Speaker 2: the employees and it really comes down to loads per 493 00:25:56,080 --> 00:25:59,320 Speaker 2: day per headcount. And for us, you know, if you 494 00:25:59,400 --> 00:26:01,600 Speaker 2: go from twenty twenty one and you take a five 495 00:26:01,680 --> 00:26:04,719 Speaker 2: year look back, we grew volume three times faster than 496 00:26:04,760 --> 00:26:07,520 Speaker 2: what we grew headcount. And in twenty twenty two and 497 00:26:07,560 --> 00:26:11,040 Speaker 2: in twenty twenty three, we've continued to see great gains 498 00:26:11,119 --> 00:26:14,120 Speaker 2: on our productivity with our employees, and it really comes 499 00:26:14,160 --> 00:26:17,240 Speaker 2: down to making the system easy to use, reducing the 500 00:26:17,320 --> 00:26:18,960 Speaker 2: number of the clicks of the mouse they have, the 501 00:26:19,040 --> 00:26:21,880 Speaker 2: key strips that they have that they can focus their 502 00:26:21,880 --> 00:26:26,920 Speaker 2: time on relationships with customers, building new solutions for the customers, 503 00:26:27,119 --> 00:26:29,520 Speaker 2: and of course if there's anything that's going on with 504 00:26:29,920 --> 00:26:32,000 Speaker 2: the order where they need to jump in and do 505 00:26:32,119 --> 00:26:35,359 Speaker 2: exception management. For us, that would be that's our dream 506 00:26:35,400 --> 00:26:40,760 Speaker 2: scenarios that our employees are focused on relationships, solutions and 507 00:26:40,840 --> 00:26:41,800 Speaker 2: acception management. 508 00:26:41,880 --> 00:26:45,440 Speaker 1: So is loads per day per headcount? Is that the 509 00:26:46,200 --> 00:26:48,879 Speaker 1: most important KPI that you look at as a as 510 00:26:48,880 --> 00:26:52,440 Speaker 1: a senior leader, I look at. 511 00:26:52,359 --> 00:26:55,000 Speaker 2: A lot of KPIs, but if you look at some 512 00:26:55,160 --> 00:26:57,840 Speaker 2: of the ones that are the most important, I watch 513 00:26:57,880 --> 00:27:00,880 Speaker 2: where gross profit per load is trending. And so that's 514 00:27:00,880 --> 00:27:02,879 Speaker 2: something that we keep an eye on I want to 515 00:27:02,880 --> 00:27:05,280 Speaker 2: see how we're doing with market share gain. So what 516 00:27:05,520 --> 00:27:08,200 Speaker 2: are we doing from a volume perspective, I want to 517 00:27:08,240 --> 00:27:12,280 Speaker 2: see are we putting From a technology perspective, are we 518 00:27:12,320 --> 00:27:16,800 Speaker 2: gaining the right adoption within our carrier base? And so 519 00:27:16,920 --> 00:27:19,600 Speaker 2: for us, we've been able to see that seventy five 520 00:27:19,600 --> 00:27:23,080 Speaker 2: percent of the time, whenever carrier logs on to RXO Connect, 521 00:27:23,080 --> 00:27:25,199 Speaker 2: they come back to the platform within a week to 522 00:27:25,240 --> 00:27:30,120 Speaker 2: do business. I talked about the headcount productivity that we've seen. 523 00:27:30,200 --> 00:27:32,880 Speaker 2: We absolutely look at the loads per day per head 524 00:27:33,200 --> 00:27:35,560 Speaker 2: So there's a lot of metrics that we that we 525 00:27:35,600 --> 00:27:37,400 Speaker 2: look at to drive our success. 526 00:27:37,760 --> 00:27:40,359 Speaker 1: Okay, And you know, I think it's pretty interesting that, 527 00:27:40,480 --> 00:27:43,760 Speaker 1: you know, five six years ago, everyone was talking about 528 00:27:43,760 --> 00:27:47,120 Speaker 1: the technology only broker model. 529 00:27:47,240 --> 00:27:50,359 Speaker 2: And you know, and then that that. 530 00:27:50,240 --> 00:27:52,840 Speaker 1: Model has kind of changed more into a hybrid where 531 00:27:53,080 --> 00:27:55,760 Speaker 1: you really just can't have just technology, you do need 532 00:27:55,760 --> 00:27:58,320 Speaker 1: people because of the relationships that you mentioned. 533 00:28:00,200 --> 00:28:05,240 Speaker 2: Yeah, we've always been investing in technology, but it's never 534 00:28:05,320 --> 00:28:09,080 Speaker 2: been technology or operations for us. And whenever we built 535 00:28:09,119 --> 00:28:12,520 Speaker 2: the business, it was built with some of the best 536 00:28:12,560 --> 00:28:15,280 Speaker 2: operators who know and understand how to operate in the 537 00:28:15,280 --> 00:28:20,440 Speaker 2: transportation market, who understand having deep relationships with their customers 538 00:28:20,480 --> 00:28:23,639 Speaker 2: where they're creating solutions and partnering them with some of 539 00:28:23,640 --> 00:28:26,720 Speaker 2: the best technologists in the world, with people who've worked 540 00:28:26,760 --> 00:28:31,840 Speaker 2: at companies like Amazon and Microsoft and Google. We want 541 00:28:31,880 --> 00:28:34,680 Speaker 2: to be able to combine the best of both worlds. 542 00:28:35,160 --> 00:28:38,080 Speaker 2: That is never an either or. This is always going 543 00:28:38,120 --> 00:28:41,320 Speaker 2: to be a people business to where the relationships with 544 00:28:41,360 --> 00:28:43,840 Speaker 2: the customers matter. The service that you provide for a 545 00:28:43,880 --> 00:28:47,600 Speaker 2: customer matters. Are you able to go out and do 546 00:28:47,720 --> 00:28:50,600 Speaker 2: business at scale for a customer meeting? Can you go 547 00:28:50,720 --> 00:28:52,640 Speaker 2: to customer say hey, I can do one hundred loads 548 00:28:52,640 --> 00:28:54,680 Speaker 2: a day, two hundred loads a day, five hundred loads 549 00:28:54,720 --> 00:28:57,080 Speaker 2: a day and actually be able to back up that 550 00:28:57,600 --> 00:28:59,720 Speaker 2: and service the customer at scale. 551 00:29:00,080 --> 00:29:02,400 Speaker 1: Yeah, And I'm it's curious, so, you know, because you 552 00:29:02,760 --> 00:29:04,880 Speaker 1: are I mean, people might not think of you as 553 00:29:04,920 --> 00:29:07,800 Speaker 1: a technology company, but you are a technology based company 554 00:29:08,480 --> 00:29:11,520 Speaker 1: in my eyes. You know, are you having a hard 555 00:29:11,520 --> 00:29:15,920 Speaker 1: time finding engineers nowadays or has that become easier given 556 00:29:15,960 --> 00:29:17,160 Speaker 1: the economy. 557 00:29:18,560 --> 00:29:21,360 Speaker 2: We've got some great engineers who have been here for 558 00:29:21,760 --> 00:29:25,400 Speaker 2: a very long time who have helped us build RXO 559 00:29:25,480 --> 00:29:29,000 Speaker 2: Connect from the ground up. You know, I think when 560 00:29:29,040 --> 00:29:33,520 Speaker 2: you look in the technology labor market. It's always been 561 00:29:33,680 --> 00:29:37,080 Speaker 2: a very competitive place to be, but for us, people 562 00:29:37,200 --> 00:29:39,840 Speaker 2: want to come to work here because they see, Hey, 563 00:29:39,840 --> 00:29:42,000 Speaker 2: I can go work for a company that is in 564 00:29:42,080 --> 00:29:45,720 Speaker 2: an industry that's growing and they're outgrowing that industry. I 565 00:29:45,720 --> 00:29:48,200 Speaker 2: can see I can go work for a company that 566 00:29:48,360 --> 00:29:52,640 Speaker 2: believes in technology and creating solutions for customers and carriers 567 00:29:52,920 --> 00:29:55,280 Speaker 2: and employees that want to go to work with winners. 568 00:29:55,320 --> 00:29:57,720 Speaker 2: And we've got a great group of winners here at RXO. 569 00:29:58,080 --> 00:30:01,920 Speaker 2: And you're in Charlotte, right, So, uh, we were in Charlotte. 570 00:30:01,920 --> 00:30:04,040 Speaker 2: If my accent doesn't give it away, we're in Charlotte, 571 00:30:04,080 --> 00:30:04,640 Speaker 2: North Carolina. 572 00:30:04,640 --> 00:30:07,120 Speaker 1: It's a nice uh you know, I guess work life balance. 573 00:30:07,600 --> 00:30:10,040 Speaker 1: Your football team's no good. I mean, as a giant 574 00:30:10,080 --> 00:30:11,959 Speaker 1: fan of someone saying that, that says something. 575 00:30:12,240 --> 00:30:15,760 Speaker 2: But they're they're struggling this year. And I'm also a 576 00:30:15,760 --> 00:30:18,040 Speaker 2: South Carolina game Cocks fan and they're they're struggling a 577 00:30:18,080 --> 00:30:19,760 Speaker 2: little bit as well this year. So it is not 578 00:30:19,880 --> 00:30:22,280 Speaker 2: our year, but they're you know, as a Gamecock fan, 579 00:30:22,320 --> 00:30:24,240 Speaker 2: I learned to saying a long time ago, wait till. 580 00:30:24,120 --> 00:30:28,000 Speaker 1: Next year, So like just if you would, so when 581 00:30:28,000 --> 00:30:30,760 Speaker 1: you're not like, you know, managing this huge business. Uh 582 00:30:31,240 --> 00:30:32,680 Speaker 1: what do you What do you do for fun outside 583 00:30:32,680 --> 00:30:33,000 Speaker 1: of work? 584 00:30:34,720 --> 00:30:36,440 Speaker 2: When I spent a lot of time at work, I love, 585 00:30:36,560 --> 00:30:38,520 Speaker 2: I love what I do, and I'm pretty I'm a 586 00:30:38,520 --> 00:30:44,480 Speaker 2: pretty simple person. It is faith's family, work, It's South Carolina. 587 00:30:45,440 --> 00:30:47,680 Speaker 2: The outside of that, there is There's not a lot 588 00:30:47,800 --> 00:30:51,120 Speaker 2: that I've got going on. I've got two girls that 589 00:30:51,160 --> 00:30:53,320 Speaker 2: I love watching them if I've got the opportunity to 590 00:30:53,360 --> 00:30:55,280 Speaker 2: be able to go watch them and play in sports. 591 00:30:56,160 --> 00:30:58,959 Speaker 2: I've got a wife that I've been with since I 592 00:30:59,040 --> 00:31:02,360 Speaker 2: was sixteen years old, so we've grown up together. I 593 00:31:02,400 --> 00:31:04,640 Speaker 2: love being able to spend time with her. But I 594 00:31:04,680 --> 00:31:06,240 Speaker 2: love the people I work with, and I love being 595 00:31:06,240 --> 00:31:08,920 Speaker 2: able to come into work and you know, continue to 596 00:31:09,040 --> 00:31:12,520 Speaker 2: drive the ball forward, take market share and do it profitably. 597 00:31:12,560 --> 00:31:14,960 Speaker 2: And I believe in what we're building here in ro 598 00:31:15,080 --> 00:31:17,560 Speaker 2: So I do not mind spending a lot of time here. Right. 599 00:31:17,680 --> 00:31:20,600 Speaker 1: Well, that's good, Tod, And I'm sure your shareholders appreciate 600 00:31:21,160 --> 00:31:25,560 Speaker 1: all your efforts. You know, I think, you know, I 601 00:31:25,600 --> 00:31:28,680 Speaker 1: think we should wrap it up here. You know, I 602 00:31:28,760 --> 00:31:31,520 Speaker 1: just wanted to thank you for you know, making the 603 00:31:31,600 --> 00:31:35,080 Speaker 1: time to talk to us at talking transports, and I 604 00:31:35,120 --> 00:31:37,160 Speaker 1: want to thank everyone for tuning in. You know, if 605 00:31:37,200 --> 00:31:40,520 Speaker 1: you like the episode, please subscribe and leave a review. 606 00:31:40,840 --> 00:31:43,600 Speaker 1: We've lined up a number of great guests for the podcast. 607 00:31:43,880 --> 00:31:48,000 Speaker 1: Check back to here conversations with C suite executives from 608 00:31:48,040 --> 00:31:55,160 Speaker 1: Canadian National CSX, Werner, ARC, Best, g XO, Starbull, PAM Transportation, 609 00:31:56,200 --> 00:31:58,880 Speaker 1: Scorpio Tankers, just to name a few. And if you 610 00:31:58,880 --> 00:32:01,800 Speaker 1: have any ideas for future episodes, please hit me up 611 00:32:01,960 --> 00:32:04,320 Speaker 1: on the terminal or you can reach me on Twitter 612 00:32:04,400 --> 00:32:06,920 Speaker 1: at Logistics Lee. Thanks d you for your. 613 00:32:06,800 --> 00:32:08,400 Speaker 2: Time, Thanks for having me Lee. 614 00:32:08,600 --> 00:32:11,360 Speaker 1: All right, take care of a great day. Bye.