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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-07 · 68 added, 61 removed, 128 unchanged (50% of the section changed)

55 unchanged sentences

In management’s opinion, the condensed consolidated financial statements reflect all adjustments that are of a normal recurring nature and are necessary for a fair presentation of financial condition, results of operations and cash flows for the interim periods presented.

Operating results for the three and six months ended months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.

Operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.

Refer to Note 2—Basis of Presentation and Significant Accounting Policies for additional details regarding the basis of presentation used for the Company’s condensed consolidated financial statements.

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Results of Operations

Three Months Ended June 30, Percentage of Revenue

Three Months Ended September 30, Percentage of Revenue

(In millions) 2025 2024 2025 2024

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Restructuring costs 4 2 0.3 % 0.2 %

Operating income (loss) $ — $ — — % — %

Other expense 2 — 0.1 % — %

Operating loss $ (7) $ (20) (0.5) % (1.9) %

Other expense (income) (1) 216 (0.1) % 20.8 %

Interest expense, net 9 6 0.6 % 0.6 %

Loss before income taxes $ (15) $ (242) (1.1) % (23.3) %

Income tax benefit (1) (1) (0.1) % (0.1) %

Income tax provision (benefit) (1) 1 (0.1) % 0.1 %

Net loss $ (14) $ (243) (1.0) % (23.4) %

Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024

Revenue increased by 52.6% to $1.4 billion in the second quarter of 2025, compared with $930 million for the same quarter in 2024.

The year-over-year increase in revenue in the second quarter of 2025 was driven by (i) a $482 million increase in truck brokerage revenue, primarily as a result of the Coyote acquisition and (ii) a $50 million increase in last mile revenue, primarily as a result of a 17% increase in volume.

Three Months Ended September 30, 2025 Compared with Three Months Ended September 30, 2024

Revenue increased by 36.6% to $1.4 billion in the third quarter of 2025, compared with $1.0 billion for the same quarter in 2024.

The year-over-year increase in revenue in the third quarter of 2025 was driven by (i) a $384 million increase in truck brokerage revenue, primarily as a result of the Coyote acquisition and (ii) a $37 million increase in last mile revenue, primarily as a result of a 12% increase in volume.

This was partially offset by a $14 million decrease in revenue in our managed transportation business, driven primarily by a decrease in expedite automotive volume.

Cost of transportation and services (exclusive of depreciation and amortization) in the second quarter of 2025 was $1.1 billion, or 78.8% of revenue, compared with $700 million, or 75.3% of revenue in the same quarter in 2024.

The $418 million increase is primarily attributable to the Coyote acquisition.

The year-over-year increase as a percentage of revenue during the second quarter of 2025 was driven primarily by (i) a 0.5 percentage point increase in truck brokerage cost of transportation and services as a percentage of revenue, as lower freight rates were not fully offset by corresponding reductions in cost of purchased transportation during the quarter and (ii) a 2.4 percentage point increase in last mile cost of transportation and services as a percentage of revenue as a result of freight mix changes.

Direct operating expense (exclusive of depreciation and amortization) of $47 million in the second quarter of 2025 decreased $3 million, or 6.0%, from $50 million in the same quarter in 2024.

As a percentage of revenue, direct operating expense (exclusive of depreciation and amortization) decreased to 3.3% in the second quarter of 2025 compared with 5.4% in the same quarter in 2024 driven primarily by cost reduction initiatives and improved leverage as a result of increased scale due to the Coyote acquisition.

SG&A of $214 million in the second quarter of 2025 increased $60 million, or 39.0%, from $154 million in the second quarter in 2024, primarily attributable to the Coyote acquisition.

As a percentage of revenue, SG&A decreased to 15.1% in the second quarter of 2025 compared with 16.6% for the same quarter in 2024 driven primarily by improved leverage as a result of increased scale due to the Coyote acquisition, as well as cost savings from restructuring actions.

Depreciation and amortization expense for the second quarter of 2025 was $30 million, compared with $17 million for the same quarter in 2024.

Depreciation and amortization expense for the second quarter of 2025 included $11 million attributable to the Coyote acquisition.

Transaction and integration costs for both the second quarter of 2025 and 2024 were $7 million.

Transaction and integration costs for the second quarter of 2025 and 2024 included $6 million and $5 million, respectively, attributable to the Coyote acquisition.

Restructuring costs for the second quarter of 2025 and 2024 were $3 million and $2 million, respectively, and primarily comprised severance costs and operating lease impairment costs.

Our effective income tax rates were 14.5% and 11.3% for the second quarter of 2025 and 2024, respectively.

The effective tax rates for the second quarter of 2025 and 2024 were calculated using the discrete method.

Our effective tax rate for the second quarter of 2025 differs from the U.S.

Cost of transportation and services (exclusive of depreciation and amortization) in the third quarter of 2025 was $1.1 billion, or 80.0% of revenue, compared with $809 million, or 77.8% of revenue in the same quarter in 2024.

The $328 million increase is primarily attributable to a full quarter of Coyote activity in the third quarter of 2025.

The year-over-year increase as a percentage of revenue during the third quarter of 2025 was driven primarily by (i) a 0.4 percentage point increase in truck brokerage cost of transportation and services as a percentage of revenue as the market tightened during the third quarter of 2025, with capacity rapidly exiting in certain regions driven primarily by regulatory changes and enforcement, which caused buy rates to increase faster than our contractual sell rates and (ii) a 2.2 percentage point increase in last mile cost of transportation and services as a percentage of revenue as a result of freight mix changes.

Direct operating expense (exclusive of depreciation and amortization) of $48 million in the third quarter of 2025 decreased $1 million, or 2.0%, from $49 million in the same quarter in 2024.

As a percentage of revenue, direct operating expense (exclusive of depreciation and amortization) decreased to 3.4% in the third quarter of 2025 compared with 4.7% in the same quarter in 2024 driven primarily by cost reduction initiatives and improved leverage as a result of increased scale due to the Coyote acquisition.

SG&A of $208 million in the third quarter of 2025 increased $59 million, or 39.6%, from $149 million in the third quarter of 2024, primarily attributable to a full quarter of Coyote activity in the third quarter of 2025.

As a percentage of revenue, SG&A increased to 14.6% in the third quarter of 2025 compared with 14.3% for the same quarter in 2024 driven primarily by an increase in purchased services and legal expense between periods.

Depreciation and amortization expense for the third quarter of 2025 was $26 million, compared with $21 million for the same quarter in 2024.

Depreciation and amortization expense for the third quarter of 2025 included an increase of $7 million attributable to a full quarter of Coyote activity in the third quarter of 2025.

Transaction and integration costs for the third quarter of 2025 was $5 million, compared with $30 million for the same quarter in 2024.

Transaction and integration costs for the third quarter of 2025 and 2024 included $4 million and $29 million, respectively, attributable to the Coyote acquisition.

Restructuring costs for the third quarter of 2025 and 2024 were $4 million and $2 million, respectively, and primarily comprised severance costs and operating lease impairment costs.

Other expense for the third quarter of 2024 included a one-time charge of $216 million representing a deemed non-pro rata distribution in connection with the private placement common stock issuance completed in August 2024.

Our effective income tax rates were 9.2% and (0.4)% for the third quarter of 2025 and 2024, respectively.

The effective tax rates for the third quarter of 2025 and 2024 were calculated using the discrete method.

Our effective tax rate for the third quarter of 2025 differs from the U.S.

corporate income tax rate of 21% primarily due to the effect of nondeductible expenses when experiencing a pre-tax loss.

Our effective tax rate for the second quarter of 2024 differs from the U.S.

corporate income tax rate of 21% primarily due to the effect of discrete tax items when experiencing a pre-tax loss.

Six Months Ended June 30, Percentage of Revenue

Our effective tax rate for the third quarter of 2024 differs from the U.S.

corporate income tax rate of 21% primarily due to the effect of large non-deductible tax items associated with the Coyote acquisition and related common stock issuances.

Nine Months Ended September 30, Percentage of Revenue

(In millions) 2025 2024 2025 2024

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Net loss $ (54) $ (265) (1.3) % (9.2) %

Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024

Revenue increased by 54.7% to $2.9 billion in the first six months of 2025, compared with $1.8 billion for the same period in 2024.

The year-over-year increase in revenue in the first six months of 2025 was driven by (i) a $985 million increase in truck brokerage revenue, primarily as a result of the Coyote acquisition and (ii) a $96 million increase in last mile revenue, primarily as a result of a 20% increase in volume.

Nine Months Ended September 30, 2025 Compared with Nine Months Ended September 30, 2024

Revenue increased by 48.2% to $4.3 billion in the first nine months of 2025, compared with $2.9 billion for the same period in 2024.

The year-over-year increase in revenue in the first nine months of 2025 was driven by (i) a $1.4 billion increase in truck brokerage revenue, primarily as a result of the Coyote acquisition and (ii) a $133 million increase in last mile revenue, primarily as a result of an 18% increase in volume.

This was partially offset by a $43 million decrease in revenue in our managed transportation business, driven primarily by a decrease in expedite automotive volume.

Cost of transportation and services (exclusive of depreciation and amortization) in the first six months of 2025 was $2.3 billion, or 79.6% of revenue, compared with $1.4 billion, or 75.9% of revenue in the same period in 2024.

The $872 million increase is primarily attributable to the Coyote acquisition.

The year-over-year increase as a percentage of revenue in the first six months of 2025 was driven primarily by (i) a 0.6 percentage point increase in truck brokerage cost of transportation and services as a percentage of revenue, as lower freight rates were not fully offset by corresponding reductions in cost of purchased transportation during the quarter and (ii) a 2.8 percentage point increase in last mile cost of transportation and services as a percentage of revenue as a result of freight mix changes.

Direct operating expense (exclusive of depreciation and amortization) of $95 million in the first six months of 2025 decreased $8 million, or 7.8%, from $103 million in the same period in 2024.

As a percentage of revenue, direct operating expense (exclusive of depreciation and amortization) decreased to 3.3% in the first six months of 2025 compared with 5.6% in the same period of 2024 driven primarily by cost reduction initiatives and improved leverage as a result of increased scale due to the Coyote acquisition.

SG&A of $424 million in the first six months of 2025 increased $125 million, or 41.8%, from $299 million in the same period in 2024, primarily attributable to the Coyote acquisition.

As a percentage of revenue, SG&A decreased to 14.9% in the first six months of 2025 compared with 16.2% for the same period in 2024 driven primarily by improved leverage as a result of increased scale due to the Coyote acquisition, as well as cost savings from restructuring actions.

Depreciation and amortization expense for the first six months of 2025 was $62 million, compared with $33 million for the same period in 2024.

Depreciation and amortization expense for the first six months of 2025 included $26 million attributable to the Coyote acquisition.

Transaction and integration costs for the first six months of 2025 and 2024 were $13 million and $8 million, respectively.

Transaction and integration costs for the first six months of 2025 and 2024 included $11 million and $5 million, respectively, attributable to the Coyote acquisition.

Restructuring costs for the first six months of 2025 and 2024 were $17 million and $13 million, respectively, and primarily comprised severance costs and operating lease impairment costs.

Our effective income tax rates were 18.2% and 22.9% for the first six months of 2025 and 2024, respectively.

The effective tax rates for the first six months of 2025 and 2024 were calculated using the discrete method.

Our effective tax rate for the first six months of 2025 differs from the U.S.

Cost of transportation and services (exclusive of depreciation and amortization) in the first nine months of 2025 was $3.4 billion, or 79.8% of revenue, compared with $2.2 billion, or 76.6% of revenue in the same period in 2024.

The $1.2 billion increase is primarily attributable to a full nine months of Coyote activity in 2025.

The year-over-year increase as a percentage of revenue in the first nine months of 2025 was driven primarily by (i) a 0.5 percentage point increase in truck brokerage cost of transportation and services as a percentage of revenue, as lower customer freight rates were not fully offset by corresponding reductions in cost of purchased transportation during the current year and (ii) a 2.4 percentage point increase in last mile cost of transportation and services as a percentage of revenue as a result of freight mix changes.

Direct operating expense (exclusive of depreciation and amortization) of $143 million in the first nine months of 2025 decreased $9 million, or 5.9%, from $152 million in the same period in 2024.

As a percentage of revenue, direct operating expense (exclusive of depreciation and amortization) decreased to 3.3% in the first nine months of 2025 compared with 5.3% in the same period of 2024 driven primarily by cost reduction initiatives and improved leverage as a result of increased scale due to the Coyote acquisition.

SG&A of $632 million in the first nine months of 2025 increased $184 million, or 41.1%, from $448 million in the same period in 2024, primarily attributable to a full nine months of Coyote activity in 2025.

As a percentage of revenue, SG&A decreased to 14.8% in the first nine months of 2025 compared with 15.5% for the same period in 2024 driven primarily by improved leverage as a result of increased scale due to the Coyote acquisition, as well as cost savings from restructuring actions.

Depreciation and amortization expense for the first nine months of 2025 was $88 million, compared with $54 million for the same period in 2024.

Depreciation and amortization expense for the first nine months of 2025 included an increase of $33 million attributable to a full nine months of Coyote activity in 2025.

Transaction and integration costs for the first nine months of 2025 and 2024 were $18 million and $38 million, respectively.

Transaction and integration costs for the first nine months of 2025 and 2024 included $15 million and $35 million, respectively, attributable to the Coyote acquisition.

Restructuring costs for the first nine months of 2025 and 2024 were $21 million and $15 million, respectively, and primarily comprised severance costs and operating lease impairment costs.

Other expense for the first nine months of 2024 included a one-time charge of $216 million representing a deemed non-pro rata distribution in connection with the private placement common stock issuance completed in August 2024.

Our effective income tax rates were 16.0% and 2.2% for the first nine months of 2025 and 2024, respectively.

The effective tax rates for the first nine months of 2025 and 2024 were calculated using the discrete method.

Our effective tax rate for the first nine months of 2025 differs from the U.S.

corporate income tax rate of 21% primarily due to the effect of nondeductible expenses when experiencing a pre-tax loss.

Our effective tax rate for the first six months of 2024 differs from the U.S.

corporate income tax rate of 21% primarily due to state income taxes.

Our effective tax rate for the first nine months of 2024 differs from the U.S.

corporate income tax rate of 21% primarily due to the effect of large non-deductible tax items associated with the Coyote acquisition and related common stock issuances.

Liquidity and Capital Resources

9 unchanged sentences

Debt and Financing Arrangements

We were in compliance with all covenants and other provisions of our outstanding debt and financing arrangements as of June 30, 2025.

We were in compliance with all covenants and other provisions of our outstanding debt and financing arrangements as of September 30, 2025.

Any failure to comply with any material provision or covenant of these agreements could have a material adverse effect on our liquidity and operations.

Refer to Note 7—Debt to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for disclosures regarding the Company’s debt and financing arrangements as of June 30, 2025.

As of September 30, 2025, the Company had $565 million committed under the Revolver, net of outstanding borrowings.

As of September 30, 2025, the Company’s available borrowing capacity under the Revolver, after giving effect to the financial covenants described above, was $383 million.

Financial Condition

Our asset and liability balances are summarized as follows:

(In millions) June 30, 2025 December 31, 2024 $ Change % Change

(In millions) September 30, 2025 December 31, 2024 $ Change % Change

Total current assets $ 1,201 $ 1,339 $ (138) (10.3) %

2 unchanged sentences

Total long-term liabilities 714 737 (23) (3.1) %

Total assets decreased by $213 million from December 31, 2024 to June 30, 2025, primarily due to (i) a $162 million decrease in accounts receivable as a result of a decrease in revenue in the second quarter of 2025 compared to the fourth quarter of 2024, (ii) a $26 million decrease in operating lease assets as a result of amortization and (iii) a $17 million decrease in cash and cash equivalents as a result of timing of transaction-related payments associated with the Coyote acquisition.

Total liabilities decreased by $189 million from December 31, 2024 to June 30, 2025, primarily due to a decrease in third party transportation costs in the second quarter of 2025 compared to the fourth quarter of 2024, partially offset by a $36 million increase in long-term debt and obligations under finance leases.

Total assets decreased by $213 million from December 31, 2024 to September 30, 2025, primarily due to (i) a $123 million decrease in accounts receivable as a result of a decrease in revenue in the third quarter of 2025 compared to the fourth quarter of 2024, (ii) a $36 million decrease in identifiable intangible assets as a result of amortization and (iii) a $22 million decrease in operating lease assets as a result of amortization.

Total liabilities decreased by $181 million from December 31, 2024 to September 30, 2025, primarily due to (i) a decrease in third-party transportation costs in the third quarter of 2025 compared to the fourth quarter of 2024 and (ii) a $17 million decrease in short-term and long-term operating lease liabilities as a result of amortization.

These decreases were partially offset by a $36 million increase in long-term debt and obligations under finance leases.

Cash Flow Activity

Our cash flows from operating, investing and financing activities are summarized as follows:

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions) 2025 2024 $ Change

Net cash provided by operating activities $ 21 $ 2 $ 19

Net cash provided by (used in) operating activities $ 44 $ (5) $ 49

Net cash used in investing activities (56) (1,052) 996

1 unchanged sentence

Effect of exchange rates on cash, cash equivalents and restricted cash 2 — 2

Net change in cash, cash equivalents and restricted cash $ (16) $ 2 $ (18)

Net cash provided by operating activities for the first six months of 2025 was $21 million compared with $2 million in the same period in 2024.

The increase in net cash provided by operating activities was due primarily to an increase in non-cash depreciation and amortization expense of $29 million, which is added back in the determination of operating cash flows, partially offset by an increase in net loss of $18 million between periods.

Net cash used in investing activities for the first six months of 2025 was $43 million compared with $22 million in the same period in 2024.

The increase in net cash used in investing activities was due primarily to (i) $10 million paid related to the Coyote acquisition for working capital and other post-closing adjustments and (ii) a $7 million increase in cash used to purchase property and equipment driven primarily by strategic real estate investments.

Net cash provided by financing activities for the first six months of 2025 was $4 million compared with $22 million in the same period in 2024.

The primary source of cash in the first six months of 2025 was $34 million in net proceeds from borrowings on revolving credit facilities, partially offset by $18 million in payments for tax withholdings primarily attributable to the vesting of stock compensation awards held by non-RXO employees at the spin which are now substantially complete.

The primary source of cash in the first six months of 2024 was $27 million in net proceeds from borrowings on revolving credit facilities.

Net increase (decrease) in cash, cash equivalents and restricted cash $ (9) $ 50 $ (59)

Net cash provided by operating activities for the first nine months of 2025 was $44 million compared with $5 million used in the same period in 2024.

The increase in net cash provided by operating activities was primarily due to higher income and working capital.

Net cash used in investing activities for the first nine months of 2025 was $56 million compared with $1.1 billion in the same period in 2024.

The primary uses of cash in the first nine months of 2025 were (i) $43 million for purchases of property and equipment and (ii) $10 million paid related to the Coyote acquisition for working capital and post-closing adjustments.

The primary uses of cash in the first nine months of 2024 were (i) $1.0 billion for the acquisition of Coyote, net of cash acquired and (ii) $33 million for purchases of property and equipment.

The increase in purchases of property and equipment was driven primarily by strategic real estate investments in 2025.

Net cash provided by financing activities for the first nine months of 2025 was $1 million compared with $1.1 billion in the same period in 2024.

The primary source of cash in the first nine months of 2025 was $33 million in net proceeds from borrowings on revolving credit facilities, partially offset by $20 million in payments for tax withholdings primarily attributable to the vesting of stock compensation awards held by non-RXO employees at the spin which are now substantially complete.

The primary source of cash in the first nine months of 2024 was $1.1 billion in net proceeds from the issuance of common stock used to fund the acquisition of Coyote.

Critical Accounting Policies

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis