RXO, Inc 10-Q for FY2024 Q1
RXO, Inc. (RXO)
10-Q
2024-05-07
For: 2024-03-31
View Original
Added on
April 11, 2026
About this 10-Q
RXO, Inc filed this 10-Q on May 7, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $913M
- down 9.6% from $1.01B a year earlier
- Net loss
- $15M
- compared with net income of $0 a year earlier
- Diluted EPS
- -$0.13
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
Form 10-Q
___________________________________
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 31, 2024
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from ____________ to ____________
Commission File Number: 001-41514
_______________________________________________
(Exact name of registrant as specified in its charter)
_______________________________________________
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (Address of principal executive offices) | (Zip Code) | ||||
(980 ) 308-6058
(Registrant’s telephone number, including area code)
_______________________________________________
N/A
_______________________________________________
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated filer | o | |||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||||||||
| Emerging growth company | |||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ☒
As of May 3, 2024, there were 117,548,465 shares of the registrant’s common stock, par value $0.01 per share, outstanding.
RXO, Inc.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended March 31, 2024
Table of Contents
| Page No. | |||||
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
1
RXO, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| March 31, | December 31, | |||||||||||||
| (Dollars in millions, shares in thousands, except per share amounts) | 2024 | 2023 | ||||||||||||
| ASSETS | ||||||||||||||
| Current assets | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
Accounts receivable, net of $ | ||||||||||||||
| Other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Long-term assets | ||||||||||||||
Property and equipment, net of $ | ||||||||||||||
| Operating lease assets | ||||||||||||||
| Goodwill | ||||||||||||||
Identifiable intangible assets, net of $ | ||||||||||||||
| Other long-term assets | ||||||||||||||
| Total long-term assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| Current liabilities | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued expenses | ||||||||||||||
| Short-term debt and current maturities of long-term debt | ||||||||||||||
| Short-term operating lease liabilities | ||||||||||||||
| Other current liabilities | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Long-term liabilities | ||||||||||||||
| Long-term debt and obligations under finance leases | ||||||||||||||
| Deferred tax liability | ||||||||||||||
| Long-term operating lease liabilities | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Total long-term liabilities | ||||||||||||||
| Commitments and Contingencies (Note 9) | ||||||||||||||
| Equity | ||||||||||||||
Preferred stock, $ | ||||||||||||||
Common stock, $ | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Retained earnings (Accumulated deficit) | ( | |||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||
| Total equity | ||||||||||||||
| Total liabilities and equity | $ | $ | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
2
RXO, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (Dollars in millions, shares in thousands, except per share amounts) | 2024 | 2023 | ||||||||||||||||||||||||
| Revenue | $ | $ | ||||||||||||||||||||||||
| Cost of transportation and services (exclusive of depreciation and amortization) | ||||||||||||||||||||||||||
| Direct operating expense (exclusive of depreciation and amortization) | ||||||||||||||||||||||||||
| Sales, general and administrative expense | ||||||||||||||||||||||||||
| Depreciation and amortization expense | ||||||||||||||||||||||||||
| Transaction and integration costs | ||||||||||||||||||||||||||
| Restructuring costs | ||||||||||||||||||||||||||
| Operating income (loss) | $ | ( | $ | |||||||||||||||||||||||
| Other expense | ||||||||||||||||||||||||||
| Interest expense, net | ||||||||||||||||||||||||||
| Loss before income taxes | $ | ( | $ | ( | ||||||||||||||||||||||
| Income tax benefit | ( | ( | ||||||||||||||||||||||||
| Net income (loss) | $ | ( | $ | |||||||||||||||||||||||
| Earnings (loss) per share data | ||||||||||||||||||||||||||
| Basic earnings (loss) per share | $ | ( | $ | |||||||||||||||||||||||
| Diluted earnings (loss) per share | $ | ( | $ | |||||||||||||||||||||||
| Weighted-average common shares outstanding | ||||||||||||||||||||||||||
| Basic weighted-average common shares outstanding | ||||||||||||||||||||||||||
| Diluted weighted-average common shares outstanding | ||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
3
RXO, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | ||||||||||||||||||||||||
| Net income (loss) | $ | ( | $ | |||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | ||||||||||||||||||||||||||
Foreign currency translation, net of tax effect of $ | $ | $ | ||||||||||||||||||||||||
| Other comprehensive income (loss) | ||||||||||||||||||||||||||
| Comprehensive income (loss) | $ | ( | $ | |||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
4
RXO, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended March 31, | ||||||||||||||
| (In millions) | 2024 | 2023 | ||||||||||||
| Operating activities | ||||||||||||||
| Net income (loss) | $ | ( | $ | |||||||||||
| Adjustments to reconcile net income (loss) to net cash from operating activities | ||||||||||||||
| Depreciation and amortization expense | ||||||||||||||
| Stock compensation expense | ||||||||||||||
| Deferred tax benefit | ( | |||||||||||||
| Other | ||||||||||||||
| Changes in assets and liabilities | ||||||||||||||
| Accounts receivable | ||||||||||||||
| Other assets | ( | ( | ||||||||||||
| Accounts payable | ( | ( | ||||||||||||
| Accrued expenses and other liabilities | ||||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| Investing activities | ||||||||||||||
| Payment for purchases of property and equipment | ( | ( | ||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| Financing activities | ||||||||||||||
| Proceeds from borrowings on revolving credit facilities | ||||||||||||||
| Repayment of borrowings on revolving credit facilities | ( | |||||||||||||
| Payment for tax withholdings related to vesting of stock compensation awards | ( | ( | ||||||||||||
| Other | ( | |||||||||||||
| Net cash provided by (used in) financing activities | ( | |||||||||||||
| Effect of exchange rates on cash, cash equivalents and restricted cash | ||||||||||||||
| Net increase in cash, cash equivalents and restricted cash | ||||||||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | ||||||||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | $ | ||||||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||||
| Leased assets obtained in exchange for new operating lease liabilities | $ | $ | ||||||||||||
| Cash paid for income taxes, net | ||||||||||||||
| Cash paid for interest, net | ||||||||||||||
See accompanying notes to condensed consolidated financial statements.
5
RXO, Inc.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| Common Stock | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions, shares in thousands) | Shares | Amount | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Loss | Total Equity | ||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Vesting of stock compensation awards | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Tax withholdings related to vesting of stock compensation awards | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions, shares in thousands) | Shares | Amount | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Loss | Total Equity | ||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Vesting of stock compensation awards | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Tax withholdings related to vesting of stock compensation awards | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
6
RXO, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization
RXO, Inc. (“RXO”, the “Company” or “we”) is a brokered transportation platform defined by cutting-edge technology and an asset-light business model. The largest component is our core truck brokerage business. Our operations also include three asset-light, brokered transportation services, all of which complement our truck brokerage business: managed transportation, last mile and freight forwarding. We present our operations in the condensed consolidated financial statements as one reportable segment.
2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements have been prepared on a basis that is substantially consistent with the accounting principles applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the 2023 Form 10-K.
The Company’s condensed consolidated financial statements include the accounts of RXO, Inc. and its majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated. 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 months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
Significant Accounting Policies
Our significant accounting policies are disclosed in Note 2 to the 2023 Form 10-K. There have been no material changes to the Company’s significant accounting policies as of March 31, 2024.
Accounting Pronouncements Issued but Not Yet Effective
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.” The amendments in this update improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements of the ASU are required for entities with a single reportable segment. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods for our fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis to all periods presented. Early adoption is permitted. We are currently evaluating the impact of the new guidance.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740) - Improvements to Income Tax Disclosure.” The ASU seeks to enhance income tax information primarily through changes in the rate reconciliation and income taxes paid information. The amendments are effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. We are currently evaluating the impact of the new guidance.
7
In March 2024, the SEC issued the final rules under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. In April 2024, the SEC voluntarily stayed implementation of the final rules as a result of pending judicial review. These rules, if adopted, will require registrants to disclose certain climate-related information, including Scope 1 and Scope 2 greenhouse gas emissions and other climate-related topics, in registration statements and annual reports, when material. Disclosure requirements, absent the results of pending judicial review, will begin phasing in with the Company’s annual reporting for the year ending December 31, 2025. We are currently evaluating the impact the rules will have on our disclosures.
3. Revenue Recognition
Disaggregation of Revenues
We disaggregate our revenue by geographic area, service offering and industry sector. The majority of our revenue, based on sales office location, is generated in the U.S. Approximately 7 % of our revenues were generated outside the U.S. (primarily in Canada, Mexico and Asia) for the three months ended March 31, 2024 and 2023.
Our revenue disaggregated by service offering is as follows:
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | ||||||||||||||||||||||||
| Truck brokerage | $ | $ | ||||||||||||||||||||||||
| Last mile | ||||||||||||||||||||||||||
| Managed transportation | ||||||||||||||||||||||||||
| Freight forwarding | ||||||||||||||||||||||||||
| Eliminations | ( | ( | ||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||
Our revenue disaggregated by industry sector is as follows:
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | ||||||||||||||||||||||||
| Retail/e-commerce | $ | $ | ||||||||||||||||||||||||
| Industrial/manufacturing | ||||||||||||||||||||||||||
| Food and beverage | ||||||||||||||||||||||||||
| Automotive | ||||||||||||||||||||||||||
| Logistics and transportation | ||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||
Performance Obligations
Remaining performance obligations represent firm contracts for which services have not been performed and future revenue recognition is expected. As permitted in determining the remaining performance obligation, we omit obligations that: (i) have original expected durations of one year or less or (ii) contain variable consideration. As of March 31, 2024, the fixed consideration component of our remaining performance obligation was approximately $61 million, and we expect approximately 100 % of that amount to be recognized over the next 3 years. We estimate remaining performance obligations at a point in time and actual amounts may differ from these estimates due to contract revisions or terminations.
8
4. Restructuring Charges
We engage in restructuring actions as part of our ongoing efforts to best use our resources and infrastructure. These actions generally include severance and facility-related costs, including impairment of operating lease assets, and are intended to improve our efficiency and profitability going forward.
The following is a rollforward of the Company’s restructuring liability, which is included in Accrued expenses in the Condensed Consolidated Balance Sheets:
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||
| (In millions) | Reserve Balance as of December 31, 2023 | Charges Incurred | Payments | Reserve Balance as of March 31, 2024 | ||||||||||||||||||||||||||||
| Severance | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
| Facilities | ( | |||||||||||||||||||||||||||||||
| Contract termination | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||
We expect the majority of the cash outlays related to the remaining restructuring liability at March 31, 2024 to be complete within twelve months.
5. Debt
The following table summarizes the principal balance and carrying value of our debt:
| March 31, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| (In millions) | Principal Balance | Carrying Value | Principal Balance | Carrying Value | ||||||||||||||||||||||
| Revolver | $ | $ | $ | $ | ||||||||||||||||||||||
| Finance leases, asset financing and short-term debt | ||||||||||||||||||||||||||
| Total debt and obligations under finance leases | ||||||||||||||||||||||||||
| Less: Short-term debt and current maturities of long-term debt | ||||||||||||||||||||||||||
| Total long-term debt and obligations under finance leases | $ | $ | $ | $ | ||||||||||||||||||||||
(1)The carrying value of the 7.50 % Notes due 2027 is presented net of unamortized debt issuance cost and discount of $8 million and $8 million as of March 31, 2024 and December 31, 2023, respectively.
Revolving Credit Facilities
On October 18, 2022, we entered into a five-year , $500 million unsecured multi-currency revolving credit facility (the “Revolver”), with $50 million available for the issuance of letters of credit. Loans under the Revolver bear interest at a fluctuating rate plus an applicable margin based on the Company’s credit ratings, with interest payable quarterly. The Company is required to pay a commitment fee on any unused commitment, based on pricing levels set forth in the agreement. The covenants in the Revolver are customary for financings of this type. The Revolver requires the Company to maintain a maximum consolidated leverage ratio not greater than 3.50 :1.00 and minimum interest coverage ratio of not less than 3.00 :1.00. At March 31, 2024, the Company was in compliance with the covenants of the Revolver. There were no letters of credit outstanding on the Revolver at March 31, 2024.
On November 2, 2023, the Company exercised a feature to increase the total commitments under the Revolver from $500 million to $600 million.
On April 11, 2024, the Company and lenders entered into an amendment to increase the consolidated leverage ratio financial covenant level applicable under the Revolver from the fiscal quarter ending June 30, 2024 through the fiscal quarter ending March 31, 2025 (the “Covenant Relief Period”), as follows: (i) to 4.25 :1.00 for the fiscal
9
quarters ending June 30, 2024 and September 30, 2024; (ii) to 4.00 :1.00 for the fiscal quarter ending December 31, 2024; (iii) to 3.75 :1.00 for the fiscal quarter ending March 31, 2025; and (iv) returns to 3.50 :1.00 beginning with the fiscal quarter ending June 30, 2025. In addition, during the Covenant Relief Period, the Company and its subsidiaries are subject to restrictions with respect to paying dividends or other distributions on equity interests, share repurchases, and other restricted payments, as well as certain material acquisitions, in each case subject to certain exceptions. The Company can elect to terminate the Covenant Relief Period and the restrictions thereunder if the consolidated leverage ratio financial covenant as of any fiscal quarter end is not greater than 3.50 :1.00.
We also have a non-U.S. revolving credit facility with a maximum commitment of approximately $18 million. This facility has a one-year term and we had $13 million outstanding as of March 31, 2024 classified as short-term debt.
Notes
On October 25, 2022, we completed an offering of $355 million in aggregate principal amount of unsecured notes (the “Notes” or the “7.50 % Notes due 2027”). The Notes bear interest at a rate of 7.50 % per annum payable semiannually in cash in arrears on May 15 and November 15 of each year, beginning May 15, 2023, and mature on November 15, 2027, unless earlier repurchased or redeemed, if applicable. The Notes were issued at an issue price of 98.962 % of par. The effective interest rate on the Notes was 8.13 % as of March 31, 2024.
We may redeem the Notes, in whole or in part, at any time on or after November 15, 2024 at a redemption price equal to (i) 103.750 % of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on November 15, 2024, (ii) 101.875 % of the principal amount to be redeemed if the redemption occurs during the 12-month period beginning on November 15, 2025 and (iii) 100 % of the principal amount to be redeemed if the redemption occurs on or after November 15, 2026, in each case plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time prior to November 15, 2024, we may also redeem up to 40 % of the Notes with the net cash proceeds of certain equity offerings at a redemption price equal to 107.500 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, at any time prior to November 15, 2024, we may redeem the Notes, in whole or in part, at a redemption price equal to 100 % of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date plus an applicable “make-whole” premium.
The Notes are guaranteed by each of our direct and indirect wholly-owned domestic subsidiaries (other than certain excluded subsidiaries). The Notes and its guarantees are unsecured, senior indebtedness for us and our guarantors. The Notes contain covenants customary for debt securities of this nature. At March 31, 2024, the Company was in compliance with the covenants of the Notes.
6. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The levels of inputs used to measure fair value are:
•Level 1—Quoted prices for identical instruments in active markets;
•Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and
•Level 3—Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.
Assets and Liabilities
The Company bases its fair value estimates on market assumptions and available information. The carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and short-term debt and current maturities of long-term debt approximated their fair values as of March 31, 2024 and December 31, 2023, due to their short-term nature and/or being receivable or payable on demand.
10
Debt
The fair value of our debt and classification in the fair value hierarchy is as follows:
| (In millions) | Level | March 31, 2024 | December 31, 2023 | |||||||||||||||||
| Revolver | 3 | $ | $ | |||||||||||||||||
| 1 | ||||||||||||||||||||
We valued Level 1 debt using quoted prices in active markets. We valued Level 3 debt using unobservable inputs which reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date.
7. Stockholders’ Equity
On May 2, 2023, the Company’s Board of Directors authorized the repurchase of up to $125 million of the Company’s common stock (the “2023 Share Repurchase Program”). During 2023, the Company repurchased 100,000 shares of its common stock for $2 million at an average price of $20.53 per share, funded by available cash. There were no share repurchases under the 2023 Share Repurchase Program in the first quarter of 2024. As of March 31, 2024, $123 million remained approved to be used for share repurchases under the 2023 Share Repurchase Program. The 2023 Share Repurchase Program does not have an expiration date and may be suspended or discontinued at any time at the discretion of the Company’s Board of Directors. We are not obligated to repurchase any specific number of shares or use a specific dollar amount of the approved and remaining $123 million.
8. Earnings per Share
The computations of basic and diluted earnings per share are as follows:
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (Dollars in millions, shares in thousands, except per share data) | 2024 | 2023 | ||||||||||||||||||||||||
| Net income (loss) | $ | ( | $ | |||||||||||||||||||||||
| Basic weighted-average common shares | ||||||||||||||||||||||||||
| Dilutive effect of stock-based awards | ||||||||||||||||||||||||||
Diluted weighted-average common shares (1) | ||||||||||||||||||||||||||
| Basic earnings (loss) per share | $ | ( | $ | |||||||||||||||||||||||
| Diluted earnings (loss) per share | $ | ( | $ | |||||||||||||||||||||||
| Antidilutive shares excluded from diluted weighted-average common shares | ||||||||||||||||||||||||||
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9. Commitments and Contingencies
We are involved, and will continue to be involved, in numerous proceedings arising out of the conduct of our business. These proceedings may include claims for property damage or personal injury incurred in connection with the transportation of freight, environmental liability, commercial disputes, and employment-related claims, including claims involving asserted breaches of employee restrictive covenants. These matters also include several class action and collective action cases involving claims that the contract carriers with which we contract for performance of delivery services, or their delivery workers, should be treated as employees, rather than independent contractors (“misclassification claims”) and may seek substantial monetary damages (including claims for unpaid wages, overtime, unreimbursed business expenses, deductions from wages, penalties and other items), injunctive relief, or both.
We establish accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If a loss is not both probable and reasonably estimable, or if an exposure to loss exists in excess of the amount accrued, we assess whether there is at least a reasonable possibility that a loss, or additional loss, may have been incurred. If there is a reasonable possibility that a loss, or additional loss, may have been incurred, we disclose the estimate of the possible loss or range of loss if it is material and an estimate can be made, or disclose that such an estimate cannot be made. The determination as to whether a loss can reasonably be considered to be possible or probable is based on our assessment, together with legal counsel, regarding the ultimate outcome of the matter.
We believe that we have adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable. We do not believe that the ultimate resolution of any matters to which we are presently a party will have a material adverse effect on our results of operations, cash flows or financial condition. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our results of operations, cash flows or financial condition. Legal costs incurred related to these matters are expensed as incurred.
We carry liability and excess umbrella insurance policies that we deem sufficient to cover potential legal claims arising in the normal course of conducting our operations as a transportation company. The liability and excess umbrella insurance policies generally do not cover the misclassification claims described in this note. In the event we are required to satisfy a legal claim outside the scope of the coverage provided by insurance, our results of operations, cash flows or financial condition could be negatively impacted.
Our last mile subsidiary is involved in several class action and collective action cases involving misclassification claims. The misclassification claims related solely to our last mile business, which operated as a wholly owned subsidiary of XPO until the spin-off of RXO was completed.
Pursuant to the Separation and Distribution Agreement between XPO and RXO, the liabilities of XPO’s last mile subsidiary, including legal liabilities, if any, related to the misclassification claims, were spun-off as part of RXO as of November 1, 2022. Pursuant to the Separation and Distribution Agreement, RXO has agreed to indemnify XPO for certain matters relating to RXO, including indemnifying XPO from and against any liabilities, damages, costs, or expenses incurred by XPO arising out of or resulting from the misclassification claims.
In one of the misclassification claims, Muniz v. RXO Last Mile, Inc., the court has granted plaintiffs partial summary judgment and determined our last mile subsidiary misclassified the plaintiff owner/operators as independent contractors when they should have been deemed employees. We are vigorously defending the Company in this matter and believe we have a number of meritorious defenses, and there are unresolved questions of law and fact that could be important to the ultimate resolution of this matter.
We believe the misclassification claims, including Muniz v. RXO Last Mile, Inc., are without merit and we intend to defend the Company vigorously. We are unable at this time to determine the amount of the possible loss or range of loss, if any, that we may incur as a result of these matters.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q and other written reports and oral statements we make from time to time contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “trajectory” or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include those discussed below and the risks discussed in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements set forth in this Quarterly Report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The following discussion should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report, and with the audited consolidated financial statements and related notes thereto included in the 2023 Annual Report on Form 10-K. Forward-looking statements set forth in this Quarterly Report speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law.
Business Overview
RXO, Inc. (“RXO”, the “Company” or “we”) is a brokered transportation platform defined by cutting-edge technology and an asset-light business model. The largest component is our core truck brokerage business. Our operations also include three asset-light, brokered transportation services, all of which complement our truck brokerage business: managed transportation, last mile and freight forwarding.
Our truck brokerage business has a history of generating robust free cash flow conversion and a high return on invested capital. Shippers create demand for our service, and we place their freight with qualified independent carriers using our technology. We price our service on either a contract or a spot basis.
Notable factors driving volume growth in our business include our ability to access massive truckload capacity for shippers through our carrier relationships; our proprietary, cutting-edge technology; our strong management expertise; and favorable long-term industry tailwinds. As of March 31, 2024, we had approximately 115,000 carriers in our North American truck brokerage network, and access to more than 1.5 million trucks.
We provide our customers with highly efficient access to capacity through our digital brokerage technology. This proprietary platform is a major differentiator for our truck brokerage business, and together with our pricing technology, we believe it can unlock incremental profitable growth well beyond our current levels. Our complementary services for managed transportation, last mile and freight forwarding also utilize our digital brokerage technology.
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Our managed transportation service provides asset-light solutions for shippers who outsource their freight transportation to gain reliability, visibility and cost savings. The service uses proprietary technology to enhance our revenue synergy, with cross-selling to truck brokerage, last mile and freight forwarding. Our managed transportation offering includes bespoke load planning and procurement, complex solutions tailored to specific challenges, performance monitoring, engineering and data analytics, among other services. Our control tower solution leverages the expertise of a dedicated team focused on continuous improvement, and digital, door-to-door visibility into order status and freight in transit. In addition, we offer technology-enabled managed expedite services that automate transportation procurement for time-critical freight moved by road and air charter carriers.
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. population and serving a customer base of omnichannel and e-commerce retailers and direct-to-consumer manufacturers.
Our freight forwarding service is a scalable, asset-light offering managed with advanced technology that facilitates ocean, road and air transportation and assists with customs brokerage. We are a U.S.-based freight forwarder with a global network of company-owned and partner-owned locations and coverage of key trade lanes that reach approximately 150 countries and territories.
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. Generally, inflationary increases in labor and operating costs related to our operations have historically been offset through price increases. However, the pricing environment generally becomes more competitive during economic downturns, which may, as it has in the past, affect our ability to obtain price increases from customers both during and following such periods.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements have been prepared on a basis that is substantially consistent with the accounting principles applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the 2023 Form 10-K.
The Company’s condensed consolidated financial statements include the accounts of RXO, Inc. and its majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated. 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 months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. 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.
Cost of transportation and services (exclusive of depreciation and amortization) primarily includes the cost of providing or procuring freight transportation for RXO customers.
Direct operating expenses (exclusive of depreciation and amortization) includes both fixed and variable expenses and consists mainly of personnel costs; facility and equipment expenses, such as rent, utilities, equipment maintenance and repair; costs of materials and supplies; information technology expenses; and gains and losses on sales of property and equipment.
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Sales, general and administrative expense (“SG&A”) primarily consists of salaries and commissions for the sales function; salary and benefit costs for executive and certain administration functions; third-party professional fees; facility costs; bad debt expense; and legal costs.
RXO has one reportable segment.
Results of Operations
| Three Months Ended March 31, | Percentage of Revenue | |||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||
| Revenue | $ | 913 | $ | 1,010 | 100.0 | % | 100.0 | % | ||||||||||||||||||
| Cost of transportation and services (exclusive of depreciation and amortization) | 699 | 759 | 76.6 | % | 75.1 | % | ||||||||||||||||||||
| Direct operating expense (exclusive of depreciation and amortization) | 53 | 61 | 5.8 | % | 6.0 | % | ||||||||||||||||||||
| Sales, general and administrative expense | 145 | 153 | 15.9 | % | 15.1 | % | ||||||||||||||||||||
| Depreciation and amortization expense | 16 | 18 | 1.8 | % | 1.8 | % | ||||||||||||||||||||
| Transaction and integration costs | 1 | 6 | 0.1 | % | 0.6 | % | ||||||||||||||||||||
| Restructuring costs | 11 | 8 | 1.2 | % | 0.8 | % | ||||||||||||||||||||
| Operating income (loss) | $ | (12) | $ | 5 | (1.3) | % | 0.5 | % | ||||||||||||||||||
| Other expense | 1 | — | 0.1 | % | — | % | ||||||||||||||||||||
| Interest expense, net | 8 | 8 | 0.9 | % | 0.8 | % | ||||||||||||||||||||
| Loss before income taxes | $ | (21) | $ | (3) | (2.3) | % | (0.3) | % | ||||||||||||||||||
| Income tax benefit | (6) | (3) | (0.7) | % | (0.3) | % | ||||||||||||||||||||
| Net income (loss) | $ | (15) | $ | — | (1.6) | % | — | % | ||||||||||||||||||
Three Months Ended March 31, 2024 Compared with Three Months Ended March 31, 2023
Revenue decreased by 9.6% to $913 million in the first quarter of 2024, compared with $1,010 million for the same quarter in 2023. The year-over-year decrease in revenue in the first quarter of 2024 was driven primarily by (i) a $36 million decrease in revenue generated from our truck brokerage business, as a result of a 15% reduction in revenue per load, which was impacted by a combination of transportation market rates, fuel prices, length of haul, and freight mix, partially offset by an 11% increase in load volume, (ii) a $25 million decrease in revenue generated from our freight forwarding business, driven primarily by a decrease in ocean rates and volume, and (iii) a $20 million decrease in revenue generated from our managed transportation business, driven primarily by a decrease in expedite air rates and volume.
Cost of transportation and services (exclusive of depreciation and amortization) in the first quarter of 2024 was $699 million, or 76.6% of revenue, compared with $759 million, or 75.1% of revenue in the same quarter of 2023. The year-over-year increase as a percentage of revenue during the first quarter of 2024 was driven primarily by a 2.1 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. This was partially offset by an improvement in mix in our freight forwarding business.
Direct operating expense (exclusive of depreciation and amortization) of $53 million in the first quarter of 2024 decreased $8 million, or 13.1%, from $61 million in the same quarter of 2023. As a percentage of revenue, direct operating expense (exclusive of depreciation and amortization) decreased to 5.8% in the first quarter of 2024 compared with 6.0% in the same quarter of 2023 due to cost reduction initiatives.
SG&A of $145 million for the first quarter of 2024 decreased $8 million, or 5.2%, from $153 million for the first quarter of 2023. As a percentage of revenue, SG&A increased to 15.9% in the first quarter of 2024 compared to 15.1% for the same quarter of 2023 due to higher compensation-related costs of 0.4 percentage points reflecting deleverage on lower revenue. This was partially offset by cost savings from restructuring actions executed in 2023 and the first quarter of 2024. We anticipate the restructuring actions executed in 2023 and the first quarter of 2024 will result in combined cost savings of more than $60 million annually.
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Depreciation and amortization expense for the first quarter of 2024 was $16 million, compared with $18 million for the same quarter in 2023, flat year-over-year as a percentage of revenue.
Transaction and integration costs for the first quarter of 2024 and 2023 were $1 million and $6 million, respectively, and primarily comprised spin-off related costs.
Restructuring costs for the first quarter of 2024 and 2023 were $11 million and $8 million, respectively, and primarily comprised severance costs.
Our effective income tax rates were 27.7% and 106.0% for the first quarter of 2024 and 2023, respectively. The effective tax rate for the first quarter of 2024 was calculated using the discrete method. The effective tax rate for the first quarter of 2023 was based on forecasted full-year effective tax rates, adjusted for discrete items that occurred within the period presented. Our effective tax rate for the first quarter of 2024 differs from the U.S. corporate income tax rate of 21% primarily due to state income taxes within the U.S. Our effective tax rate for the first quarter of 2023 differs from the U.S. corporate income tax rate of 21% primarily due to a tax benefit of $2 million from changes in reserves for uncertain tax positions. The impact of this driver was enhanced due to our low pre-tax loss in the first quarter of 2023.
Liquidity and Capital Resources
Overview
Our ability to fund our operations and anticipated capital needs is reliant upon the generation of cash from operations, supplemented as necessary by utilization of our revolving credit facility (the “Revolver”). Our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures, repayment of borrowings, strategic business development transactions and share repurchases. The timing and magnitude of our growth and working capital needs can vary and may positively or negatively impact our cash flows.
We continually evaluate our liquidity requirements and capital structure in light of our operating needs, growth initiatives and capital resources. We believe that our existing liquidity and sources of capital are sufficient to support our operations over the next 12 months.
Capital Expenditures
Our 2024 capital expenditures include capital allocations associated with strategic investments in technology, equipment and real estate. We believe that we have significant discretion over the amount and timing of our capital expenditures as we are not subject to any agreement that would require significant capital expenditures on a designated schedule or upon the occurrence of designated events.
Debt and Financing Arrangements
We were in compliance with all covenants and other provisions of our outstanding debt and financing arrangements as of March 31, 2024. 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 5—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 March 31, 2024.
As discussed further in Note 5—Debt, on April 11, 2024, we amended the Revolver (the “Amendment”). Among other things, the Amendment increases the consolidated leverage ratio financial covenant level applicable under the Revolver from the fiscal quarter ending June 30, 2024 through the fiscal quarter ending March 31, 2025, as follows: (i) to 4.25:1.00 for the fiscal quarters ending June 30, 2024 and September 30, 2024; (ii) to 4.00:1.00 for the fiscal quarter ending December 31, 2024; (iii) to 3.75:1.00 for the fiscal quarter ending March 31, 2025; and (iv) returns to 3.50:1.00 beginning with the fiscal quarter ending June 30, 2025.
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Financial Condition
Our asset and liability balances are summarized as follows:
| March 31, | December 31, | |||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||
| Total current assets | $ | 770 | $ | 796 | $ | (26) | (3.3) | % | ||||||||||||||||||
| Total long-term assets | 1,029 | 1,029 | — | — | % | |||||||||||||||||||||
| Total current liabilities | 674 | 682 | (8) | (1.2) | % | |||||||||||||||||||||
| Total long-term liabilities | 543 | 549 | (6) | (1.1) | % | |||||||||||||||||||||
Total assets decreased by $26 million from December 31, 2023 to March 31, 2024, driven primarily by a $27 million decrease in accounts receivable as a result of a decrease in revenue. Total liabilities decreased by $14 million from December 31, 2023 to March 31, 2024, driven primarily by a decrease in third party transportation costs.
Cash Flow Activity
Our cash flows from operating, investing and financing activities are summarized as follows:
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (In millions) | 2024 | 2023 | $ Change | % Change | ||||||||||||||||||||||
| Net cash provided by operating activities | $ | 7 | $ | 42 | $ | (35) | (83.3) | % | ||||||||||||||||||
| Net cash used in investing activities | (11) | (12) | 1 | 8.3 | % | |||||||||||||||||||||
| Net cash provided by (used in) financing activities | 6 | (8) | 14 | 175.0 | % | |||||||||||||||||||||
| Effect of exchange rates on cash, cash equivalents and restricted cash | — | 1 | (1) | (100.0) | % | |||||||||||||||||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 2 | $ | 23 | $ | (21) | (91.3) | % | ||||||||||||||||||
Net cash provided by operating activities for the first three months of 2024 decreased by $35 million compared with the same period in 2023. The decrease in cash provided by operating activities reflects the impact of (i) a $15 million decrease in net income between periods and (ii) changes in working capital.
Investing activities used $11 million of cash for the first three months of 2024, compared with using $12 million of cash for the same period in 2023. The use of cash in both periods was to purchase property and equipment.
Financing activities provided $6 million of cash for the first three months of 2024, compared with using $8 million of cash for the same period in 2023. The primary source of cash in the first three months of 2024 was $8 million in net proceeds from borrowings. The primary use of cash in the first three months of 2023 was $7 million for payments of tax withholdings related to vesting of stock compensation awards.
Critical Accounting Policies
Our significant accounting policies, which include management’s most subjective and complex estimates and judgments, are included in Note 2—Basis of Presentation and Significant Accounting Policies to the Consolidated Financial Statements for the year ended December 31, 2023 included in the 2023 Form 10-K. A discussion of accounting estimates, considered critical because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates, are disclosed in the Critical Accounting Policies and Estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2023 Form 10-K. There have been no significant changes in the Company’s critical accounting estimates since December 31, 2023.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk related to changes in foreign currency exchange rates, commodity prices, interest rates and the price of diesel fuel purchased by third-party carriers who perform the physical freight movements we arrange. There have been no material changes to our quantitative and qualitative disclosures about market risk related to our continuing operations during the quarter ended March 31, 2024, as compared with the quantitative and qualitative disclosures about market risk described in the 2023 Form 10-K.
ITEM 4. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of March 31, 2024. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2024, such that the information required to be included in our SEC reports is: (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to RXO, including our consolidated subsidiaries; and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 9—Commitments and Contingencies to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of our legal proceedings.
ITEM 1A. RISK FACTORS
For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in the 2023 Form 10-K. There have been no material changes with respect to these risk factors.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no issuances of unregistered securities during the three months ended March 31, 2024.
On May 2, 2023, the Company’s Board of Directors authorized the repurchase of up to $125 million of the Company’s common stock. As of March 31, 2024, $123 million remained available under the program for future share repurchases. We are not obligated to repurchase any specific number of shares or use a specific dollar amount of the approved amount. The program does not have an expiration date and may be suspended or discontinued at any time at the discretion of the Company’s Board of Directors. There were no share repurchases under the program or otherwise during the three months ended March 31, 2024. For further details, refer to Note 7—Stockholders’ Equity to the condensed consolidated financial statements.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
Exhibit Number | Description | |||||||
10.19 *+ | ||||||||
| 31.1 * | ||||||||
| 31.2 * | ||||||||
| 32.1 ** | ||||||||
| 32.2 ** | ||||||||
| 101.INS * | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH * | XBRL Taxonomy Extension Schema. | |||||||
| 101.CAL * | XBRL Taxonomy Extension Calculation Linkbase. | |||||||
| 101.DEF * | XBRL Taxonomy Extension Definition Linkbase. | |||||||
| 101.LAB * | XBRL Taxonomy Extension Label Linkbase. | |||||||
| 101.PRE * | XBRL Taxonomy Extension Presentation Linkbase. | |||||||
| 104 * | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). | |||||||
* Filed herewith.
** Furnished herewith.
+ This exhibit is a management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: May 7, 2024 | RXO, INC. | |||||||
| By: | /s/ Drew M. Wilkerson | |||||||
| Drew M. Wilkerson | ||||||||
| Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
| By: | /s/ James E. Harris | |||||||
| James E. Harris | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial Officer) | ||||||||
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Exhibit 10.19 PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT UNDER THE RXO, INC. 2022 OMNIBUS INCENTIVE COMPENSATION PLAN, dated as of ###GRANT_DATE###, (the “Grant Date”), between RXO, INC., a Delaware corporation (the “Company” or “RXO”), and ###PARTICIPANT_NAME###. This Performance-Based Restricted Stock Unit Award Agreement (this “Award Agreement”) sets forth the terms and conditions of an award of ###TOTAL_AWARDS### (representing the aggregate Target Amount) performance- based restricted stock units (“PSUs”) that are subject to the terms and conditions specified herein (this “Award”) and that are granted to you under the RXO, Inc. 2022 Omnibus Incentive Compensation Plan (the “Plan”). This Award provides you with the opportunity to earn, subject to the terms of this Award Agreement, shares of the Company’s Common Stock, $0.01 par value (each, a “Share”), or cash, as set forth in Section 3 of this Award Agreement. You must affirmatively acknowledge and accept this Award Agreement within 120 days following the Grant Date. A failure to acknowledge and accept this Award Agreement within such 120-day period will result in forfeiture of this Award, effective as of the 121st day following the Grant Date. You must acknowledge and accept the terms and conditions of this Award Agreement electronically through the Morgan Stanley website. THIS AWARD IS SUBJECT TO ALL TERMS AND CONDITIONS OF THE PLAN INCLUDING THE PLAN RULES, THIS AWARD AGREEMENT, INCLUDING THE DISPUTE RESOLUTION PROVISIONS SET FORTH IN SECTION 12 OF THIS AWARD AGREEMENT. BY ACCEPTING THIS AWARD, YOU SHALL HAVE CONFIRMED YOUR ACCEPTANCE OF THE TERMS AND CONDITIONS OF THIS AWARD AGREEMENT. SECTION 1. The Plan. This Award is made pursuant to the Plan, all the terms of which are hereby incorporated in this Award Agreement. In the event of any conflict between the terms of the Plan and the terms of this Award Agreement, the terms of the Plan shall govern. SECTION 2. Definitions. Capitalized terms used in this Award Agreement that are not defined in this Award Agreement have the meanings as used or defined in the Plan. As used in this Award Agreement, the following terms have the meanings set forth below (in addition to any definitions set forth in Exhibit A hereto): “Business Day” means a day that is not a Saturday, a Sunday or a day on which banking institutions are legally permitted to be closed in the City of New York. “Cause” means: (i) your dereliction of duties or gross negligence or failure to perform your duties or refusal to follow any lawful directive of the officer to whom you report; (ii) your abuse of or dependency on alcohol or drugs (illicit or otherwise) that adversely affects your performance of duties for the Company; (iii) your commission of any fraud, embezzlement, theft or dishonesty, or any deliberate misappropriation of
2 money or other assets of the Company; (iv) your breach of any fiduciary duties to the Company or any agreement with the Company; (v) any act, or failure to act, by you in bad faith to the detriment of the Company; (vi) your failure to provide the Company with at least 30 days’ advanced written notice of your intention to resign; (vii) your failure to cooperate in good faith with a governmental or internal investigation of the Company or any of its directors, managers, officers or employees, if the Company requests your cooperation; (viii) your failure to follow Company policies, including the Company’s code of conduct and/or ethics policy, as may be in effect from time to time, and (ix) your conviction of, or plea of nolo contendere to, a felony or any serious crime; provided that in cases where cure is possible, you shall first be provided a 15-day cure period. If, subsequent to your termination of employment for any reason other than by the Company for Cause, it is determined in good faith by the Chief Executive Officer of the Company that your employment could have been terminated by the Company for Cause, your employment shall, at the election of the Chief Executive Officer of the Company at any time up to two years after your termination of employment but in no event more than six months after the Chief Executive Officer of the Company learns of the facts or events that could give rise to the termination for Cause, be deemed to have been terminated for Cause retroactively to the date the events giving rise to Cause occurred. “Code” means the Internal Revenue Code of 1986, as amended. “Determination Date” means the date following the completion of any Performance Period(s) on which the Committee certifies the level of achievement of the applicable Performance Goals. “Disability” means permanent and total disability as determined under the Company’s long-term disability plan applicable to you, or if there is no such plan applicable to you, “Disability” means a determination of total disability by the Social Security Administration; provided that, in either case, your condition also qualifies as a “disability” for purposes of Section 409A(a)(2)(C) of the Code with respect to any Award subject to Section 409A. “Earned Amount” means the number of PSUs (as a percentage of the Target Amount) earned based on the level of achievement of the Performance Goals or otherwise in accordance with this Award Agreement. “Employment Agreement” means any individual employment agreement between you and the Company or any of its Subsidiaries. “Good Reason” means the definition thereof as set forth in the Plan; provided that if you are a party to an employment or similar agreement with the Company, or are an eligible participant in a severance or change in control severance plan of the Company, that has a definition of Good Reason, the definition in such agreement or plan shall replace the definition of Good Reason hereunder. “Performance Goal(s)” means the performance goal(s) set forth in Exhibit A.
3 “Performance Period” means the period(s) with respect to which the Performance Goals are measured as set forth in Exhibit A. “Retirement” means a voluntary termination not for Cause, after you reach (i) 55 years of age and (ii) 10 years of continuous service with the Company. “Section 409A” means Section 409A of the Code, and the regulations and other interpretive guidance promulgated thereunder, as in effect from time to time. “Settlement Date” means, subject to Section 17, the date on, or as soon as reasonably practicable following, the later of (i) the Vesting Date (or any earlier vesting by reason of certain termination of employment events set forth in Section 3(b) hereof) and (ii) the applicable Determination Date; provided that in the event of a termination due to death or Disability, the Settlement Date shall mean on, or as soon as reasonably practicable following, the date of such death or Disability; provided further that in the event of a Retirement, the foregoing reference in clause (i) to “earlier vesting” shall mean the date of Retirement, if earlier than the scheduled Vesting Date. “Target Amount” means, with respect to each Tranche, the target amount of PSUs subject to such Tranche as set forth in Exhibit A. “Tranche” means each of the Tranches as identified in Exhibit A. “Vesting Date” means the vesting date specified in Exhibit A. SECTION 3. Vesting and Settlement. (a) Regularly Scheduled Vesting. Except as otherwise provided in this Award Agreement, the Earned Amount of each Tranche, determined based on the level of achievement of the Performance Goals during the applicable Performance Period as certified by the Committee, shall vest on the Vesting Date for such Tranche subject to your continued employment through such Vesting Date. Except as otherwise provided in this Award Agreement, no PSUs shall be earned and payable with respect to any Tranche unless the Committee has certified the level of achievement of the applicable Performance Goals. The Committee shall have sole discretion to determine the level of achievement of the applicable Performance Goals. If the Earned Amount for any Tranche is determined to be less than the Target Amount, any excess PSUs for such Tranche shall be forfeited as of immediately following the conclusion of the applicable Performance Period. (b) Termination of Employment. Notwithstanding anything to the contrary in this Award Agreement or the Plan: (i) if your employment terminates by reason of your death or Disability, outstanding PSUs shall vest in full immediately in an amount equal to (x) for each Tranche for which the Performance Period was completed prior to the date of termination, the Earned Amount (as determined on the applicable Determination Date as set forth on Exhibit A hereto) plus (y) for any other Tranche, the Target Amount for such Tranche;
4 (ii) if your employment is terminated by the Company for Cause or if you resign for any reason, other than due to Retirement, all unvested PSUs shall be immediately forfeited; (iii) if your employment is terminated (A) by the Company without Cause and, within the period specified by the Company (but ending no later than 60 days following termination), you execute and let become effective a general release of claims in a form approved by the Company, or (B) by you due to Retirement, then you shall vest (or remain eligible to vest) in (x) for each Tranche for which the Performance Period was completed prior to the date of termination, the Earned Amount (as determined on the applicable Determination Date as set forth on Exhibit A hereto) plus (y) for the Performance Period in which the date of termination occurs, a pro-rated amount determined by multiplying the Earned Amount for such Tranche (as determined on the applicable Determination Date) by a fraction, the numerator of which is the number of days from the beginning of such Performance Period through the date of termination of your employment and the denominator of which is the number of days during such Performance Period; provided that the remainder of the PSUs shall be forfeited. (c) Change of Control. In the event that your employment is terminated by the Company without Cause or by you for Good Reason at any time following a Change of Control, outstanding PSUs (including any Replacement Award with respect to this Award) shall vest in full immediately in an amount equal to (i) for any Tranche for which a Determination Date occurred on or prior to the Change of Control, the Earned Amount for such Tranche (as determined on the applicable Determination Date as set forth on Exhibit A hereto) and (ii) for any other Tranche, the greater of (x) the Target Amount or (y) the actual achievement for such Tranche as determined through the date of the Change of Control. (d) Settlement of PSU Award. Subject to Section 17(a), if PSUs vest pursuant to the foregoing provisions then on the Settlement Date, the Company shall deliver to you or your legal representative either (i) one Share or (ii) a cash payment equal to the Fair Market Value determined as of the Settlement Date of one Share, in each case, for each Earned Amount of PSUs that has vested in accordance with the terms of this Award Agreement; provided that, the Company shall have sole discretion to determine whether to settle such PSUs in Shares, cash or a combination thereof. SECTION 4. Forfeiture of PSUs. If you (a) breach any restrictive covenant (which, for the avoidance of doubt, includes any non-compete, non-solicit, non- disparagement or confidentiality provisions) contained in any of your arrangements with the Company (including any Employment Agreement and the confidentiality covenant contained in Section 12(c) hereof), subject to applicable law, (b) engage in fraud or willful misconduct that contributes materially to any financial restatement or material loss to the Company or any of its Subsidiaries, your rights with respect to the PSUs shall immediately terminate, and you shall be entitled to no further payments or benefits with respect thereto and, if the PSUs are vested and/or settled, the Company may require you to forfeit or remit to the Company any amount payable, or the after-tax net amount paid
5 or received by you, in respect of any PSUs; provided, however, that (i) the Company shall make such demand that you forfeit or remit any such amount no later than six months after learning of the conduct described in this Section 4 and (ii) in cases where cure is possible, you shall first be provided a 15-day cure period to cease, and to cure, such conduct. SECTION 5. No Rights as a Stockholder until Issuance of Shares Following Vesting Date. You shall not have any rights or privileges of a stockholder with respect to the PSUs subject to this Award Agreement unless and until Shares are actually issued in book-entry form to you or your legal representative in settlement of this Award. SECTION 6. Non-Transferability of PSUs. Unless otherwise provided by the Committee in its discretion, PSUs may not be sold, assigned, alienated, transferred, pledged, attached or otherwise encumbered except as provided in Section 9(a) of the Plan. Any purported sale, assignment, alienation, transfer, pledge, attachment or other encumbrance of PSUs in violation of the provisions of this Section 6 and Section 9(a) of the Plan shall be void. SECTION 7. Withholding. (a) Responsibility for Withholding. The delivery of Shares or cash pursuant to Section 3 of this Award Agreement is conditioned on your satisfaction of any applicable withholding taxes in accordance with this Section 7 and Section 9(d) of the Plan. No later than the date as of which an amount first becomes includible in your gross income for Federal, state, local or foreign income tax purposes with respect to any PSUs, you shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any Federal, state, local and foreign taxes that are required by applicable laws and regulations to be withheld with respect to such amount. (b) Methods of Satisfaction. In the event that there is withholding tax liability in connection with the settlement of the PSUs, the Company may determine to cause your obligations to be satisfied automatically by any of the following methods without your further consent: (i) by having the Company withhold from the number of Shares or cash you would be entitled to receive upon settlement of the PSUs, an amount in cash or a number of Shares having a Fair Market Value (which shall either have the meaning set forth in the Plan or shall have such other meaning as determined by the Company in accordance with applicable withholding requirements) equal to such withholding tax liability; (ii) withholding from proceeds of the sale of Shares acquired at vesting either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization), or “sell-to-cover” transaction, without your further consent; provided that to the extent required by the Company, you agree to execute and deliver to the Company or its agent any other documents as they reasonably deem necessary or appropriate to carry out the
6 foregoing, including without limitation, any agreement intended to ensure the foregoing comply with the requirements of Rule 10b5-1I under the Exchange Act; (iii) withholding from wages or other cash compensation paid to you by the Company or any Subsidiary; (iv) any other method approved by the Committee and permitted by applicable laws; provided that if you are an individual covered under Section 16 of the Securities Exchange Act of 1934, as amended at the time that a taxable event occurs, then unless and until otherwise determined by the Committee or the Board, the Company’s withholding obligations with respect to such taxable event will be satisfied pursuant to clause (i) above. SECTION 8. Consents and Legends. (a) Consents. Your rights in respect of the PSUs are conditioned on the receipt to the full satisfaction of the Committee of any required consents that the Committee may determine to be necessary or advisable (including your consent to the Company’s supplying to any third-party recordkeeper of the Plan such personal information as the Committee deems advisable to administer the Plan). (b) Legends. The Company may affix to certificates (or book-entry equivalents) for Shares issued pursuant to this Award Agreement any legend that the Committee determines to be necessary or advisable (including to reflect any restrictions to which you may be subject under any applicable securities laws). The Company may advise the transfer agent to place a stop order against any legended Shares. SECTION 9. Clawback Policies. You hereby acknowledge and agree that, to the extent the Company has in place a policy applicable to you with respect to clawback or recoupment of compensation, including any policy that may be required by applicable law or the rules and regulations of the NYSE or any other securities exchange or inter-dealer quotation system on which the Shares are listed or quoted and any policy adopted after the Grant Date, this Award shall be subject to clawback, forfeiture, reduction, recoupment of gains or similar requirements (and such requirements shall be deemed incorporated by reference into this Award Agreement). SECTION 10. Successors and Assigns of the Company. The terms and conditions of this Award Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns. SECTION 11. Committee Discretion. The Compensation Committee of the Board shall have full and plenary discretion with respect to any actions to be taken or determinations to be made in connection with this Award Agreement, and its determinations shall be final, binding and conclusive.
7 SECTION 12. Dispute Resolution. (a) Jurisdiction and Venue. Notwithstanding any provision in any Employment Agreement, any claim initiated by you arising out of or relating to this Award Agreement, or the breach thereof, shall be resolved by binding arbitration before a single arbitrator in the State of Delaware administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Except to the extent that the Company seeks injunctive relief pursuant to any individual agreement between you and the Company, any claim initiated by the Company arising out of or relating to this Award Agreement, or the breach thereof, shall, at the election of the Company be resolved in accordance with this Section 12. You hereby irrevocably submit to the jurisdiction of any state or federal court located in the State of Delaware; provided, however, that nothing herein shall preclude the Company from bringing any suit, action or proceeding in any other court for the purposes of enforcing any judgment or award obtained by the Company. You waive, to the fullest extent permitted by applicable law, any objection which you now or hereafter have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding brought in an applicable court described in this Section 12, and agree that you shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any court. You agree that, to the fullest extent permitted by applicable law, a final and non-appealable judgment in any suit, action or proceeding brought in any applicable court described in this Section 12 shall be conclusive and binding upon you and may be enforced in any other jurisdiction. (b) Waiver of Jury Trial. You and the Company hereby waive, to the fullest extent permitted by applicable law, any right either of you may have to a trial by jury in respect to any litigation directly or indirectly arising out of, under or in connection with this Award Agreement or the Plan. (c) Confidentiality. You hereby agree to keep confidential the existence of, and any information concerning, a dispute described in this Section 12, except that you may disclose information concerning such dispute to the court that is considering such dispute or to your legal counsel (provided that such counsel agrees not to disclose any such information other than as necessary to the prosecution or defense of the dispute). SECTION 13. Notice. All notices, requests, demands and other communications required or permitted to be given under the terms of this Award Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three Business Days after they have been mailed by U.S. certified or registered mail, return receipt requested, postage prepaid, addressed to the other party as set forth below: If to the Company: RXO, Inc. 11215 North Community House Road Charlotte, NC 28277 USA Attention: Chief Human Resources Officer
8 If to you: To your address as most recently supplied to the Company and set forth in the Company’s records The parties may change the address to which notices under this Award Agreement shall be sent by providing written notice to the other in the manner specified above. SECTION 14. Governing Law. This Award Agreement shall be deemed to be made in the State of Delaware, and the validity, construction and effect of this Award Agreement in all respects shall be determined in accordance with the laws of the State of Delaware, without giving effect to the conflict of law principles thereof. SECTION 15. Headings and Construction. Headings are given to the Sections and subsections of this Award Agreement solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Award Agreement or any provision thereof. Whenever the words “include”, “includes” or “including” are used in this Award Agreement, they shall be deemed to be followed by the words “but not limited to”. The term “or” is not exclusive. SECTION 16. Amendment of this Award Agreement. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Award Agreement prospectively or retroactively; provided, however, that, except as set forth in Section 17(d) of this Award Agreement, any such waiver, amendment, alteration, suspension, discontinuance, cancelation or termination that would materially and adversely impair your rights under this Award Agreement shall not to that extent be effective without your consent (it being understood, notwithstanding the foregoing proviso, that this Award Agreement and the PSUs shall be subject to the provisions of Section 7(c) of the Plan). SECTION 17. Section 409A. (a) It is intended that the provisions of this Award Agreement be exempt from, or comply with, Section 409A, and all provisions of this Award Agreement shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A. If any provision of this Award Agreement or any term or condition of the PSUs would otherwise conflict with this intent, the provision, term or condition shall be interpreted and deemed amended so as to avoid this conflict. Except as otherwise set forth herein, the Settlement Date shall occur within the same taxable year of the Company in which the scheduled Vesting Date occurs. With respect to any portion of the Award intended to be exempt from Section 409A, the Settlement Date shall occur within the short-term deferral period thereunder. With respect to any portion of the Award payable upon a separation from service pursuant to Section 3(b) hereof that is subject to Section 409A, the Settlement Date shall occur either (i) within the same taxable year of the Company in which the separation from service (or, if later and applicable, the Determination Date for the relevant Tranche) occurs or (ii) if later (to the extent permitted by Section 409A), by the 15th day of the third calendar month following the separation from service, as determined by the Company, subject to clause (c) below.
9 (b) Neither you nor any of your creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Section 409A) payable under this Award Agreement to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A, any deferred compensation (within the meaning of Section 409A) payable to you or for your benefit under this Award Agreement may not be reduced by, or offset against, any amount owing by you to the Company or any of its Affiliates. (c) If, at the time of your separation from service (within the meaning of Section 409A), (i) you shall be a specified employee (within the meaning of Section 409A and using the identification methodology selected by the Company from time to time) and (ii) the Company shall make a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid taxes or penalties under Section 409A, then the Company shall not pay such amount on the otherwise scheduled payment date but shall instead pay it, without interest, on the first Business Day after such six-month period. For purposes of Section 409A, each payment hereunder will be deemed to be a separate payment as permitted under Treasury Regulation Section 1.409A-2(b)(2)(iii). To the extent required by Section 409A, if the period during which you have discretion to execute or revoke a release straddles two calendar years, the Settlement Date for any PSUs that become vested based on such release shall occur in the second of the two calendar years. All references to “termination of employment” or similar references in this Award Agreement shall mean a “separation from service” (within the meaning of Section 409A). (d) Notwithstanding any provision of this Award Agreement to the contrary, in light of the uncertainty with respect to the proper application of Section 409A, the Company reserves the right to make amendments to this Award Agreement as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A. In any case, you shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on you or for your account in connection with this Award Agreement (including any taxes and penalties under Section 409A), and neither the Company nor any of its Affiliates shall have any obligation to indemnify or otherwise hold you harmless from any or all of such taxes or penalties. SECTION 18. Counterparts and Severability. This Award Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. You and the Company hereby acknowledge and agree that signatures delivered by facsimile or electronic means (including by “pdf”) shall be deemed effective for all purposes. The invalidity or unenforceability of any provision of this Award Agreement shall not affect the validity or enforceability of any other provision of this Award Agreement, and each other provision of this Award Agreement shall be severable and enforceable to the extent permitted by law.
10 SECTION 19. Section 280G. Notwithstanding anything in this Award Agreement to the contrary and regardless of whether this Award Agreement has otherwise expired or terminated, unless otherwise provided in your Employment Agreement, in the event that any payments, distributions, benefits or entitlements of any type payable to you (“CIC Benefits”) (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) but for this paragraph would be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then your CIC Benefits shall be reduced to such lesser amount (the “Reduced Amount”) that would result in no portion of such benefits being subject to the Excise Tax; provided that such amounts shall not be so reduced if the Company determines, based on the advice of Golden Parachute Tax Solutions LLC, or such other nationally recognized certified public accounting firm as may be designated by the Company (the “Accounting Firm”), that without such reduction you would be entitled to receive and retain, on a net after tax basis (including, without limitation, any excise taxes payable under Section 4999 of the Code), an amount that is greater than the amount, on a net after tax basis, that you would be entitled to retain upon receipt of the Reduced Amount. Unless the Company and you otherwise agree in writing, any determination required under this Section 19 shall be made in writing in good faith by the Accounting Firm. In the event of a reduction of benefits hereunder, benefits shall be reduced by first reducing or eliminating the portion of the CIC Benefits that are payable under this Award Agreement and then by reducing or eliminating the portion of the CIC Benefits that are payable in cash and then by reducing or eliminating the non-cash portion of the CIC Benefits, in each case, in reverse order beginning with payments or benefits which are to be paid the furthest in the future. For purposes of making the calculations required by this Section 19, the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code, and other applicable legal authority. The Company and you shall furnish to the Accounting Firm such information and documents as the Accounting Firm may reasonably require in order to make a determination under this Section 18, and the Company shall bear the cost of all fees the Accounting Firm charges in connection with any calculations contemplated by this Section 19. In connection with making determinations under this Section 19, the Accounting Firm shall take into account the value of any reasonable compensation for services to be rendered by you before or after the Change of Control, including any non-competition provisions that may apply to you and the Company shall cooperate in the valuation of any such services, including any non-competition provisions. SECTION 20. Trade Monitoring Policy. You are required to maintain a securities brokerage account with the Company’s preferred broker in order to receive any Shares issuable under this Award, in accordance with the Company securities trade monitoring policy (the “Trade Monitoring Policy”). The Company’s preferred broker is currently Morgan Stanley. Any Shares issued to you pursuant to this Award Agreement shall be deposited in your account with the Company’s preferred broker in accordance with the terms set forth herein. You hereby acknowledge that you have reviewed, and agree to comply with, the terms of the Trade Monitoring Policy, and that this Award, and the value of any Shares issued pursuant to this Award Agreement, shall be subject to forfeiture or recoupment by the Company, as applicable, in the event of your
11 noncompliance with the Trade Monitoring Policy, as it may be in effect from time to time. SECTION 21. Imposition of Other Requirements. The Company reserves the right to impose other requirements on your participation in the Plan, on this Award and on any Shares acquired upon settlement of this Award, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. The parties have duly executed this Award Agreement as of the date first written above. RXO, INC. By: /s/ Heidi Ratti Name: Heidi Ratti Title: Chief Human Resources Officer
Exhibit 31.1
CERTIFICATION
I, Drew M. Wilkerson, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 of RXO, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ Drew M. Wilkerson | |||||
| Drew M. Wilkerson | |||||
| Chief Executive Officer | |||||
| (Principal Executive Officer) | |||||
Date: May 7, 2024 | |||||
Exhibit 31.2
CERTIFICATION
I, James E. Harris, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 of RXO, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| /s/ James E. Harris | |||||
| James E. Harris | |||||
| Chief Financial Officer | |||||
| (Principal Financial Officer) | |||||
Date: May 7, 2024 | |||||
Exhibit 32.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. Section 1350
As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Solely for the purposes of complying with 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, the undersigned Chief Executive Officer of RXO, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Drew M. Wilkerson | |||||
| Drew M. Wilkerson | |||||
| Chief Executive Officer | |||||
| (Principal Executive Officer) | |||||
Date: May 7, 2024 | |||||
Exhibit 32.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. Section 1350
As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Solely for the purposes of complying with 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, the undersigned Chief Financial Officer of RXO, Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2024 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ James E. Harris | |||||
| James E. Harris | |||||
| Chief Financial Officer | |||||
| (Principal Financial Officer) | |||||
Date: May 7, 2024 | |||||