Welcome to the Q2 2024 RXO Earnings Conference Call. My name is Sharon and I will be your operator for today's call. Please note that this conference is being recorded. During this call, the company will make certain forward-looking statements within the meaning of Federal Securities laws, which, by their nature, involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those in the forward-looking statements. A discussion of factors that could cause actual results to differ materially is contained in the company's SEC filing as well as in its earnings release. You should refer to the copy of the company's earnings release in the Investors Relations section on the company's website for additional important information regarding forward-looking statements and disclosures and reconciliations of non-GAAP financial measures that the company uses for discussing its results. I will now turn the call over to Drew Wilkerson. Mr. Wilkerson, you may begin.

Good morning, everyone, and thank you for joining today. I'm here in Charlotte with RXO's Chief Financial Officer, Jamie Harris; and Chief Strategy Officer, Jared Weisfeld. There are four main takeaways I'd like you to walk away with today. First, we delivered adjusted EBITDA, brokerage volume growth, both full truckload and LTL and brokerage gross margin at the high end of our guidance ranges. Second, we have momentum in managed transportation and have won significant new business and have an impressive sales pipeline. Third, in last mile, we achieved the fastest year-over-year growth rate in stops in nearly two years and have taken actions to significantly improve profitability. Lastly, we expect our actions to result in both sequential and year-over-year adjusted EBITDA growth in the third quarter. Now let me walk you through our second quarter results. RXO executed well with adjusted EBITDA of $28 million in what continues to be a soft freight market. Our brokerage business grew volume by 4%, with a 40% increase in less-than-truckload volume. We continue to build scale in our LTL business, which now represents 20% of our brokerage volume and is contributing to profitable growth. Full truckload volume was down 2% above the midpoint of our expectations. The decline was the result of the bid season strategy we walked you through last quarter and a tough comparison to the second quarter of 2023. Cross-border brokerage volume increased by 12% year-over-year. We're hitting tough comparisons, but cross-border demand remains robust. Full truckload contract business represented 78% of our mix in the quarter and positions us well to earn spot volume and project loads when the market improves. Our strong relationships and service lead customers to choose RXO for spot loads and projects. Importantly, the bid season strategy we talked with you about last quarter combined with our effective management of purchased transportation yielded brokerage gross margin of 14.7%. Jared will discuss brokerage margin dynamics in more detail. Complementary Services were a major contributor to our results. In Managed Transportation, we again grew synergy loads provided to our brokerage business year over year and customers awarded us more than $200 million in freight under management or FUM in the quarter. The total new FUM in our sales pipeline is substantial, greater than $1.6 billion. We have a long runway for growth in managed transportation and converting that pipeline will fuel growth across RXO. In the second quarter, last mile stops grew by 7% year-over-year, the fastest rate in nearly two years. This was a result of our focus to build deep relationships with the top brands and provide those customers with the best service in the industry. The largest retailers of big and bulky goods are turning to large national last mile providers like RXO because of our scale, technology, financial stability, and exceptional service. We continue to bolster our position as the number one provider of big and bulky last mile deliveries. Complimentary Services gross margin of 23% was up 170 basis points year-over-year. The increase was primarily driven by last mile performance, which included stronger volume and results from a profitability initiative. Jamie will talk more about this in a few minutes, but we expect this effort to generate more than $20 million in annualized adjusted EBITDA. RXO's company-wide gross margin was 19% in the quarter. Let's talk about the overall freight market. While conditions remain soft, most key industry metrics improved since the first quarter. On the supply side, carriers continued to exit each month in the quarter. However, the rate of exit slowed when compared to the first quarter. As we anticipated, the national load-to-truck ratio moved seasonally higher as the quarter progressed. This was a result of DOT road checks, produce season, and continued capacity exits. Carrier rates have started to increase and while this puts short-term pressure on our gross margin, it's consistent with our view that rates are at an unsustainable level for many carriers. On the demand side, indicators continue to be mixed. While inflation has moderated and retail inventory positions are healthy, the labor market, consumer confidence, and the industrial ISM index have all weakened. It's too soon to tell whether the tightening we're seeing is sustainable, but we continue to make strategic decisions in anticipation of the market recovery. We remain focused on reliably serving our customers' needs and honoring our contractual rates. This strategy contributed to our second quarter results and will position us well to capture spot volume and project freight when the market recovers. Let's talk about what we saw in July and what our expectations are for the third quarter. July is typically the slowest month of the quarter and we expect that to be the case this year. Full truckload volume in the month was down approximately mid-single digits when compared to June and down high single-digits year-over-year. As July progressed, we did see an improvement in our gross margin. For the third quarter, we anticipate that brokerage volume will decline by a low to mid-single digit percentage on a year-over-year basis and will grow slightly quarter-over-quarter. We anticipate that growth in LTL will continue, but that full truckload volume will decline by a high single-digit to low double-digit percentage. This is primarily because of our bid season pricing strategy and tough comparison to the third quarter of 2023. As you recall, in the third quarter of last year, our brokerage volume grew by 18% year-over-year. RXO will continue to take profitable market share over the long term and those gains will be sticky. In the second quarter, full truckload contract volume grew by more than 40% since the second quarter of 2021. Even with the anticipated third quarter year-over-year volume decline, full truckload contract volume will be up approximately 30% on a three-year stack. While we're still operating in a prolonged soft freight environment, our strong margin performance and disciplined focus on costs give us confidence in our ability to grow adjusted EBITDA again sequentially and also year-over-year. Jamie and Jared will discuss our guidance in more detail in a few minutes. This is the right point in the cycle to make strategic investments, like our planned acquisition of Coyote Logistics. We're on track to close in the first half of the fourth quarter. As I mentioned on our call in June, we've had an integration mindset since we started the due diligence process and have made good progress. I've had the opportunity to spend some time with a wide range of team members at Coyote, and I'm impressed by their energy, passion, and knowledge. Many in key roles have been with Coyote since its early days and are excited about the significantly increased scale that RXO will have after the acquisition closes. This is the right deal at the right time. We're buying at a good point in the freight cycle, Coyote and RXO share a few customers and carriers in common, and our large scale business will be even more primed for profitable growth. I remain confident that this acquisition will create substantial value for our customers, carriers, employees, and investors. You'll hear more about our progress in the coming weeks and months, but for now, we're focused on continuing to provide the best service, the most comprehensive set of solutions, continuous innovation, and close customer relationships. We'll also remain disciplined when it comes to cost. RXO is well positioned to deliver earnings growth when the market inflects. Now, Jamie will discuss our financial results in more detail.

Thank you, Drew, and good morning, everyone. Let's review our second quarter performance in more detail. We generated $930 million in revenue compared to $963 million in the second quarter of 2023. Gross margin was 19%, up 160 basis points sequentially and up 40 basis points year-over-year. Our adjusted EBITDA was $28 million, among the midpoint of the guidance range we provided to you in May. This compares to $38 million in the second quarter of 2023. Our adjusted EBITDA margin was 3%, up 140 basis points sequentially and down 90 basis points year-over-year. Below the line, our interest expense was $8 million. For the quarter, our adjusted earnings per share was $0.03. You can find a bridge to adjusted EPS on Slide 7 of the earnings presentation. Now I'd like to give an overview of our performance within our lines of business. Brokers generated $543 million of revenue, down 4% sequentially and 3% year-over-year. The year-over-year decline was primarily due to slightly lower full truckload volume and lower freight rates. Brokerage gross margin remained solid at 14.7%, toward the high end of our guidance. The margin performance in the quarter was primarily due to our bid season strategy that anticipated a market recovery while honoring customer rates as well as our focus on procuring purchased transportation effectively. Brokerage gross margin expanded by 50 basis points sequentially and declined by 70 basis points year-over-year. Complementary Services revenue in the quarter of $421 million was up 10% sequentially and down 4% year-over-year. The sequential revenue increase was primarily due to seasonality within our last mile business driven by an increase in stops from new and existing customers. Last mile stops grew 7% year-over-year, the fastest growth in nearly two years. Similar to the first quarter, automotive expedite volume in our managed transportation business remained soft. Complementary Services gross margin of 23% increased by 240 basis points sequentially and by 170 basis points year-over-year. All of our lines of business contributed to this performance. We're pleased with our Complementary Services gross margin performance, but we still have plenty of opportunities for future expansion. In last mile, we have several profitability initiatives that are underway, but one specifically I'd like to expand on. Earlier this year, we partnered with an outside consultant to accelerate the design and implementation of the strategy to significantly reduce last-mile purchase transportation costs. The initiative has already positively impacted last mile. In the second quarter, the annualized adjusted EBITDA impact of this initiative was approximately $11 million. We realized the associated benefits in a phased approach throughout the quarter resulting in an improvement in second quarter adjusted EBITDA of $2 million, which was more than offset in the quarter by one-time professional fees. Looking forward and when fully implemented, we expect the annualized adjusted EBITDA impact to be more than $20 million, an impressive return on the dollars spent. As we discuss cash, please refer to Slide 8. Over the trailing six months, our adjusted free cash flow was negative $8 million, which was impacted by lower profitability levels at the bottom of the freight cycle. Additionally, this includes the impact of our semiannual interest payment, the settlement of previously discussed legacy liability claims, and our strategic use of working capital notably increased usage of our quick pay offering for carriers. Our adjusted free cash flow in the second quarter was negative $9 million, slightly better than our expectation of negative $10 million which we shared with you in May. We ended the quarter with $7 million of cash on the balance sheet, flat with the prior quarter. Our revolving credit facility increased by $18 million sequentially consistent with our estimate. The primary difference between adjusted free cash flow and cash usage in the quarter was $7 million of restructuring-related cash outflows. We continue to expect a conversion range of 40% to 60% through market cycles and remain excited about the cash flow generation that RXO will produce as the market influx. As you can see on Slide 9, our liquidity position remains strong with approximately $600 million of committed liquidity at the end of the quarter. Quarter-end gross leverage was 3.3 times trailing 12 months adjusted EBITDA, and net leverage was 3.2 times. This is higher than our first quarter leverage due to our siphon of last year's adjusted EBITDA. We remain comfortable with our current leverage ratio and given the strong free cash flow characteristics of our business, we expect to de-lever rapidly as the market recovers. Moving to cost. Last quarter, we updated our expectations for annualized cost reductions to at least $35 million in 2024. We now expect annualized cost reductions of approximately $35 million to $40 million. The actions to achieve these cost reductions are complete. The P&L expense and cash outflows associated with these cost reductions were approximately $13 million, a strong return of just under 200%. While a large portion of these cost reductions were offset by the year-over-year declines in gross profit per load and inflationary pressures, they position us well for operating leverage when the market recovers. Importantly, these cost outs are mostly structural in nature. Over the last 18 months, we've taken out more than $65 million of annualized costs while strategically investing in the business. RXO is well positioned for the market recovery. Importantly, as with everything else we're discussing today, these cost savings and restructuring charges don't include any impact from synergies or charges resulting from the upcoming Coyote acquisition. Now let's discuss our expectations for the third quarter and the full year. While we're still operating in a prolonged soft freight environment, our strong margin performance and cost discipline give us confidence in another quarter of sequential adjusted EBITDA growth. We expect to deliver between $28 million and $34 million of adjusted EBITDA in Q3. We also expect a strong adjusted free cash flow quarter with an adjusted free cash flow conversion of more than 50%. Jared will provide more details on our outlook shortly.

Thanks, Jamie and good morning everyone. We continued to outperform the market in the second quarter, growing brokerage volume by 4% year-over-year. LTL growth was robust with 40% year-over-year growth, exceeding our guidance of 30%. Our full truckload customers continue to award us LTL freight because of our strong service and relationships. LTL represented 20% of brokerage volume in the second quarter, up 300 basis points sequentially and 500 basis points year-over-year. Full truckload volume was down 2% year-over-year, above the midpoint of the range we provided last quarter. Full truckload volume represented 80% of brokerage volume in the quarter, down 300 basis points sequentially and down 500 basis points year-over-year. We also maintained a favorable mix of contract and spot business in the quarter. With LTL growing so quickly and considering that a vast majority of our LTL freight is contractual in nature, starting this quarter and going forward, we'll communicate our spot and contract mix from a full truckload perspective. We believe this is a more accurate representation of our underlying volume mix. Contracts represented 78% of our full truckload volume in the quarter, approximately flat sequentially and up 300 basis points when compared to the second quarter of 2023. In the second quarter, overall contract volume grew 9% year-over-year and full truckload contract volume was up 2% year-over-year. Importantly, on a three-year stack, our full truckload contract volume grew by over 40%, which speaks to our multi-year market share gains. Within our full truckload business, performance across our major verticals was largely consistent with our consolidated volume trends. Retail and e-commerce volume was approximately flat year-over-year. Inventory positions at our retail customers were made healthy. At the largest retailers in the country, year-over-year revenue growth has exceeded inventory growth for the last six consecutive quarters. While this is encouraging, consumer confidence continues to fall with many leading indicators sitting at multi-month lows. Volume from industrial and manufacturing customers was also approximately flat year-over-year. While there were some encouraging signs earlier in the year with the ISM manufacturing PMI, the new orders component has been in contractionary territory for the last few months. Automotive volume grew by 14% year-over-year although at a slower pace than the last few quarters. From a profitability perspective, brokerage gross margin of 14.7% was toward the high end of the 13% to 15% range we provided you in May. As expected, brokerage gross margin and gross profit per load moved lower as the quarter progressed due to seasonality. I'll expand on this momentarily. In the second quarter, we launched several new technology enhancements. We strengthened tracking and visibility for cross-border customers and rolled out enhanced AI pricing algorithms. We continued to expand our LTL automation capabilities and rolled out LTL enhancements to drive improved billing accuracy and time to bill. Seven-day carrier retention remains strong at 75% in the quarter, down slightly from 76% in the first quarter. Our technology enables our people to become even more productive. On a rolling 12-month basis, productivity in our brokerage business, as measured by loads per person per day, improved by over 18% year-over-year. I now like to review our brokerage financial performance and market conditions in more detail. You can find this information on slides 10 through 13 of the presentation. Revenue per load declined by 7% year-over-year, the fourth consecutive quarter of easing. That's an 800 basis point improvement when compared to the first quarter. To get a better sense of our consolidated year-over-year price declines on a per load basis, it's important to consider the impacts of length of haul, mix, and changes in fuel prices. When normalizing for those items, revenue per load on a percentage basis was down just low single digits year-over-year, also moderating when compared to last quarter's year-over-year decline. While we have lapped the length of haul headwinds, we expect mix to be a continued headwind given our robust LTL volume growth. As a reminder, LTL revenue per load is dilutive to consolidated revenue per load, but at scale, LTL runs at higher gross margin and EBITDA margin percentage when compared to full truckload. Full truckload revenue per load inflected positive year-over-year in the month of June, slightly ahead of our expectation of roughly flat year-over-year. Let's move to slide 11 and discuss RXO Brokerage monthly gross margin and industry trends. We entered the second quarter with a gross margin of approximately 16%. As expected, the market tightened as the quarter progressed due to seasonal factors, most notably produce season and DOT road checks. Thanks to our bid season strategy and our ability to leverage technology to effectively procure capacity, we were still able to post a gross margin toward the high end of guidance despite tightening market conditions. From an industry perspective, we're still operating in a prolonged soft freight environment but there are some encouraging signs. The national load-to-truck ratio and tender rejections moved higher both sequentially and year-over-year in the second quarter, averaging approximately 4.2% and 4.5% respectively. However, the national average was heavily influenced by pockets of regional tightness due to produce season. On the demand side, while it has not yet translated into over-the-road volume strength, year-to-date port volume growth has been robust. This is also consistent with the improved inventory positions of our retail customers. However, as I mentioned earlier, we are monitoring the macroeconomic indicators that have recently weakened. Turning to supply, there is still too much truckload capacity relative to current demand and carrier unit economics remain challenged. However, there have been monthly carrier authority exits for almost two years and with the reduced supply, the environment is likely now more susceptible to being impacted by near-term changes in demand. While it's too early to determine if this is the beginning of the recovery, industry metrics are moving in the right direction. Let's go to slide 12. With our LTL brokerage volume growing so rapidly, we thought it would be helpful to break out our historical full truckload and LTL volume gross profit per load trends. As we just walked through, our profitability moved lower as the quarter progressed due to seasonal factors, but full truckload gross profit per load in the second quarter improved modestly when compared to the first quarter. RXO's full truckload gross profit per load remains at trough levels. To give some more color, in the second quarter, RXO's full truckload gross profit per load was approximately 30% below our five-year average. When the cycle recovers, there will be strong flow through to adjusted EBITDA. Moving to slide 13, our LTL business has grown rapidly over the past few years. Importantly, LTL brokerage operates with less cyclical gross profit per load. At scale, LTL will be a key contributor of stable EBITDA. I now like to look forward and give you some more color on our third quarter outlook. This outlook assumes no meaningful improvement in freight market conditions and limited spot opportunities. Let's start with brokerage. We expect consolidated brokerage volume to decline by low to mid-single digit percent year-over-year in the third quarter and to increase slightly sequentially. We expect LTL volume to grow again in the third quarter; the business is performing well as we scale and we expect LTL volume to increase by 10% to 20% year-over-year. Turning to full truckload, we expect full truckload volume to decline by a high single-digit to low double-digit percent year-over-year, primarily due to our bid season strategy and more difficult comps. On a sequential basis, we expect full truckload volume to be approximately flat when compared to the second quarter. I want to expand on our historical volume growth. We grew volume by 12% in 2023, significantly outperforming the broader market which declined by mid-single digits. As we mentioned last quarter, our comps get tougher as the year progresses and we expect this dynamic to be most pronounced in the fourth quarter of this year. A high single-digit to low double-digit percent year-over-year decline in third quarter full truckload volume would still result in full truckload contract volume growth of approximately 30% on a three-year stack, significantly ahead of the broader market. Moving to revenue per load, we expect consolidated year-over-year revenue per load declines to improve again in the third quarter marking the fifth consecutive quarter of moderating declines. We expect full truckload revenue per load to be approximately flat year-over-year in the third quarter. We expect brokerage gross margin to be between 13% and 15% in the third quarter, similar to our outlook for the second quarter despite tightening freight market conditions. We expect brokerage gross margin percentage and gross profit per load to seasonally improve throughout the third quarter with July representing the low point of the quarter. Turning to Complimentary Services, in Managed Transportation we expect automotive volume to improve throughout the quarter as plants come back online and in last mile, while we're expecting a seasonal decline from the second quarter, this will be largely offset by the profitability initiative that Jamie described earlier. We also continue to remain disciplined on costs and the third quarter will benefit from the full run rate of our cost takeouts. Putting it all together, we expect RXO's third quarter adjusted EBITDA to grow again sequentially and be between $28 million and $34 million. In summary, we're continuing to execute well in this soft freight market. We're entering the third quarter with continued momentum, sustained multi-year brokerage market share gains, a managed transportation pipeline of greater than $1.6 billion and tangible progress on improving last-mile profitability. We expect to deliver strong earnings growth when the market influx and look forward to closing the acquisition of Coyote in the first half of the fourth quarter.

Thank you very much. Good morning. I wanted to follow up on some of Jared's comments regarding the third quarter. I understand that you expect volumes to be down year-over-year in the third quarter, even more so than in the second quarter. You mentioned that July tends to be the lowest month of the year, which is expected seasonally. Could you elaborate on how you anticipate the seasonal build from the second quarter to the third quarter and into the fourth quarter? I thought I heard Jared say it would remain flat, but I would like to get a clearer picture of your expectations for volume for the rest of the year, especially considering the holiday season. Thank you.

Sure, Scott. Good morning. So when we think about the volume progression from Q2 to Q3, you're right. We expect volume to move higher throughout the quarter. While it is on full truckload down, call it, high single-digit to low double-digit year-over-year, I'd say two things: One, we look at this business over the long term and if you look at the last three years, even with that guide for Q3, our full truckload contract volume is up more than 30% over the last three years, which I think speaks to our multiyear market share gains. And when you combine that with the tough comps from Q3 of last year where volume was up 18% year-over-year, that's what really translates into that volume growth. I think importantly, moving from Q2 to Q3, volumes will be up slightly on a sequential basis and full truckload will be about flat sequentially, and as the quarter progresses, we also expect automotive volumes to move higher throughout the quarter as plants come back online, which should benefit both brokerage and managed transportation. Yes, absolutely. I think importantly in the month of June, our full truckload revenue per load inflected positively, which was slightly ahead of our expectation of flat. So we did see that improvement and I think that's a direct reflection of our bid season strategy that we talked to you about three months ago. As it relates to the back half of the year, I think it will depend on how the freight market evolves and we look forward to communicating that later this year, but I think we're really proud of the fact that the third quarter will mark our fifth consecutive quarter of easing. We do have a mix shift, right, with LTL increasing as a percentage of the mix, but importantly, on full truckload, it did inflect positive in the month of June.

Your next question comes from Scott Group with Wolfe Research. Please go ahead.

Good morning, Scott. This is Drew. If you look at what we're seeing, load-to-truck ratios is still below what we typically see when we start seeing spots. We start seeing spots at 6:7:1. If you look at July, it was just over 4:1 from a load-to-truck ratio. Tender rejections are still in, call it, low to mid-single digits, overall, and you wanna see those start itching closer to double digits. We have seen some spot loads come through, but I wouldn't say it's anything that has caused us to say that you are seeing a market inflection or market turning. I anticipate that you could see that later in the year or early next year.

Okay, helpful. And then can you just talk about the drivers of the sequential EBITDA improvement Q2 to Q3? It sounds like last mile seasonally a little bit lower. Is it brokerage that's driving it? Is it forwarding? I know it's small, but that maybe that's is that how big of a factor is that? And then can we just clarify with the EBITDA growth starting to inflect positive in Q3, do you think we've hit the high point on the leverage ratios?

Yes. Scott, this is Jamie. Look at Q2 to Q3, it's really a cost story. We see kind of flat over the operational side, but some of the cost initiatives that we've talked about previously are beginning to flow through the P&L in full. We do agree with you with the Q3 EBITDA being up year-over-year. We see the leverage coming down 10 to 20 basis points in Q3. We begin to have obviously lower comps-to-cycle as time moves forward and so we feel good about our balance sheet. It's very strong, but yeah, we see that coming down. Yes, we can't share specific details at this moment. As mentioned during the announcement, we have secured financing for the deal in the form of a bridge loan. We are currently working on finalizing all of our financing. More information will be available later. However, we want to highlight that at the time of the announcement, we expect our financing to keep our credit profile at least neutral in terms of leverage, and we feel confident about that.

Hi, good morning. Thank you. I was hoping you could maybe elaborate a bit on your bid season pricing strategy, if this has changed at all as the cycle has progressed. Can you talk a little bit about what you might be seeing from a competitive standpoint as well?

Yes. Stephanie, this is Drew. When you look at what we said on the first quarter call, for us, it was important to put rates in place that we felt like we could service through a bid. We communicated that to our customers. It was received well of the transparency that we were providing and we took a position that we felt like the market would inflect at least at some point before the middle of next year when the next season's bids were being implemented. So for us, we're happy with the execution that the team has delivered on that. The margins have been strong and have put us in a position of strength with our customers by communicating where we believe the market is going to continue to receive spots, projects, and mini bids.

Yes. I would say they're running as expected, in line with what we thought, both from an amount as well as the timing. As we talked about last quarter, Stephanie, those are phased in throughout the year. We're beginning to see the full impact of that hit in Q3, Q4, but they're right in line with what we're expecting.

Good morning. I know you had a question about the brokerage volume, specifically the truckload brokerage volume in the third quarter compared to the second quarter. Are you indicating that this aligns with typical seasonality, but the significant year-over-year decline is simply due to comparisons, or how should we view that volume in relation to what is usually expected for truckload brokerage in the third quarter versus the second quarter?

Hey, Tom, it's Jared. So you're right. We are expecting typical seasonality from Q3 from Q2 with respect to our volume. We expect volume to improve throughout the quarter. I think one of the main drivers there will also come down to automotive with the plants coming back online impacting both brokerage and Managed Transportation from a sequential perspective, right, modest growth sequentially Q3 versus Q2 on volumes, about flat sequentially with respect to full truckload and to your point about comps, right, we grew volumes last year Q3, up 18% year-over-year and the volume strength continued throughout the year. So our comps do get a little bit tougher from Q3 to Q4.

Thank you very much. Good morning. I would like to follow up on some of Jared's comments regarding the third quarter. I understand you expect volumes to be down year-over-year in the third quarter, more so than in the second quarter. You mentioned that July will be the lowest month of the year, which is expected seasonally. Could you elaborate on how you expect seasonal growth to develop from the second quarter to the third quarter and into the fourth quarter? I thought I heard Jared indicate it would be relatively flat, but I would like to clarify your expectations for volume throughout the rest of the year, considering the holiday season as well.

Yes, Stephanie, this is Drew. When you look at what we said on the first quarter call, for us, it was important to put rates in place that we felt like we could service through a bid. We communicated that to our customers. It was received well of the transparency that we were providing and we took a position that we felt like the market would inflect at least at some point before the middle of next year when the next season's bids were being implemented. So for us, we're happy with the execution that the team has delivered on that. The margins have been strong and has put us in a position of strength with our customers by communicating where we believe the market is going to continue to receive spots, projects, and mini bids.

Great. Thanks. Good morning. Just to follow-up on that gross margin target down sequentially. Is that just solely from bid season or is there another anything else in there where you think there's a little bit more pressure on that?

Hey, Ken, it's Jared. I think it's a result of the tightening market conditions that progressed as Q2 played out, right? So I think as we mentioned, load-to-truck ratio intended projections have moved higher. So I think importantly, the guidance range that we provided 13% to 15% is the same range that we gave for Q2 despite the market tightening conditions, and I think that reflects our overall bid pricing strategy that we talked to you about earlier this year and that we're able to navigate the tightening market pretty effectively.

Hey, thanks and good morning. Maybe just to touch again on last mile for a minute here. Good to see the acceleration in volume growth there. Can you just maybe break down what's driving the strength? How much of that is easy comps from last year versus an improvement in the core market versus maybe some winning of share? And how do you think about the top line as we move into the back half of the year in that segment?

Yes, I don't think that when you're looking at comps from last year, I think that the end consumer was spending less and having fewer home deliveries last year by a lot and so what you're seeing this year, they're still doing the same thing. So the market share gains that you're seeing are significant and what we are hearing from our customers is that they want to do business with large financially stable companies who have scale and a footprint, who give them good service, have great technology, have strong relationships and have built trust over a period of time and is the market leader in the last mile space, we've been doing that for a long time. We've got a footprint in our last mile hubs that puts us roughly 125 miles away from 90% of the U.S. population. So we're in a strong position to be able to continue to go out there and win. Our customers, our large customers are actually coming to us and saying, hey, we want to talk to you about potentially doing more business. We're bringing on new customers that we haven't done business with. So on the last mile side, we do expect to continue to grow last mile stops on a year-over-year basis in the third quarter. Thank you, Sharon. In the second quarter, RXO delivered brokerage volume growth, large customer wins in Managed Transportation, and significant increases in last mile stops and underlying profitability. In the third quarter, we expect to grow EBITDA sequentially and year-over-year. We're effectively managing our costs, including the cost of purchased transportation. We remain focused on providing the best service, the most comprehensive set of solutions, continuous innovation, and deep customer relationships. The Coyote acquisition is on track and we're well positioned to continue to outperform over the long term.

Ladies and gentlemen, this concludes your conference call for today.