What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-07 compared with 2025-11-06 · 51 added, 92 removed, 104 unchanged (58% of the section changed)

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In addition, we offer technology-enabled managed expedite services that automate transportation procurement for time-critical freight moved by road and air charter carriers.

We also offer freight forwarding services, including facilitation of ocean and air transportation, customs brokerage and additional domestic services.

We also offer freight forwarding services, including facilitation of ocean and air transportation, customs brokerage and additional domestic services including middle mile.

Our last mile offering is an asset-light service that facilitates consumer deliveries performed by highly qualified third-party contractors.

We are the largest provider of outsourced last mile transportation for heavy goods in the U.S., positioned within 125 miles of the vast majority of the U.S.

We are the largest provider of outsourced last mile transportation for heavy goods in the United States, positioned within reach of the vast majority of the U.S.

population and serving a customer base of omnichannel and e-commerce retailers and direct-to-consumer manufacturers.

The Coyote Acquisition

On September 16, 2024 (the “acquisition date”), the Company acquired the technology-driven, asset-light based truckload freight brokerage services business, as well as certain assets used to conduct haulage, dedicated transport and warehousing services in the United Kingdom (collectively, “Coyote”), from United Parcel Service of America, Inc.

(“UPS”) and certain subsidiaries of UPS.

We acquired Coyote for $1.038 billion in cash, subject to certain additional customary adjustments.

The purchase price was subsequently increased by $10 million for working capital and other post-closing adjustments, which was paid in the first quarter of 2025.

Refer to Note 3—Acquisition to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for disclosures regarding the Company’s acquisition of Coyote.

Impact of Inflation

Economic inflation can have a negative impact on our operating costs, and any economic recession could depress activity levels and adversely affect our results of operations.

A prolonged period of inflation could cause interest rates, fuel, wages and other costs to continue to increase, which would adversely affect our results of operations unless our pricing to our customers correspondingly increases.

A prolonged period of inflation could cause interest rates, fuel, wages and other costs to increase, which would adversely affect our results of operations unless our pricing to our customers correspondingly increases.

Generally, inflationary increases in labor and operating costs related to our operations have historically been offset through price increases.

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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 nine months ended September 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 months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.

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 September 30, Percentage of Revenue

(In millions) 2025 2024 2025 2024

Revenue $ 1,421 $ 1,040 100.0 % 100.0 %

Cost of transportation and services (exclusive of depreciation and amortization) 1,137 809 80.0 % 77.8 %

Direct operating expense (exclusive of depreciation and amortization) 48 49 3.4 % 4.7 %

Sales, general and administrative expense 208 149 14.6 % 14.3 %

Depreciation and amortization expense 26 21 1.8 % 2.0 %

Transaction and integration costs 5 30 0.4 % 2.9 %

Restructuring costs 4 2 0.3 % 0.2 %

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 provision (benefit) (1) 1 (0.1) % 0.1 %

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

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 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 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

Three Months Ended March 31, Percentage of Revenue

(In millions) 2026 2025 2026 2025

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Other expense 1 — 0.1 % — %

Debt extinguishment loss 11 — 0.8 % — %

Interest expense, net 9 9 0.6 % 0.6 %

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Net loss $ (36) $ (31) (2.5) % (2.2) %

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 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 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.

Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025

Revenue decreased by $8 million in the first quarter of 2026 to $1,425 million, compared with $1,433 million for the same quarter in 2025.

The year-over-year decrease in revenue in the first quarter of 2026 was driven by (i) a $14 million decrease in revenue in our managed transportation business, driven primarily by a decrease in expedite ground volume and (ii) a $13 million decrease in last mile revenue as a result of an 8% decrease in volume.

This was partially offset by a $30 million increase in truck brokerage revenue, primarily as a result of a 12% increase in revenue per load driven by increases in freight rates and fuel prices, partially offset by an 8% decrease in volume.

Cost of transportation and services (exclusive of depreciation and amortization) in the first quarter of 2026 was $1,171 million, or 82.2% of revenue, compared with $1,153 million, or 80.5% of revenue in the same quarter in 2025.

The year-over-year increase as a percentage of revenue during the first quarter of 2026 was driven primarily by (i) a 1.9 percentage point increase in truck brokerage cost of transportation and services as a percentage of revenue as the market remained tight in the first quarter of 2026, with capacity continuing to exit, driven primarily by regulatory changes and enforcement, which caused buy rates to increase faster than our contractual sell rates and (ii) a 0.8 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 $50 million in the first quarter of 2026 increased $2 million, or 4.2%, from $48 million in the same quarter in 2025.

As a percentage of revenue, direct operating expense (exclusive of depreciation and amortization) increased to 3.5% in the first quarter of 2026 compared with 3.3% in the same quarter in 2025 driven primarily by changes in cost mix between periods.

SG&A of $197 million in the first quarter of 2026 decreased $13 million, or 6.2%, from $210 million in the first quarter of 2025.

As a percentage of revenue, SG&A decreased to 13.8% in the first quarter of 2026 compared with 14.7% for the same quarter in 2025 driven primarily by cost savings from restructuring actions.

Depreciation and amortization expense for the first quarter of 2026 was $26 million, compared with $32 million for the same quarter in 2025.

The decrease was primarily due to a $5 million decrease in intangible amortization expense.

Transaction and integration costs for the first quarter of 2026 and 2025 were $2 million and $6 million, respectively, and primarily comprised acquisition integration costs.

Restructuring costs for the first quarter of 2026 and 2025 were $7 million and $14 million, respectively, and primarily comprised severance and operating lease impairment costs.

Debt extinguishment loss for the first quarter of 2026 was $11 million, resulting from the redemption of our outstanding 7.50% Notes due 2027 and the write off of the related unamortized debt issuance costs and discount.

Our effective income tax rates were 25.5% and 19.2% for the first quarter of 2026 and 2025, respectively.

The effective tax rates for the first quarter of 2026 and 2025 were calculated using the discrete method.

Our effective tax rate for the first quarter of 2026 differs from the U.S.

corporate income tax rate of 21% primarily due to the recognition of discrete tax benefits.

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

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

Liquidity and Capital Resources

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Debt and Financing Arrangements

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 September 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.

Revolving Credit Facilities

On February 5, 2026, we entered into a $450 million asset-based revolving credit facility (the “ABL Facility”) and used proceeds from loans under the ABL Facility to repay and terminate our previous revolving credit agreement (“the Revolver”).

The ABL Facility matures on February 5, 2031.

As of March 31, 2026, the Company had $365 million available under the ABL Facility, net of $35 million of outstanding borrowings and $50 million of outstanding letters of credit.

On February 20, 2026 , we completed an offering of $400 million in aggregate principal amount of unsecured notes (the “2031 Notes”).

A portion of the proceeds from the offering were used to redeem all the outstanding 2027 Notes at a redemption price of 101.875% of the principal amount thereof, plus accrued and unpaid interest.

We recorded a debt extinguishment loss of $11 million in the first quarter of 2026 due to the redemption of the 2027 Notes.

The 2031 Notes bear interest at a rate of 6.375% per annum payable semiannually in cash in arrears on May 15 and November 15 of each year, beginning November 15, 2026 , and mature on May 15, 2031 , unless repurchased or redeemed earlier, if applicable.

The 2031 Notes were issued at an issue price of 100.00% of par.

The company may redeem the 2031 Notes in whole or in part prior to the 2031 redemption date at predetermined prices depending on the date the 2031 Notes are redeemed.

Refer to Note 6—Debt to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional disclosures regarding the Company’s debt and financing arrangements as of March 31, 2026 .

Financial Condition

Our asset and liability balances are summarized as follows:

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

(In millions) March 31, 2026 December 31, 2025 $ Change % Change

Total current assets $ 1,335 $ 1,317 $ 18 1.4 %

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Total long-term liabilities 711 698 13 1.9 %

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.

Total assets decreased by $9 million from December 31, 2025 to March 31, 2026, primarily due to (i) a $10 million decrease in accounts receivable as a result of a sequential decrease in revenue, (ii) an $11 million decrease in identifiable intangible assets as a result of amortization and (iii) a $16 million decrease in operating lease assets as a result of amortization, partially offset by a $24 million increase in other current assets primarily as a result of the timing of prepaid contracts.

Total liabilities increased by $23 million from December 31, 2025 to March 31, 2026, primarily due to a $43 million increase in long-term debt as a result of debt refinancing transactions completed in the first quarter of 2026, partially offset by a $14 million decrease in short-term and long-term operating lease liabilities as a result of lease payments.

Cash Flow Activity

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

Nine Months Ended September 30,

Three Months Ended March 31,

(In millions) 2026 2025 $ Change

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

Net cash used in operating activities $ (7) $ (2) $ (5)

Net cash used in investing activities (17) (25) 8

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Net increase (decrease) in cash, cash equivalents and restricted cash $ 4 $ (19) $ 23

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.

Net cash used in operating activities for the first three months of 2026 was $7 million compared with $2 million used in the same period in 2025.

The increase in net cash used by operating activities was primarily due to lower income.

Net cash used in investing activities for the first three months of 2026 was $17 million compared with $25 million in the same period in 2025.

The use of cash in the first three months of 2026 was $17 million for purchases of property and equipment.

The uses of cash in the first three months of 2025 were (i) $15 million for purchases of property and equipment and (ii) $10 million paid related to the Coyote acquisition for working capital and post-closing adjustments.

Net cash provided by financing activities for the first three months of 2026 was $28 million compared with $7 million in the same period in 2025.

The primary source of cash in the first three months of 2026 was $400 million in proceeds from the issuance of the 2031 Notes, partially offset by (i) $362 million paid for the redemption of the 2027 Notes and (ii) $8 million paid for debt issuance costs.

The primary source of cash in the first three months of 2025 was $35 million in net proceeds from borrowings, partially offset by $17 million in payments for tax withholdings primarily attributable to the vesting of stock compensation awards held by non-RXO employees at the time of the Company’s spin-off from XPO, Inc.

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