RXO, Inc. ($RXO)

All right. We're going to go ahead and get started with our next presentation here or Q&A rather. We have RXO here on stage, Jared Weisfeld, Chief Strategy Officer; Kevin Sterling in IR and Strategy as well. So thanks, guys, for making the trip here.

Maybe let's just jump straight in and talk about demand. That's been the thing we've all been waiting for to help turn the market. We can get to the supply side in a little bit later. But what are you seeing in terms of the demand aspect? Any positives as we look into the second quarter, even wrap up the first quarter from some of your key end markets or customers?

Sure. So thanks for having us, Brian. When you think about the demand environment, we talked about on our earnings call how we were operating still in a prolonged soft freight environment from a demand standpoint. You saw January was down 7% year-over-year from a Cass Freight Index standpoint. I think it came out this morning or the day prior that February was also down 7% year-over-year. So that was, of course, contemplated in our Q1 outlook. When you think about what we're focused on, I'd say a couple of things. To your point, in terms of green shoots, the industrial sector of the economy has certainly had two positive PMI readings now to start the year at the highest levels in 4 years, especially that new orders component flashed 57 in January and was hot again in February. That tends to have about a 2- to 3-month lead time relative to actually seeing the orders, and that's important for RXO. It's about 20% of our business within brokerage is the industrial manufacturing sector of the economy. And then on the consumer side, you have seen a move higher to start the year on consumer confidence, and we obviously have to see how everything plays out with all the geopolitical noise over the last couple of weeks in terms of consumer confidence readings, et cetera. But I think the key for RXO is that our late-stage sales pipeline is up more than 50% year-over-year, and we talked a little bit about this on the earnings call. And this is across the company with the integration of Coyote materially complete, having the ability to focus on this late-stage sales pipeline, which historically runs at a pretty healthy conversion rate. And this is not just law of small numbers. This is hundreds and hundreds of millions of dollars up more than 50% year-on-year. I think just speaks to a lot of the idiosyncratic levers that we have heading into Q2 and the rest of the year.

And Brian, just to piggyback on Jared's comments, particularly as you think about ISM strength, I know you know this, but look, what's going on flatbed rates. Well, we don't have a lot of flatbed business. But if you kind of look at general industry flatbed rates, they are really, really strong. I think that's also a good leading indicator of kind of some of this industrial strength that Jared is talking about.

So I do want to ask about the late-stage brokered sales pipeline. So maybe you can define that a little bit more, like what goes in there? How is quantify like what type of projects you're seeing? And you mentioned there's a pretty high conversion rate. Like what does that roughly translate into over time?

Sure. So it's the first time we've talked about it externally. And to give a little bit more color, the reason why we talked about it last quarter was we made a statement on the earnings call that we expect to resume truckload outperformance versus the broader market as early as the middle of the year. And to make that kind of statement, we thought it was appropriate to give some backing of why we were so confident in that. So to speak to that late-stage sales pipeline, what is that? It's composed of deals that are already in pricing, late-stage qualification with customers. So that will hit as early as Q2 and stage throughout the rest of the year, and that runs -- this is also -- this excludes the pre-pipe. This is a later-stage pipeline. So it does -- we haven't given that percentage in terms of what it runs at from a conversion standpoint, but it is very healthy. And importantly, it is composed mostly of full truckload, and it is very diverse in terms of the composition of that. So we feel very good about the health of the pipeline and what that means with respect to truckload volume. And I think importantly, for RXO, if you go back over the last 10, 15 years, RXO DNA is all about profitable growth, truckload outperformance. We took a step back last year with numerous headwinds that we're facing the business, but we're very excited to getting back on the path for truckload outperformance versus the market as early as the middle of the year.

So most of that is full truckload, I would assume a lot of that is contract as well. I mean you wouldn't really necessarily put spot in there.

Yes. That's exactly right. This is contractual in nature, but the -- it's an important point when you think about the mix of the business, which last quarter on our truckload business was about 72% contract, 28% spot. Our fundamental belief is having that large contractual book of business will lead to materially accretive spot opportunities, special projects, mini bids when the market does become tight. And we're seeing that right now, right? When you think about just where the overall industry is versus last year, 2 years ago, 3 years ago, despite that muted demand environment that we just talked about, to Kevin's point, not only are you seeing elevated rates across other modalities such as flatbed, but in the overall dry van market, you're seeing 14%, 15% tender rejections coming out of the slowest freight month of the year. So I think it does speak to how much supply has really come out of the market.

And Brian, just to take a step further, talk about the contractual book of business. And it's very important to make sure you service that contractual book of business for your customers so that when there are spot load opportunities that Jared is talking about, you're that first call because that shipper is going to know like, hey, Kevin does a good job, I'm going to get that first call versus randomly using someone may or may not be there. So it's so important you service that customer's contractual freight so that when the spot opportunities are there, you can really capitalize.

So how are the -- obviously, the spot rates jumped in remain elevated. You mentioned the rejection rates. So how are conversations with shippers starting to change? Or have they already changed? Because before it was like, well, it's just weather and we're going to debate about the impact. And now it does seem like at least our conversations, they're more willing to accept it or recognize it, obviously, not jumping up and down to pay more unless they have to. But like how is that progressing from like your side of these conversations?

Yes. So it's been constructive. We put out our monthly curve or our quarterly curve report a few weeks ago when we talked about how we have now moved to an inflationary rate environment. We talked about on our earnings call that we expect contract rates to be up low to mid-single digits for 2026, Combine that with the curve report where we talk about entering in that inflationary part of the cycle, which has obviously been a soft freight market for the last 3.5 to 4 years. I think the -- I think it's safe to say with tender rejections sitting at 14% in the middle of bid season, that is a favorable backdrop with respect to renegotiations and existing bids. And I think the -- because it's a 2-way conversation, right? The shipper and for RXO, it's large Tier 1 enterprise class shippers. They want to put in rates with large strategic carriers that they know can get serviced throughout all types of cycles. So they want to have confidence that their routing guide is going to hold up. So I think we talked about the contract rate environment moving to an inflationary phase. And certainly, that will provide relief on our gross margin when you think about just how our model works. You have to get through the repricing, which we're in the middle of right now. And then post repricing, you'll see an improvement and relief on our contractual gross margin. And then you combine that with an elevated tender rejection environment and what that means for spot opportunities. I think it's a pretty robust environment to think about the opportunity to capitalize on spots relative to 2, 3, 4 years ago when tender rejections were sitting at 2%, 4%, 6%. And when I say robust environment, I'm not saying from a demand standpoint, I'm just talking about overall freight KPIs at much healthier levels than they were over the last few years.

So when we think about the tender rejections, are these carriers -- because it's a little bit different with brokers, right? Like carriers just make less money if they take a load that they can make more money later, but brokers can get squeezed, right, because of the way the contract works. So are we seeing other brokers that are just walking away and redoing bids? Like how far along are we in this process?

Yes. I can't speak to other brokers, but what I can say is that industry-wide tender rejections are sitting at mid-teens. And when you think about RXO, how do we service our freight. We want to go ahead and put in rates where we can service our customers, certainly to the extent -- and then to the extent you start to see pressure on waterfall routing guides, you'll see the ability for RXO to capitalize on those spot opportunities. So we saw an increase, small in December relative to November, an increase in January relative to December. And you think about just how the market has developed with industry-wide tender rejections sitting in, call it, that 14%, 15% level, I think that does provide a nice jumping off point heading into and the rest of the year.

And Brian, sometimes too, there are certain regions of the country which are really tight. For instance, take the Midwest, very, very tight right now. So you can go lane by lane with the shipper as well. You don't have to go with a blanket price increases, kind of go lane by lane, like, look, it's really tight here and they can see it. So you can -- we have that ability to drill down lane by lane.

And I want to hit on that also because it's a really important point that Kevin brought up where you think about -- and you mentioned this a little bit, the impact from weather in Q1, right? I mean for 2 out of the 3 months in the quarter, most of the country was frozen and shut down. It doesn't matter if you were in New York where we are or the middle of the country or even the Southeast where Kevin is, it had an impact, right? So -- but to your point, Brian, post weather, the country is starting to reopen, I think there was an expectation by some that you would see a moderation in tender rejections, a moderation in rates, and they continue to move counter seasonally and hold in. So you think about an environment where demand is soft and we're still holding at 14%, 15% tender rejections in the weakest freight month of the year, I do think that it just shows, and I think the language that we used on the call was that this market is the most susceptible it's been to changes in demand than it's been in the last 3.5 years. On one hand, that's not saying much given how weak it's been for the last 3.5 years. But on the other hand, I think it just speaks to how much capacity has come out of the market.

Well, just to touch on that point, there's been, of course, a lot of regulatory enforcement and focus and probably more to come. How have you guys seen that play out other than we just talked with spot markets and maybe the elasticity or at least is less elastic than it has been in the past. And do you think this is something that can accelerate the impact throughout the year? Like how are you thinking about that?

It's fitting that we're here in D.C. and the final rule from the FMCSA went into effect last night with respect to non-domiciled CDLs and what must be true in order to go ahead and keep the road safer and have the requirements to get a nondomiciled CDL. So the FMCSA has identified about 194,000, 197,000 drivers that will be coming off the road between now and the next 5 years. And the reality also is there's also some self-enforcement associated with this. So it could certainly be faster than those 5 years in terms of all of the checkpoints that are now across the roads -- across the country when you think about enforcement by state and local officials to abide by the new final rule. And then there's also movement in Congress right after the state of the union, there was the proposal of the Delilah's Law, which would take it another step further and effectively have to recertify all of the CDLs across the country and going through the same SAVE system at the federal level. So I think there's a lot of developments at work to go ahead and remove some of this tangential supply, the shadow capacity that has been in the industry for the last, call it, 10-plus years. And not only will it make our roads safer and reduce theft and fraud, but this capacity removal is structural in nature, and it's not coming back. So it does certainly set up for a higher for longer freight environment on the other side.

Yes. And just to piggyback on that, Brian, and you can probably remember this, too, cycles in the old days would last 3 and 4 years. I can remember '04, '05, '06, fantastic freight cycle. Why was that? There will always be a supply response, but it's more gradual, more responsible. Think about when ELDs hit in '17, '18, now looking back, we realized that freight only cycle last year because all the supply came flooding in. But you step back 20 years ago or so, the cycles -- supply would come back, but it would be very rational. And so I think to Jared's point, the spot is coming out. It's more permanent in nature, structural in nature. It's not going to come back. So we could set up where we could see what we used to see cycles that last 3 and 4 years. Truckers used to tell me in the mid-'90s, cycles would last 3 and 4 years. So it would be nice to get back to those days.

That would be a nice change. Well, we had 4 years down, so maybe more likely to be up next time, I don't know. Well, in terms of the other big impact coming out of D.C., potentially, the Supreme Court hearing, I guess, most people refer to Montgomery case, but like broker liability. So I don't know if there's a specific view you guys have internally in terms of how that could shake out, but let's just say it goes forward and brokers have to have more liability basically overnight. How does that impact the industry? How does it impact RXO? I mean there's a bunch of different things I can think of, but would love to get your thoughts on this.

Sure. I'd say, firstly, I think we continue to remain optimistic that the Supreme Court will rule in favor of preemption. And you'll certainly hear more from us after we know more and we see everyone looks like. To your point, to the extent that it does not, it's really interesting because I do think that it will become very difficult for small subscale and quite frankly, even medium-sized brokers to compete in the industry. So I think in that scenario that you're outlining, and again, we remain optimistic that the court will rule in favor of preemption, but there's a scenario where that actually could favor the top 10 brokers in a pretty meaningful way to the extent that the court rules against because ultimately, it will shake out the competitive landscape, I think, in a pretty interesting backdrop, whereby if you're a small, medium-sized brokerage and the compliance costs, the operations in terms of processes and procedures that you need to operate in that kind of world, it just becomes prohibitive. So I think that would certainly -- we've always stated that we believe that this is a winners take most type market structure where right now the top 10 players in brokerage represent almost half the industry. And we think over time, the top 5 probably represent a higher percentage of that. To the extent what you're outlining plays out, that could certainly accelerate it.

But from a risk perspective, though, I guess, brokers would need to put more price into the market basically overnight. Would you expect smaller carriers who may not be able to comply with the new standards, the checks and all the rigor that's going to go around to vetting them because now if you're responsible for them in a different way, like could that actually have a supply impact as well?

Yes, I don't want to go too far down the road on hypothesizing of a potential verdict, but I would certainly say, going back to my prior comment on why this would benefit the top 10, you think about how we do business today, we are extremely strict in terms of what must be true in order to go ahead and do business with RXO. And I would assume it's pretty similar for the top 10 as well. I think we might actually be -- have some of the strictest standards because it's a 2-sided competitive marketplace. And we take those moats, we think, are real, and there's a lot of effort to go in to make sure that we're servicing our customers' freight because we want them to obviously have a great experience and give us more freight going forward. And that can't be true if you're not using a reliable carrier network. So on RXO, we've got access to more than 120,000 carriers post Coyote across the combined network, spanning from owner operators up to large-sized fleets. And I think making sure that you've got the compliance guardrails, the right onboarding procedures to make sure that you've got a high-quality network is even more important in the world that you're outlining.

And Brian, to take that a step further, I had this question posed to me, could shippers ultimately be liable too? And I bring that up because if you're a shipper, you're more likely to do business with an RXO or a large broker, someone you know has a strict compliance and vetting process. So that's something to keep in mind as well.

Well, just that was the next question in this...

I can read your mind.

Well, I don't feel you can do that too much. In terms of the shippers like, okay, so they could potentially get impacted, but are they thinking about this right now? Maybe the bigger ones are? Does it come up in any of these conversations? Or is just...

I think everyone in the industry is paying attention to it. And I think depending on the size of the shipper is likely to dictate whether -- how closely they're paying attention to it. But I think to your point, depending on the market environment that you're in, does this -- could this be inflationary from a rate standpoint because ultimately, just the cost to do business goes higher.

Okay. It wasn't too long ago when we were talking about AI favorably. And then overnight, it became like unfavorable.

I thought you're going to have a karaoke machine up here.

I think it's in the back somewhere, but we can see if we can roll that out because evidently, that's part of the disintermediation risk that we were not paying attention to. But what are some of the, I guess, the moats as we think about AI is certainly a tool, but there's all sorts of ways to use it, and there's other things that are probably preconditions, I would suspect, to using it effectively as opposed to just ramping up the curve to get like, I don't know, 80% effective, and there's always that last piece, which is pretty significant. So what are some of the moats that you believe to be true that will really not change for yourselves, for the industry, for the scale players as we get more and more of this AI adoption with or without Karaoke machines?

We've had a -- the freight industry has had a sneak preview of this probably about 10 years ago with the threat of digital brokerages and what that would do to the industry with the notion being there would be increased price transparency and the gross profit dollar pool available to the industry would decline, and therefore, there's a terminal value problem, right? Ultimately, that was 10 years ago and what's happened. All those digital brokers for the most part, no longer exist. And I think the RXO philosophy has always been we are not a technology company. We are a tech-enabled service provider, and we invest in technology aggressively. We spend more than $100 million a year in technology. We spend it across all aspects of tech from not only artificial intelligence, but also Gen AI and Agentic AI, which I'm sure we'll get into, in addition to our pricing algorithms from machine learning techniques, and we've been doing that for a while. So I think the fundamental premise is that this -- I think you characterized it quite well, this is a 2-sided network with moats on each side. And overnight, you cannot scale up a carrier network to 120,000 type carriers. And you also think about like this is a business that is built on service, relationships and trust. We continue to have such strong customer relationships. If you think about our top 20 shippers, they've been with RXO for the last 16 years on average. And that is because of those deep personal relationships and the service levels that follow. And no doubt -- I mean, what's interesting right now is you think about sort of that perfect order in terms of what is totally touchless. We haven't talked about what percentage that is, but it's been growing over time. So it's already part of the network. But I think the harsh reality in the world of freight transportation is something is always going wrong with the load, right? So exception management is a huge part of our day when you think about our customer reps and our carrier reps. Is there a significant opportunity to automate that and help with respect to decreasing the amount of man hours associated with rudimentary tasks 100%. Are we deploying Agentic AI aggressively to go ahead and capitalize on that opportunity? Absolutely. Does that replace the human? No.

And Brian, just we talked about service, and that's a key theme here that we've touched on. And just think about this as the market probably seems like it could be turning and things may get a little chaotic. And once again, if you're that shipper, to Jared's point, we manage exceptions, we manage chaos. We manage volatility. That's what we -- really, that's our guiding principle to help our customers. And as the market kind of gets chaotic, gets volatile, who are they going to turn to? A reliable partner that they can trust. That's so important.

So in the spectrum of everything is disrupted in a race to the bottom versus, well, this is just the next nothing burger, somewhere in between, it feels like is where AI and technology will probably be in the near term, maybe medium term for brokers. So like what does that mean for you guys? Is that more Agentic? Is it more productivity? Like how do you see the, I guess, the practical applications that have financial impacts and productivity impacts for the business?

Yes. I mean it's all of it. I mean, at this point, especially for a top scale broker, AI is table stakes. So you need to be investing in Agentic AI capabilities. You need to be investing in generative AI capabilities. You need to be investing in machine learning techniques to help from a pricing algorithm standpoint. And you think about how we're doing that, we talk about the 4 key pillars and the principles that we abide by internally at RXO across volume, margin, service, productivity. It's all because of those aggressive investments. And I mean, at its highest level, how do we go ahead and increase volume through our network by 20%, 30%, 40%, 50% and decouple that from headcount growth. Because when you can decouple that, the incremental margins are significant and can be as high as 70% to 80%. So you think about what that means, and that's the beautiful part of our business model and having a platform that is so scalable with respect to -- we've been hit hard clearly over the last few years in terms of deleveraging the of the P&L because if you look between the gross margin and EBIT, 2/3 of those costs are either fixed or semi-fixed. It obviously works the exact opposite way on the other side. And if you can releverage the model even further by having that scalable tech platform and dropping through that volume with minimal headcount additions, the contribution margins at that level on a business that right now is doing low single-digit EBITDA margins, obviously, can be quite impactful. So that's how we think about the business. And then the other angle is productivity. We've talked about over the last 12 months, our productivity is up by 19%. On a 2-year stack, it's almost 40%. And then layering on a lot of the capabilities that we've been investing in, specifically on spot quote agents, et cetera, across the network that are being deployed right now, I think there's a lot of opportunity for incremental margin unlock.

And how are you guys measuring productivity? And those are like KPI that everybody uses or reports on uniformly across the industry, but is this like loads per headcount or what's the...

Loads per person per day. Who is involved associated with that -- the life of that order? And if they are involved, we'll burden the productivity number with that headcount. And we've had -- and we think we are still in the very early innings with respect to productivity. If we look at our most productive rep, and I mean, going back to your point on the fears of AI disintermediation and Karaoke Day, if you actually look at the stats in that press release, I think they talked about someone that was doing 8 loads a day, right? I mean I think that was probably accomplished about 20 years ago at RXO. So like you think about our most productive rep, you're talking multiples of that -- many multiples of that. So how do we then bring up the average across the base where we've got our most productive rep. And as you can expect, the more tenured you are, the more productive you are, there are certain loads in certain verticals that are more accommodative for higher productivity. But in general, there is so much room on that productivity scale in terms of loads per person per day.

And Brian, in the old days, if you're a good salesperson, we'd hire a sales assistant to help book freight as a market turn. If you're really good, we'd hire 2. We don't have to do that now. We can lean in technology. And that to Jared's point, you're just going to see us leverage and lean in that loads per head per day should continue to move higher.

So a couple more questions, but we can see if there's any audience after this one. Clearly, there's a bunch of headwinds. As we look at the first quarter, the margin squeeze, eventually will be a good thing. Spot market seems like it's -- I mean what we heard this week at the conference seems like there's maybe a little bit of an offset from volume opportunities that maybe weren't there in the fourth quarter to kind of make up for that margin compression. But where are you in terms of expectations for this quarter and where we go from here and you're sort of tracking relatively in line with what you initially thought based on what the market is doing right now?

Sure. So we're not going to give a mid-quarter update, but we gave an outlook for Q1 of $5 million to $12 million of adjusted EBITDA for the company. And within that outlook included a variety of market assumptions with respect to the tighter market conditions persisting throughout the quarter. Obviously, weather has been a headwind as well. And as you think about tender projections operating to your point, in that mid-teens, that obviously has the impact of squeezing our brokerage gross margin, which is why we gave that $5 million to $12 million outlook. But I think importantly, for RXO, you think about the base that we're building off of the Q1, I'll go back to what I started with. Our pipeline is up more than 50% year-over-year. So that will clearly be a tailwind from Q1 into Q2. We talked about on the earnings call how Q1 is historically the weakest quarter of the year and also the weakest percent contribution from a full year perspective. So you think of off of that Q1 base, historically, that's been -- can be up as much as last couple of years, it's been up 100% sequentially. And obviously, it's now a law of small numbers. So the percentages get a little bit wacky. But you think about the building blocks, higher pipeline we talked about. We then talk about the opportunity for rate relief in terms of the negotiations that were ongoing as part of bid season and the opportunity to reprice given the current environment that we're in. Building on that, managed transportation is seasonally a better quarter into Q2 from an automotive standpoint. And we also talked about new wins that were awarded in Q4 of last year. We awarded more than $200 million of freight under management and managed trans has significant momentum. And then last mile, Q2 is the seasonally strongest quarter for the for the company. So I think a lot of opportunity for us as we exit Q1 into the rest of the year and into 2027.

Brian, I remember a few years ago, I had a transportation executive tell me once, February is our 12th best freight month of the year.

And it all comes down to March, so...

It comes down to March. But I think importantly, it's the momentum building from March into Q2 and into the rest of the year. And I think importantly, for RXO, we do have some company-specific tailwinds irrespective of the broader freight market with the integration behind us, the focus is entirely on profitable growth, driving that pipeline higher and then converting that pipeline, yielding tangible results across the business, all with a much more efficient cost structure because we've taken out more than $155 million of costs since we've spun. We took out $65 million in the first 2 years post spinning from XPO. We took out $60 million of operating expenses from a synergy standpoint with Coyote, and we announced a new $30 million cost out in Q4. So putting it all together, you think about just those contribution margins that we were talking about earlier and how this model is prime for incremental operating leverage. It's also prime from a standpoint of a very efficient cost structure.

Okay. Any questions? We got one here in the middle here, if you can get the mic, please.

You hit on 2 topics that I'd like to touch on. One has to do, you said your late-stage pipeline is up 50%. And actually, at the end, you just now said you're dramatically focused on conversion. What is the conversion rate at the late-stage pipeline if you're allowed to share that? And then the second question, you also talked a little about too, you're under repricing. Can you give some color around what you're seeing as the sensitivities and upsides for getting repricing in this environment?

Sure. So on the first question with respect to the late-stage pipeline, we haven't quantified what that conversion rate was historically. But what we have said is that if you look at the overall pipeline, including pre-pipe, et cetera, that generally has been low single-digit type conversion, and this would be multiples that. So you think about just the fact that these are qualified opportunities that are already in the pricing stage. So I think there's good line of sight across the board and the fact that the pipeline is composed of opportunities that are very diverse. We're not one -- there's not one opportunity that is dominating that overall pipeline. I think gives us confidence in terms of executing against that pipe and yielding results as early as Q2. On the second question in terms of contract price increases. So I'll go back to what I said earlier, it's a 2-way conversation. This is a partnership. There's a reason why our top 20 customers have been with us for the last 16 years. We need to be able to put in rates that we can service throughout all freight markets. And when we're in the tighter environment right now, to your point, Brian, I mean, shippers don't like paying higher rates, but it's ultimately the environment that we're in right now, and you've had so much capacity come out that is structural in nature. And despite softer demand, we're sitting at 15% tender projections. And we talked about in our Curve proprietary report, which is available at rxo.com if anyone wants take a look, a little plug there, that it is -- we are now entering that phase where we are inflationary in nature in terms of what those contract rates look like. So -- but it's -- I think Kevin brought up this point earlier. I think it's important to note, this is not just holistic price increase across the board, and therefore, we're going to put that through. It's customer by customer, geography by geography, lane by lane, and we're going to look at the customer holistically where ultimately you think about being able to service certain contractual freight and if that leads to the opportunity to yield incremental spot volumes, that could make a lot of sense. But I think in terms of the contract repricing, we talked about that low to mid-single-digit increase. I think the confidence level there is very high.

Maybe just on that point, if there's no other questions. I guess 2 quick follow-ups to sort of wrap us up here. The timing of the contract renewals or the repricing opportunities, are these some things that can show up this quarter because you're moving some lanes around? I mean, typically, we don't see these things progress until several quarters and it takes some time to really get through the whole system. So maybe some comments on that. And then also, is there managed trans in this late-stage pipeline that's moving some of the numbers as well? I just wanted to clarify that.

On the first point, you're exactly right. It is staggered in nature, right? So what I'm talking about in terms of contract rate increases, et cetera, this is not a Q1 type comment, right? This is going to be staggered in nature as early as Q2 in terms of the benefits associated with relief on the contractual side of business with getting the repricing into the book. That's meant to be more Q2 and onwards. And then in terms of managed trans, now the brokerage sales pipeline is up more than 50% year-over-year. Managed trans, we isolated and that pipeline is very strong at almost $1.5 billion. So the momentum across the business between the late-stage sales pipeline and brokerage, a managed trans pipeline, also late stage of, call it, $1.5 billion, of which we had $200 million awarded in Q4. And then certainly, from a seasonality standpoint, last mile will start to improve not only with the weather falling out, but Q2 is the seasonally strongest quarter.

Okay. That's helpful to clarify those. In terms of just maybe last mile and managed trans don't get as much attention. So maybe 2 minutes worth we can do here to wrap up. You mentioned the seasonality, you mentioned some of the things that are just more normal course of business, but like what are some of the other initiatives or growth opportunities like the $200 million you mentioned earlier about new wins. Like how is all that shaping up? And like what are sort of the initiatives that are flowing through these 2, I call them sectors but -- or segments, but like business lines?

Yes. So one segment company, but we do have complementary services, which is composed of our managed transportation, where we act as the control tower and the transportation department on behalf of our shippers, where we manage about $3.5 billion of freight under management. Momentum in that business exiting the year was quite strong with more than $200 million awarded in Q4 and a late-stage sales pipeline that is almost $1.5 billion. And the reason why that is particularly important is we talk about synergy loads within the company, whereby managed transportation can be a customer to our brokerage business. And ultimately, the brokerage customer or the managed transportation customer then has access to dedicated capacity within our brokerage business. So it's a pretty symbiotic relationship and very synergistic. On the last mile side, demand for big and bulky has been and is soft, which should not be surprising to anyone. If you think about -- you've had a little bit move lower on the 30-year with respect to mortgage rates. But overall, that's going to be tied to housing market and big and bulky is soft. In 2025, we significantly outperformed from a stop standpoint, onboarding existing new customers and new business with existing customers. But we did feel an acute slowdown last year on the last mile side, really after Labor Day in terms of just overall big and bulky demand. So I think the initiative there is as we think about across RXO, and we put out a press release a few weeks ago talking about RXO middle mile solutions and how we can leverage our RXO hub network across the country in ways that can deliver incremental solutions to customers, how we can effectively leverage that real estate footprint, I think, is a very strategic priority because the contribution margins, given obviously the fixed asset nature of the business can be quite high.

Okay. Well, guys, we're out of time, but thanks very much for joining us, Jared and Kevin. I appreciate making the time for us.

Thanks, Brian.

Thank you.