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What changed in RXO, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RXO, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+160 added−200 removedSource: 10-K (2024-02-13) vs 10-K (2023-02-24)

Top changes in RXO, Inc.'s 2023 10-K

160 paragraphs added · 200 removed · 135 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeITEM 1. BUSINESS Company Overview RXO, Inc. is a high-performing brokered transportation platform defined by cutting-edge technology and a nimble, asset-light business model, with the largest component being our core truck brokerage business.
Biggest changeITEM 1. BUSINESS Company 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.
In addition, we offer technology-enabled managed expedite services that automate transportation procurement for time-critical freight moved by independent 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.
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.
Our other complementary services for managed transportation, last mile and freight forwarding also utilize our digital brokerage technology. 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 complementary services for managed transportation, last mile and freight forwarding also utilize our digital brokerage technology. 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.
Importantly, our digital brokerage platform creates ongoing value for RXO in four key areas: • Increases share and revenue generation by providing real-time visibility into available supply and demand for current and future time periods, leading to optimal transportation management; • Ensures competitive rates by engaging customers and carriers through user-friendly interfaces underpinned by cutting-edge pricing technology; • Optimizes for value and margin with dynamic pricing algorithms that use machine learning, and generates superior, real-time market intelligence harvested from load-matching data; and 4 Table of Contents • Improves productivity by facilitating transactions through cost-efficient automated processes and messaging, increasing the productivity of RXO’s customer and carrier representatives, and enabling our business to manage more volume without a commensurate increase in expense Customers and Markets RXO provides services to approximately 10,000 customers ranging in size from small businesses to Fortune 100 companies and sector leaders.
Importantly, our digital brokerage platform creates ongoing value for RXO in four key areas: • Increases share and revenue generation by providing real-time visibility into available supply and demand for current and future time periods, leading to optimal transportation management; • Ensures competitive rates by engaging customers and carriers through user-friendly interfaces underpinned by cutting-edge pricing technology; • Optimizes for value and margin with dynamic pricing algorithms that use machine learning, and generates superior, real-time market intelligence harvested from load-matching data; and • Improves productivity by facilitating transactions through cost-efficient automated processes and messaging, increasing the productivity of RXO’s customer and carrier representatives, and enabling our business to manage more volume without a commensurate increase in expense. 4 Table of Contents Customers and Markets RXO provides services to customers ranging in size from small businesses to Fortune 100 companies and sector leaders.
We conduct our truck brokerage operations by striving to best utilize our resources of people, technology and data. Our sales representatives communicate with customers about truckload freight that needs to be shipped, and we locate trucks with available capacity using our RXO Connect technology platform.
We conduct our truck brokerage operations by striving to best utilize our resources of people, technology and data. Our sales representatives communicate with customers about freight that needs to be shipped, and we locate trucks with available capacity using our RXO Connect™ technology platform.
We believe that our operations are in substantial compliance with current laws and regulations, and we do not know of any existing environmental condition that reasonably would be expected to have a material adverse effect on our business or operating results.
We believe that our operations are in compliance with current laws and regulations, and we do not know of any existing environmental condition that reasonably would be expected to have a material adverse effect on our business or operating results.
Robinson, Convoy, Coyote, Echo, Expeditors, Forward Air, Flexport, J.B. Hunt, Landstar System, Total Quality Logistics, Transfix and Uber Freight. Due to the competitive nature of our industry, we strive to strengthen existing business relationships and forge new relationships.
Robinson, Coyote, Echo, Expeditors, Forward Air, Flexport, J.B. Hunt, Landstar System, Total Quality Logistics, Transfix and Uber Freight. Due to the competitive nature of our industry, we strive to strengthen existing business relationships and forge new relationships.
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 160 countries and territories.
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.
Drivers of Value Creation We have identified five key drivers of value creation in our truck brokerage business: • Critical Scale in an Expanding Industry with Low Penetration : We are the fourth largest broker of full truckload freight transportation in the United States, with a carrier pool that gives us access to vast truck capacity to serve high shipper demand for transportation.
Drivers of Value Creation We have identified five key drivers of value creation in our truck brokerage business: • Critical Scale in an Expanding Industry with Low Penetration : We are one of the largest brokers of full truckload freight transportation in the United States, with a carrier pool that gives us access to vast truck capacity to serve high shipper demand for transportation.
This fully automated, cloud-based platform encompasses Freight Optimizer, as well as our mobile app, API integrations, self-service dashboards and real-time functionality for transacting and tracking freight shipments. The technology gives shippers access to our growing transportation network and our valuable market data, and it gives independent truck drivers the ability to secure loads through our mobile app.
This fully automated, cloud-based platform encompasses Freight Optimizer, as well as our mobile app, application programming interface (“API”) integrations, self-service dashboards and real-time functionality for transacting and tracking freight shipments. The technology gives shippers access to our growing transportation network and our valuable market data, and it gives independent truck drivers the ability to secure loads through our mobile app.
Notable factors driving 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 industry tailwinds. As of December 31, 2022, we had approximately 123,000 carriers in our North American truck brokerage network, and access to more than 1.5 million trucks.
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 December 31, 2023, we had approximately 115,000 carriers in our North American truck brokerage network, and access to more than 1.4 million trucks.
We center our program efforts on professional development, competitive compensation, and dedicated loyalty to empowering a safe, inclusive, and purposeful experience for our team members and their families. Our People As of December 31, 2022, we operated with 8,590 team members - 6,248 full-time and part-time employees and 2,342 temporary workers.
We center our program efforts on professional development, competitive compensation, and dedicated loyalty to empowering a safe, inclusive, and purposeful experience for our team members and their families. Our People As of December 31, 2023, we operated with 8,432 team members - 6,051 full-time and part-time employees and 2,381 temporary workers.
It is RXO’s policy and practice to promote safety and health awareness and training throughout the company, monitor compliance with all applicable laws and regulations, document and maintain a comprehensive, preventative safety and management program, and routinely conduct risk assessments and safety audits. We continue to be diligent through the COVID pandemic.
It is RXO’s policy and practice to promote safety and health awareness and training throughout the Company, monitor compliance with all applicable laws and regulations, document and maintain a comprehensive, preventative safety and management program, and routinely conduct risk assessments and safety audits.
Information about our Executive Officers Our executive officers are as follows: Name Age Position Drew Wilkerson 39 Chief Executive Officer James Harris 60 Chief Financial Officer Jeff Firestone 52 Chief Legal Officer Drew Wilkerson is a transportation industry veteran with 16 years of experience in brokerage operations.
Information about our Executive Officers Our executive officers are as follows: Name Age Position Drew Wilkerson 40 Chief Executive Officer James Harris 61 Chief Financial Officer Jeff Firestone 53 Chief Legal Officer Drew Wilkerson is a transportation industry veteran with 17 years of experience in brokerage operations.
The diversification of our customer base minimizes concentration risk: in 2022, our top 20 customers in total and our top five customers in total accounted for approximately 39% and 21% of our revenue, respectively, with our largest customer accounting for approximately 8% of revenue.
The diversification of our customer base minimizes concentration risk: in 2023, our top 20 customers in total and our top five customers in total accounted for approximately 38% and 21% of our revenue, respectively, with our largest customer accounting for approximately 9.5% of revenue.
Our brokerage platform synergizes these operating strengths within a single digital freight marketplace. Approximately 87% of our truck brokerage transactions have a digital profile — and, as that percentage continues to grow, we are able to process more volume per head over time.
Our brokerage platform synergizes these operating strengths within a single digital freight marketplace. In the fourth quarter of 2023, approximately 97% of our truck brokerage transactions were created or covered digitally — and, as that percentage continues to grow, we are able to process more volume per head over time.
Several safety protocols have remained in place, and we continue to offer fully paid pandemic sick leave. RXO has high standards of health and safety for our employees and a desire to continuously assess, refine and implement improvements to policies and procedures. And we encourage those with whom we do business to do the same.
RXO has high standards of health and safety for our employees and a desire to continuously assess, refine and implement improvements to policies and procedures. And we encourage those with whom we do business to do the same.
At RXO, we encourage our employees to bring their authentic selves to work and to welcome everyone, regardless of gender identity, sexual orientation, race, ethnicity, national origin, religion, life experience, veteran status, and disability. We value individuality and understand that a diversity of talents, identities, backgrounds and experiences is key to driving innovation and growth.
At RXO, we encourage our employees to bring their authentic selves to work and to welcome everyone, regardless of gender identity, sexual orientation, race, ethnicity, national origin, religion, life experience, veteran status, and disability.
The Separation was completed under a Separation and Distribution Agreement and various other agreements that govern aspects of the Company’s relationship with XPO, including, but not limited to, a Tax Matters Agreement (“TMA”), an Employee Matters Agreement (“EMA”), a Transition Services Agreement (“TSA”) and an Intellectual Property License Agreement (“IPLA”).
The Separation was completed under a Separation and Distribution Agreement and various other agreements that govern aspects of the Company’s relationship with XPO, including, but not limited to, a Tax Matters Agreement (“TMA”), an Employee Matters Agreement (“EMA”), a Transition Services Agreement (“TSA”) and an Intellectual Property License Agreement (“IPLA”). 2 Table of Contents Relationship-Based Operating Structure Our truck brokerage business operates as an intermediary between shippers and carriers (truck and fleet owners), connecting truckload supply and demand.
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.
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.
RXO benefits from first-mover advantage in brokerage technology, and we continue to innovate to stay at the forefront of the technological evolution of our industry.
RXO benefits from first-mover advantage in brokerage technology, and we continue to innovate to stay at the forefront of the technological evolution of our industry. Overview of Our Digital Brokerage Platform Our self-learning RXO Connect™ digital brokerage platform gives us a scalable framework to continually enhance our service, capture share and reduce costs.
We are also well established as a truckload broker of choice across diversified industry sectors, with a notable presence in the e-commerce and retail sectors. Despite our scale, we have just 4% of the brokered truckload industry revenue, which includes full truckload and LTL transportation provided direct to shippers and via managed transportation providers.
We are also well established as a truckload broker of choice across diversified industry sectors, with a notable presence in the e-commerce and retail sectors.
Of these employees, 48% were in hourly roles and 52% were in salaried positions. None of our employees were covered by collective bargaining agreements. Approximately 39% of our employees are female.
Of these employees, 45% were in hourly roles and 55% were in salaried positions. Approximately 38% of our employees are female.
RXO Workforce (1) Total # Total % Regular 6,248 73% Hourly 2,980 48% Salaried 3,268 52% Male 3,773 60% Female 2,459 39% Others/Undisclosed 16 —% Temporary 2,342 27% Total Workforce 8,590 100% (1) Gender representation includes regular employees who have self-identified.
RXO Workforce (1) Total # Total % Regular 6,051 72% Hourly 2,742 45% Salaried 3,309 55% Male 3,668 61% Female 2,313 38% Others/Undisclosed 70 1% Temporary 2,381 28% Total Workforce 8,432 100% (1) Gender representation includes regular employees who have self-identified.
We mandate fair treatment and equitable opportunities for all individuals, and these cultural attributes allow us to be a more vital organization and a better partner to all RXO stakeholders. 8 Table of Contents Our Talent Engagement We believe acquiring top talent and investing in the development of our people gives us a sustainable, competitive advantage.
We value individuality and understand that a diversity of talents, identities, backgrounds and experiences is key to driving innovation and growth. 8 Table of Contents Our Talent Engagement We believe acquiring top talent and investing in the development of our people gives us a sustainable competitive advantage.
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Based on 2021 revenues, we are the fourth largest broker of full truckload freight transportation in the United States, and have approximately 4% share of the entire $88 billion brokered truckload industry. Our truck brokerage business has a variable cost structure with robust free cash flow conversion and a long track record of generating a high return on invested capital.
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For additional information regarding the agreements executed in connection with the Separation see Note 3 — The Separation to our consolidated financial statements. 2 Table of Contents Relationship-Based Operating Structure Our truck brokerage business operates as an intermediary between shippers and carriers (truck and fleet owners), connecting truckload supply and demand.
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Overview of Our Digital Brokerage Platform Our self-learning RXO Connect™ digital brokerage platform (known as XPO Connect® prior to the completion of the Separation) gives us a scalable framework to continually enhance our service, capture share and reduce costs.
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As of December 31, 2022, we had more than 920,000 cumulative truck driver downloads of the app.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe depend on our ability to attract and retain qualified talent, including temporary, part-time and full-time team members; sales representatives; brokerage agents; managers; and executive officers. If we are unable to attract and retain such individuals, we may be unable to maintain our current competitive position within the industry, meet our customers’ expectations or successfully expand and grow our business.
Biggest changeRisks Related to Our Strategy and Operations We depend on our ability to attract and retain qualified employees and temporary workers. We depend on our ability to attract and retain qualified talent, including temporary, part-time and full-time team members; sales representatives; brokerage agents; managers; and executive officers.
Our historical financial information does not necessarily reflect the financial condition, results of operations or cash flows that we will achieve as a standalone publicly traded company. Prior to the Separation, we were able to benefit from XPO’s shared economies of scope and scale in costs, employees, vendor relationships and customer relationships.
Our historical financial information, prior to the Separation, does not necessarily reflect the financial condition, results of operations or cash flows that we will achieve as a standalone publicly traded company. Prior to the Separation, we were able to benefit from XPO’s shared economies of scope and scale in costs, employees, vendor relationships and customer relationships.
The transportation industry in North America historically has experienced cyclical fluctuations in financial results due to economic recessions, downturns in the business cycles of our customers, increases in the prices charged by third-party carriers, interest rate fluctuations, prolonged periods of inflation, political instability, geopolitical conflict and war, changes in international trade policies and other U.S. and global economic factors beyond our control.
The transportation industry in North America historically has experienced cyclical fluctuations in financial results due to economic recessions, downturns in the business cycles of our customers, increases in the prices charged by third-party carriers, interest rate fluctuations, prolonged periods of inflation, political instability, pandemics, geopolitical conflict and war, changes in international trade policies and other U.S. and global economic factors beyond our control.
For a discussion of our goodwill impairment testing, see “Critical Accounting Policies—Evaluation of Goodwill” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Any acquisitions that we may complete in the future may be unsuccessful or result in other risks or developments that adversely affect our financial condition and results.
For a discussion of our goodwill impairment testing, see “Critical Accounting Policies and Estimates—Evaluation of Goodwill” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Any acquisitions that we may complete in the future may be unsuccessful or result in other risks or developments that adversely affect our financial condition and results.
In addition, we have other expenses that are primarily variable but are fixed for a period of time, as well as certain significant fixed expenses; • A prolonged, escalated or expanded war in Ukraine or sanctions imposed in response to the war and future conflicts may adversely impact global supply chain activities and the economy at large; and • The U.S. government has made significant changes in U.S. trade policy and has taken certain actions that have negatively impacted U.S. trade, including imposing tariffs on certain goods imported into the United States.
In addition, we have other expenses that are primarily variable but are fixed for a period of time, as well as certain significant fixed expenses; • A prolonged, escalated or expanded war in Ukraine or sanctions imposed in response to the war, the Israel-Hamas war and future conflicts may adversely impact global supply chain activities and the economy at large; and • The U.S. government has made significant changes in U.S. trade policy and has taken certain actions that have negatively impacted U.S. trade, including imposing tariffs on certain goods imported into the United States.
In connection with the Separation, XPO received an opinion of outside counsel regarding the qualification of the Separation, together with certain related transactions, as a “reorganization” within the meaning of Sections 355 and 368(a)(1)(D) of the Internal Revenue Code (the "Code").
In connection with the Separation, XPO received an opinion of outside counsel regarding the qualification of the Separation, together with certain related transactions, as a “reorganization” within the meaning of Sections 355 and 368(a)(1)(D) of the Internal Revenue Code (the “Code”).
Any charges that we are required to record or the failure to achieve the intended financial results associated with divestitures of businesses or assets could have a material adverse effect on our business, financial condition or results of operations. 20 Table of Contents Risks Related to the Separation We have a very limited operating history as a standalone, publicly traded company, and our historical financial information is not necessarily representative of the results we would have achieved as a standalone, publicly traded company and may not be a reliable indicator of our future results.
Any charges that we are required to record or the failure to achieve the intended financial results associated with divestitures of businesses or assets could have a material adverse effect on our business, financial condition or results of operations. 20 Table of Contents Risks Related to the Separation We have a limited operating history as a standalone, publicly traded company, and our historical financial information, prior to the Separation, is not necessarily representative of the results we would have achieved as a standalone, publicly traded company and may not be a reliable indicator of our future results.
Our ability to secure sufficient equipment or other transportation services to meet our commitments to customers or provide our services on competitive terms is subject to inherent risks, many of which are beyond our control, including equipment and labor shortages in the transportation industry, interruptions or stoppages in transportation services, “Acts of God” or acts of terrorism, changes in regulations impacting transportation, increases in operating expenses for carriers that result in a reduction in available carriers, and changes in transportation rates; and if we are unable to meet our commitments to our customers or provide our services on competitive terms, our operating results could be materially and adversely affected, and our customers could shift their business to our competitors temporarily or permanently.
Our ability to secure sufficient equipment or other transportation services to meet our commitments to customers or provide our services on competitive terms is subject to inherent risks, many of which are beyond our control, including equipment and labor shortages in the transportation industry, interruptions or stoppages in transportation services, “Acts of God” or acts of terrorism, changes in regulations impacting transportation, increases in operating expenses for carriers that result in a reduction in available carriers, and changes in transportation rates; and if we are unable to meet our commitments to our customers or provide our services on competitive terms, our operating results could be 13 Table of Contents materially and adversely affected, and our customers could shift their business to our competitors temporarily or permanently.
These provisions include: • the ability of our remaining directors to fill vacancies on our board of directors; • limitations on stockholders’ ability to call a special stockholder meeting or act by written consent; • rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; • the right of our board of directors to issue preferred stock without stockholder approval; and • a classified board of directors, with each class serving a staggered three-year term, which could have the effect of making the replacement of incumbent directors more time consuming and difficult.
These provisions include: • the ability of our remaining directors to fill vacancies on our board of directors; • limitations on stockholders’ ability to call a special stockholder meeting or act by written consent; • rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; • the right of our board of directors to issue preferred stock without stockholder approval; and 23 Table of Contents • a classified board of directors, with each class serving a staggered three-year term, which could have the effect of making the replacement of incumbent directors more time consuming and difficult.
If we determine that our goodwill has become impaired, we may incur impairment charges, which would negatively impact our operating results. As of December 31, 2022, we had $630 million of goodwill on our Consolidated Balance Sheet. Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations.
If we determine that our goodwill has become impaired, we may incur impairment charges, which would negatively impact our operating results. As of December 31, 2023, we had $630 million of goodwill on our Consolidated Balance Sheet. Goodwill represents the excess of cost over the fair value of net assets acquired in business combinations.
We have entered into a registration rights agreement (the “Registration Rights Agreement”) with Jacobs Private Equity, LLC (“JPE”), an affiliate of Brad Jacobs, our chairman. As of December 31, 2022, JPE beneficially owned 1.3 million shares of our common stock, which represents approximately 1.1% of our outstanding shares of common stock.
We have entered into a registration rights agreement (the “Registration Rights Agreement”) with Jacobs Private Equity, LLC (“JPE”), an affiliate of Brad Jacobs, our chairman. As of December 31, 2023, JPE beneficially owned 1.3 million shares of our common stock, which represents approximately 1.1% of our outstanding shares of common stock.
In addition, some customers may not pay us as quickly as they have in the past, causing our working capital needs to increase; 11 Table of Contents • A significant number of our carriers may go out of business or may be unable to secure sufficient equipment capacity or services to enable us to meet our commitments to our customers; • We may not be able to adjust appropriately our expenses to rapid changes in market demand.
In addition, some customers may not pay us as quickly as they have in the past, causing our working capital needs to increase; • A significant number of our carriers may go out of business or may be unable to secure sufficient equipment capacity or services to enable us to meet our commitments to our customers; • We may not be able to adjust appropriately our expenses to rapid changes in market demand.
Additionally, XPO performed various corporate functions for us, such as legal, treasury, accounting, human resources, investor relations, and finance. Our historical financial results reflect allocations of corporate expenses from XPO for such functions, which may be less than the expenses we will incur as a separate, publicly traded company.
Additionally, XPO performed various corporate functions for us, such as legal, treasury, accounting, human resources, investor relations, and finance. Our historical financial results, prior to the Separation, reflect allocations of corporate expenses from XPO for such functions, which may be less than the expenses we will incur as a separate, publicly traded company.
Our failure to meet our customers’ expectations during these seasonal peaks may negatively affect our customer relationships, could expose us to penalties under our contractual arrangements with customers and ultimately could negatively affect our business and our results of operations. 13 Table of Contents Risks Related to Third-Party Relationships We depend on third parties in the operation of our business.
Our failure to meet our customers’ expectations during these seasonal peaks may negatively affect our customer relationships, could expose us to penalties under our contractual arrangements with customers and ultimately could negatively affect our business and our results of operations. Risks Related to Third-Party Relationships We depend on third parties in the operation of our business.
With respect to certain transactions undertaken as part of the internal reorganization, XPO obtained opinions of external tax advisors regarding the tax treatment of such transactions. Such opinions are based and relied on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of XPO, RXO 22 Table of Contents or their respective subsidiaries.
With respect to certain transactions undertaken as part of the internal reorganization, XPO obtained opinions of external tax advisors regarding the tax treatment of such transactions. Such opinions are based and relied on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of XPO, RXO or their respective subsidiaries.
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 financial condition, results of operations or cash flows. 14 Table of Contents Our business may be materially adversely affected by labor disputes or organizing efforts .
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 financial condition, results of operations or cash flows. Our business may be materially adversely affected by labor disputes or organizing efforts .
Also, we may be responsible for liabilities arising from the failure of the Separation, together with certain related transactions, to qualify for tax-free treatment and our indemnity obligations for such liabilities under the TMA, may discourage, delay or prevent certain third parties from acquiring RXO.
Also, we may be responsible for liabilities arising from the failure of the 22 Table of Contents Separation, together with certain related transactions, to qualify for tax-free treatment and our indemnity obligations for such liabilities under the TMA, may discourage, delay or prevent certain third parties from acquiring RXO.
Although we are not legally liable for loss or damage to our customers' cargo, from time to time, claims may be asserted against us for cargo losses. From time to time, we are involved in lawsuits and are subject to various claims that could result in significant expenditures and impact our operations.
Although we are not legally liable for loss or damage to our customers’ cargo, from time to time, claims may be asserted against us for cargo losses. 17 Table of Contents From time to time, we are involved in lawsuits and are subject to various claims that could result in significant expenditures and impact our operations.
In addition, significant increases in insurance costs or the inability to purchase insurance as a result of these claims could reduce 17 Table of Contents our profitability.
In addition, significant increases in insurance costs or the inability to purchase insurance as a result of these claims could reduce our profitability.
We derive a significant portion of our total revenue from our largest customers. Our top five customers comprised approximately 21% of our consolidated total revenue for the year ended December 31, 2022. Our largest customer comprised approximately 8% of our consolidated total revenue for the year ended December 31, 2022.
We derive a significant portion of our total revenue from our largest customers. Our top five customers comprised approximately 21% of our consolidated total revenue for the year ended December 31, 2023. Our largest customer comprised approximately 9.5% of our consolidated total revenue for the year ended December 31, 2023.
If the Separation, together with certain related transactions, were to fail to qualify as a transaction that is tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes, XPO would recognize taxable gain as if it had sold the RXO common stock in a taxable sale for its fair market value, and XPO stockholders who receive such RXO shares in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.
In the event the IRS were to prevail with such a challenge, we, as well as XPO and XPO’s stockholders, could be subject to significant U.S. federal income tax liability. 21 Table of Contents If the Separation, together with certain related transactions, were to fail to qualify as a transaction that is tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes, XPO would recognize taxable gain as if it had sold the RXO common stock in a taxable sale for its fair market value, and XPO stockholders who receive such RXO shares in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares.
We may be subject to cybersecurity attacks and other intentional hacking. Any failure to identify and address such defects or errors or prevent a cyber-attack could result in service interruptions, operational difficulties, loss of revenues or market share, liability to our customers or others, the diversion of corporate resources, injury to our reputation or increased service and maintenance costs.
Any failure to identify and address such defects or errors or prevent a cyber-attack could result in service interruptions, operational difficulties, loss of revenues or market share, liability to our customers or others, the diversion of corporate resources, injury to our reputation or increased service and maintenance costs.
Despite significant testing for risk management, external and internal risks, such as malware, insecure coding, “Acts of God,” data leakage and human error pose a direct threat to the stability or effectiveness of our information technology systems and operations.
We also rely on third parties and virtualized infrastructure to operate our information technology systems. Despite significant testing for risk management, external and internal risks, such as malware, insecure coding, “Acts of God,” data leakage and human error pose a direct threat to the stability or effectiveness of our information technology systems and operations.
We rely on our information technology systems to effectively manage our sales and marketing, financial, legal and compliance functions, engineering and product development tasks, research and development data, communications, order entry and fulfillment and other business processes. We also rely on third parties and virtualized infrastructure to operate our information technology systems.
The efficient operation of our business depends on our information technology systems. We rely on our information technology systems to effectively manage our sales and marketing, financial, legal and compliance functions, engineering and product development tasks, research and development data, communications, order entry and fulfillment and other business processes.
Significant changes in the price or availability of fuel in future periods, or significant changes in our ability to mitigate fuel price increases through the use of fuel surcharges, could have a material adverse impact on our operations, fleet capacity and ability to generate both revenues and profits.
Significant changes in the price or availability of fuel in future periods, or significant changes in our ability to mitigate fuel price increases through the use of fuel surcharges, could have a material adverse impact on our operations, fleet capacity and ability to generate both revenues and profits. 12 Table of Contents Higher carrier prices may result in decreased income from operations and increases in working capital usage.
Increased demand for over the road transportation services and changes in regulations may reduce available capacity and increase motor carrier pricing. In some instances where we have entered into contract freight rates with customers, in the event market conditions change and those contracted rates are below market rates, we may be required to provide transportation services at a loss.
In some instances where we have entered into contract freight rates with customers, in the event market conditions change and those contracted rates are below market rates, we may be required to provide transportation services at a loss.
If our customers experience plant slowdowns or closures because they are unable to negotiate labor contracts, our revenue and profitability could be negatively impacted. Although our work force in the United States is not unionized, labor unions may attempt to organize our employees.
If our customers experience plant slowdowns or closures because they are unable to negotiate labor contracts, our revenue and profitability could be negatively impacted. Labor unions sometimes attempt to organize our employees.
Further, failure to comply with the covenants under our indebtedness may have a material adverse impact on our operations. If we fail to comply with any of the covenants under our debt and are unable to obtain a waiver or amendment, such failure may result in an event of default under our indebtedness.
If we fail to comply with any of the covenants under our debt and are unable to obtain a waiver or amendment, such failure may result in an event of default under our indebtedness. We may not have sufficient liquidity to repay or refinance our indebtedness if such indebtedness were accelerated upon an event of default.
This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with RXO or our directors or officers, which may discourage such lawsuits against RXO and our directors and officers.
Our stockholders will not be deemed to have waived compliance with the federal securities laws and the rules and regulations thereunder. 24 Table of Contents This exclusive forum provision may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with RXO or our directors or officers, which may discourage such lawsuits against RXO and our directors and officers.
Furthermore, political conditions may increase the level of intensity of regulations that impact our business, may require changes to our operating practices, may influence demand for our services, or may require us to incur significant additional costs, any of which could negatively impact our business. 18 Table of Contents Risks Related to Our Strategy and Operations We depend on our ability to attract and retain qualified employees and temporary workers.
Furthermore, political conditions may increase the level of intensity of regulations that impact our business, may require changes to our operating practices, may influence demand for our services, or may require us to incur significant additional costs, any of which could negatively impact our business.
Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with persons that acquire, more than 15% of the outstanding voting stock of a Delaware corporation may not engage in a business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or any of its affiliates becomes the holder of more than 15% of the corporation’s outstanding voting stock. 24 Table of Contents We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal.
Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with persons that acquire, more than 15% of the outstanding voting stock of a Delaware corporation may not engage in a business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or any of its affiliates becomes the holder of more than 15% of the corporation’s outstanding voting stock.
We may also incur additional indebtedness in the future. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could materially and adversely affect our financial position and results of operations.
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could materially and adversely affect our financial position and results of operations. Further, failure to comply with the covenants under our indebtedness may have a material adverse impact on our operations.
Higher carrier prices may result in decreased income from operations and increases in working capital. Motor carriers can be expected to charge higher prices if market conditions warrant or to cover higher operating expenses. Our income from operations may decrease if we are unable to increase our pricing to our customers.
Motor carriers can be expected to charge higher prices if market conditions warrant or to cover higher operating expenses. Our income from operations may decrease if we are unable to increase our pricing to our customers. Increased demand for over the road transportation services and changes in regulations may reduce available capacity and increase motor carrier pricing.
Our technology may not be successful or may not achieve the desired results, and we may require additional training or different personnel to successfully implement this technology.
Our technology may not be successful or may not achieve the desired results, and we may require additional training or different personnel to successfully implement this technology. Our technology development process may be subject to cost overruns or delays in obtaining the expected results, which may result in disruptions to our operations.
If any of the foregoing were to occur or to be perceived to occur, our reputation may suffer, our competitive position may be diminished, we could face lawsuits, regulatory investigation, fines, and potential liability and our financial results could be negatively impacted.
If any of the foregoing were to occur or to be perceived to occur, our reputation may suffer, our competitive position may be diminished, we could face lawsuits, regulatory investigation, fines, and potential liability and our financial results could be negatively impacted. 16 Table of Contents Risks Related to Our Credit and Liquidity Challenges in the commercial and credit environment may adversely affect our future access to capital on favorable terms.
We rely on third parties to provide us with a number of operational and technical services. These third parties may have access to our systems, provide hosting services or otherwise process data about us or our customers, employees or partners. Our ability to monitor such third parties’ security measures is limited.
These third parties may have access to our systems, provide hosting services or otherwise process data about us or our customers, employees or partners. Our ability to monitor such third parties’ security measures is limited. Any security incident involving such third parties could compromise the integrity or availability of, or result in the theft of, our and our customers’ data.
Any security incident involving such third parties could compromise the integrity or availability of, or result in the theft of, our and our customers’ data. Unauthorized access to data and other confidential or proprietary information may be obtained through break-ins, network breaches by unauthorized parties, employee theft or misuse, or other misconduct.
Unauthorized access to data and other confidential or proprietary information may be obtained through break-ins, network breaches by unauthorized parties, employee theft or misuse, or other misconduct.
For example, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between XPO and our company regarding the terms of the agreements governing the Separation and the relationship between the companies. 23 Table of Contents Risks Related to Our Common Stock Sales of shares of our common stock in connection with the Registration Rights Agreement, or the prospect of any such sales, could affect the market price of our common stock and could impair our ability to raise capital through future sales of equity securities.
Risks Related to Our Common Stock Sales of shares of our common stock in connection with the Registration Rights Agreement, or the prospect of any such sales, could affect the market price of our common stock and could impair our ability to raise capital through future sales of equity securities.
During economic downturns, a reduction in overall demand for transportation services will likely reduce demand for our services and exert downward pressures on our rates and margins. In addition, in periods of strong economic growth, overall demand may exceed the available supply of transportation resources, resulting in increased network congestion and operating inefficiencies.
During economic downturns, a reduction in overall demand for transportation services will likely reduce demand for our services and exert downward pressures on our rates and margins.
Successful unionization by our employees or organizing efforts could lead to business interruptions, work stoppages and the reduction of service levels due to work rules that could have an adverse effect on our customer relationships and our revenues, earnings, financial position and outlook.
Successful unionization by our employees or organizing efforts could lead to business interruptions, work stoppages and the reduction of service levels due to work rules that could have an adverse effect on our customer relationships and our revenues, earnings, financial position and outlook. 14 Table of Contents Risks Related to Our Use of Technology Our business will be seriously harmed if we fail to develop, implement, maintain, upgrade, enhance, protect and integrate our information technology systems, including those systems of any businesses that we acquire.
Recently, regulatory and enforcement focus on data protection has heightened in the United States. Failure to comply with applicable data protection regulations or other data protection standards may expose us to litigation, fines, sanctions or other penalties, which could harm our business, our reputation, results of operations and financial condition.
Failure to comply with applicable data protection regulations or other data protection standards may expose us to litigation, fines, sanctions or other penalties, which could harm our business, our reputation, results of operations and financial condition. 15 Table of Contents A failure of our information technology infrastructure, information systems, networks or processes may materially adversely affect our business.
Efforts to enforce our intellectual property rights may be time-consuming and costly, distract management’s attention, divert our resources and ultimately be unsuccessful.
Efforts to enforce our intellectual property rights may be time-consuming and costly, distract management’s attention, divert our resources and ultimately be unsuccessful. Moreover, should we fail to develop and properly manage future intellectual property, this could adversely affect our market positions and business opportunities.
For these reasons, as well as the additional risks related to the Separation noted below, we may not achieve the expected benefits of the Separation. Following the Separation, our financial profile has changed, and we are a smaller, less diversified company than XPO prior to the Separation.
For these reasons, as well as the additional risks related to the Separation noted below, we may not achieve the expected benefits of the Separation.
Risks Related to Our Credit and Liquidity Challenges in the commercial and credit environment may adversely affect our future access to capital on favorable terms. Volatility in the world financial markets could increase borrowing costs or affect our ability to access the capital markets.
Volatility in the world financial markets could increase borrowing costs or affect our ability to access the capital markets.
In addition to our permanent employees, our ability to meet customer demands and expectations, especially during periods of peak volume, is substantially dependent on our ability to recruit and retain qualified temporary workers.
If we are unable to attract and retain such individuals, we may be unable to maintain our current competitive position within the industry, meet our customers’ expectations or successfully expand and grow our business. 18 Table of Contents In addition to our permanent employees, our ability to meet customer demands and expectations, especially during periods of peak volume, is substantially dependent on our ability to recruit and retain qualified temporary workers.
Our technology development process may be subject to cost overruns or delays in obtaining the expected results, which may result in disruptions to our operations. 15 Table of Contents We could be affected by cyberattacks or breaches of our information systems, any of which could have a material adverse effect on our business.
We could be affected by cyberattacks or breaches of our information systems, any of which could have a material adverse effect on our business. We may be subject to cybersecurity attacks and other intentional hacking.
Moreover, should we fail to develop and properly manage future intellectual property, this could adversely affect our market positions and business opportunities. 16 Table of Contents Third-party security incidents could result in the loss of our or our customers’ data, expose us to liability, harm our reputation, damage our competitiveness and adversely impact our financial results.
Third-party security incidents could result in the loss of our or our customers’ data, expose us to liability, harm our reputation, damage our competitiveness and adversely impact our financial results. We rely on third parties to provide us with a number of operational and technical services.
From time to time, the drivers employed and engaged by the motor carriers we contract with are involved in accidents, which may result in serious personal injuries. The resulting types and/or amounts of damages may be excluded by or exceed the amount of insurance coverage maintained by the third-party carrier.
The resulting types and/or amounts of damages may be excluded by or exceed the amount of insurance coverage maintained by the third-party carrier.
Changes in international trade policies could significantly reduce the volume of goods transported globally and adversely affect our business and results of operations. These factors subject our business to various risks that may have a material impact on our operating results and future prospects.
These factors subject our business to various risks that may have a material impact on our operating results and future prospects. These risks may include the following: 11 Table of Contents • A reduction in overall freight volume reduces our opportunities for growth.
Any of these factors could have an adverse effect on our business, results of operations or financial condition, as well as on the price of our common stock. If we continue to face unfavorable market conditions arising from the COVID-19 pandemic, our business, prospects, financial condition and operating results may be negatively impacted.
Any of these factors could have an adverse effect on our business, results of operations or financial condition, as well as on the price of our common stock. Volatility in fuel prices impacts our fuel surcharge revenue and may impact our profitability.
We may not have sufficient liquidity to repay or refinance our indebtedness if such indebtedness were accelerated upon an event of default. Risks Related to Litigation and Regulation We are subject to claims arising from our transportation operations. We use the services of thousands of transportation companies in connection with our transportation operations.
Risks Related to Litigation and Regulation We are subject to claims arising from our transportation operations. We use the services of thousands of transportation companies in connection with our transportation operations. From time to time, the drivers employed and engaged by the motor carriers we contract with are involved in accidents, which may result in serious personal injuries.
We have incurred debt obligations that could adversely affect our business and profitability and our ability to meet other obligations. In connection with the Separation, RXO entered into (i) a revolving credit agreement providing for a five-year unsecured, multi-currency revolving credit facility and (ii) a term loan credit agreement providing for a five-year $100 million unsecured term loan facility.
We incurred debt obligations that could adversely affect our business and profitability and our ability to meet other obligations.
Removed
These risks may include the following: • A reduction in overall freight volume reduces our opportunities for growth.
Added
The pricing environment also 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, especially during periods of increased economic inflation.
Removed
The COVID-19 pandemic that emerged in 2020 affected, and may continue to affect, economic activity broadly and customer sectors served by our industry. We continue to closely monitor the COVID-19 pandemic and its impact on all aspects of our business and geographies, including how it has impacted, and may continue to impact, our employees, customers and business partners.
Added
In addition, in periods of strong economic growth, overall demand may exceed the available supply of transportation resources, resulting in increased network congestion and operating inefficiencies. Changes in international trade policies could significantly reduce the volume of goods transported globally and adversely affect our business and results of operations.
Removed
The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption, which may adversely affect our business operations and may materially and adversely affect our results of operations, cash flows and financial position.
Added
This may be more acute when we have a high percentage of contracted freight with customers and when there are significant changes in prices charged by motor carriers in a short period, as most of our transportation services are procured transactionally.
Removed
Our operations and those of our customers have been subject to supply chain disruptions due to pandemic-related plant and port shutdowns, transportation delays, government actions and other factors beyond our control.
Added
Recently, regulatory and enforcement focus on data protection has heightened in the United States.
Removed
The global shortage of certain components such as semiconductor chips, strains on production or extraction of raw materials, cost inflation, and labor and equipment shortages, could escalate in future quarters.
Added
As of December 31, 2023, we had $360 million of outstanding debt (excluding finance leases), constituting $355 million of our unsecured notes and $5 million outstanding under our unsecured, multi-currency revolving credit facility that matures in 2027 (the “Revolver”), in addition to $595 million of undrawn commitments under the Revolver. We may also incur additional indebtedness in the future.
Removed
Labor shortages, particularly of truck drivers, mechanics and others employed by our third-party carriers, have led and may continue to lead to increased costs of procuring transportation services, and along with equipment shortages, can result in lower levels of service, including timeliness, productivity and quality of service.
Added
For example, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between XPO and our company regarding the terms of the agreements governing the Separation and the relationship between the companies.
Removed
If these providers continue to face unfavorable market conditions, our business, prospects, financial condition and operating results may be negatively impacted. In response to the COVID-19 pandemic, we incurred additional costs to meet the needs of our customers and employees and implemented operational changes.
Added
We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal.
Removed
Further operational changes, including extended periods of remote work arrangements, could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, impair our ability to manage our business, and cause us to incur additional costs, which may be significant.
Removed
The impacts of the COVID-19 pandemic and new strains of the virus that cause COVID-19 may remain prevalent for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 outbreak has subsided. 12 Table of Contents Volatility in fuel prices impacts our fuel surcharge revenue and may impact our profitability.
Removed
Risks Related to Our Use of Technology Our business will be seriously harmed if we fail to develop, implement, maintain, upgrade, enhance, protect and integrate our information technology systems, including those systems of any businesses that we acquire.
Removed
A failure of our information technology infrastructure, information systems, networks or processes may materially adversely affect our business. The efficient operation of our business depends on our information technology systems.
Removed
Additionally, RXO issued $355 million of unsecured notes. RXO transferred the net proceeds from the issuance of the notes and the incurrence of the term loan, together with cash on RXO’s balance sheet, to XPO in October 2022. As a result of these transactions, RXO had approximately $455 million of outstanding debt as of December 31, 2022, excluding finance leases.
Removed
The Separation resulted in RXO becoming a smaller, less diversified company with a business concentrated in its industry. As a result, our company may be more vulnerable to changing market conditions, which could have a material adverse effect on our business, financial condition and results of operations.
Removed
In addition, the diversification of our revenues, costs, and cash flows will diminish as a standalone company, such that our results of operations, cash flows, working capital and financing requirements may be subject to increased volatility and, as we will no longer be able to use cash flow from XPO to fund our investments and operations, our ability to fund capital expenditures and investments, pay dividends and service debt may be diminished.
Removed
In connection with the Separation, RXO and XPO indemnified each other for certain liabilities. If we are required to pay under these indemnities to XPO, our financial results could be negatively impacted.
Removed
The XPO indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which XPO will be allocated responsibility, and XPO may not be able to satisfy its indemnification obligations in the future.
Removed
Pursuant to the Separation and Distribution Agreement and certain other agreements between RXO and XPO, each party agreed to indemnify the other for certain liabilities, in each case for uncapped amounts. Indemnities that we may be required to provide XPO may be significant and could negatively impact our business.
Removed
Third parties could also seek to hold us responsible for any of the liabilities that XPO has agreed to retain. Any amounts we are required to pay pursuant to these indemnification obligations and other liabilities could require us to divert cash that would otherwise have been used in furtherance of our operating business.
Removed
Further, the indemnities from XPO for our benefit may not be sufficient to protect us against the full amount of such liabilities, and XPO may not be able to fully satisfy its indemnification obligations.
Removed
Moreover, even if we ultimately succeed in recovering from XPO any amounts for which we are held liable, we may be temporarily required to bear these costs ourselves.
Removed
Each of these risks could negatively affect our business, results of operations and financial condition. 21 Table of Contents XPO may fail to perform under the various transition services agreements that were executed as part of the Separation, or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Leased Facilities Owned Facilities Customer Facilities (1) Total North America 165 2 24 191 Asia 9 — — 9 Corporate 4 — — 4 Total 178 2 24 204 (1) Locations owned or leased by customers. We lease our current executive office located in Charlotte, North Carolina. We believe that our facilities are sufficient for our current needs.
Biggest changeLocation Leased Facilities Owned Facilities Customer Facilities (1) Total North America 159 2 25 186 Asia 8 — — 8 Corporate 6 — — 6 Total 173 2 25 200 (1) Locations owned or leased by customers. We lease our current executive office located in Charlotte, North Carolina. We believe that our facilities are sufficient for our current needs.
ITEM 2. PROPERTIES As of December 31, 2022, we operated 204 principal locations, primarily located in North America, including 24 locations owned or leased by our customers.
ITEM 2. PROPERTIES As of December 31, 2023, we operated 200 principal locations, primarily located in North America, including 25 locations owned or leased by our customers.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS Information with respect to certain legal proceedings is included in Note 1 4 — Commitments and Contingencies to our consolidated financial statements (included in Part II, Item 8 of this Annual Report) and is incorporated herein by reference. For an additional discussion of certain risks associated with legal proceedings, see “Risk Factors” above.
Biggest changeITEM 3. LEGAL PROCEEDINGS Information with respect to certain legal proceedings is included in Note 1 5 — Commitments and Contingencies to our consolidated financial statements (included in Part II, Item 8 of this Annual Report) and is incorporated herein by reference.
Added
For an additional discussion of certain risks associated with legal proceedings, see “Risk Factors” above. 26 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeNovember 1, 2022 November 30, 2022 December 31, 2022 RXO, Inc. $ 100.00 $ 99.69 $ 90.24 Dow Jones Transportation Average $ 100.00 $ 108.34 $ 99.05 S&P 400 MidCap $ 100.00 $ 105.54 $ 99.50 27 Table of Contents Unregistered Sales of Equity Securities and Use of Proceeds None.
Biggest changeThe stock performance assumes $100 was invested on November 1, 2022, in our common stock and each index, including reinvestment of dividends through December 31, 2023. 28 Table of Contents 11/1/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 RXO, Inc. $ 100.00 $ 90.24 $ 103.04 $ 118.94 $ 103.52 $ 122.04 Dow Jones Transportation Average 100.00 99.05 106.79 114.86 110.71 117.59 S&P SmallCap 600 100.00 96.39 98.43 101.28 95.86 109.77 Unregistered Sales of Equity Securities and Use of Proceeds None.
Stock Performance Graph The following graph sets forth the cumulative total stockholder return to RXO’s stockholders for the period beginning November 1, 2022, the date of the Separation, through December 31, 2022, as well as the corresponding returns on the Dow Jones Transportation Average and S&P 400 MidCap index.
Stock Performance Graph The following graph sets forth the cumulative total stockholder return to RXO’s stockholders for the period beginning November 1, 2022, the date of the Separation, through December 31, 2023, as well as the corresponding returns on the Dow Jones Transportation Average and S&P SmallCap 600 index.
We have never declared or paid cash dividends on our common stock. Any determination to pay dividends on our common stock will be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors considers relevant.
Any determination to pay dividends on our common stock will be at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors considers relevant.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES On November 1, 2022, our common stock began regular-way trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “RXO.” On February 22, 2023, there were approximately 90 registered holders of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information On November 1, 2022, our common stock began regular-way trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “RXO.” As of February 8, 2024, there were approximately 97 registered holders of our common stock.
Removed
The stock performance assumes $100 was invested on November 1, 2022, in our common stock and each index, including reinvestment of dividends through December 31, 2022.
Added
Dividends We have never declared or paid cash dividends on our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

48 edited+16 added−32 removed28 unchanged
Biggest changeRXO has one reportable segment. 31 Table of Contents Results of Operations Years Ended December 31, Percent of Revenue (Dollars in millions) 2022 2021 2020 2022 2021 2020 Revenue $ 4,796 $ 4,689 $ 3,357 100.0 % 100.0 % 100.0 % Cost of transportation and services (exclusive of depreciation and amortization) 3,624 3,681 2,568 75.6 % 78.5 % 76.5 % Direct operating expense (exclusive of depreciation and amortization) 226 192 174 4.7 % 4.1 % 5.2 % Sales, general and administrative expense 640 539 455 13.3 % 11.5 % 13.6 % Depreciation and amortization expense 86 81 76 1.8 % 1.7 % 2.3 % Transaction and integration costs 84 2 14 1.8 % — % 0.4 % Restructuring costs 13 2 10 0.3 % — % 0.3 % Operating income 123 192 60 2.6 % 4.1 % 1.8 % Other expense — 1 3 — % — % 0.1 % Interest expense, net 4 — — 0.1 % — % — % Income before income taxes 119 191 57 2.5 % 4.1 % 1.7 % Income tax provision 27 41 14 0.6 % 0.9 % 0.4 % Net income $ 92 $ 150 $ 43 1.9 % 3.2 % 1.3 % Year Ended December 31, 2022 Compared with Year Ended December 31, 2021 Revenue for 2022 increased by 2.3% to $4.8 billion, from $4.7 billion in 2021.
Biggest changeRXO has one reportable segment. 32 Table of Contents Results of Operations Years Ended December 31, Percent of Revenue (Dollars in millions) 2023 2022 2021 2023 2022 2021 Revenue $ 3,927 $ 4,796 $ 4,689 100.0 % 100.0 % 100.0 % Cost of transportation and services (exclusive of depreciation and amortization) 2,967 3,624 3,681 75.6 % 75.6 % 78.5 % Direct operating expense (exclusive of depreciation and amortization) 235 226 192 6.0 % 4.7 % 4.1 % Sales, general and administrative expense 591 640 539 15.0 % 13.3 % 11.5 % Depreciation and amortization expense 67 86 81 1.7 % 1.8 % 1.7 % Transaction and integration costs 12 84 2 0.3 % 1.8 % — % Restructuring costs 16 13 2 0.4 % 0.3 % — % Operating income 39 123 192 1.0 % 2.6 % 4.1 % Other expense 3 — 1 0.1 % — % — % Interest expense, net 32 4 — 0.8 % 0.1 % — % Income before income taxes 4 119 191 0.1 % 2.5 % 4.1 % Income tax provision — 27 41 — % 0.6 % 0.9 % Net income $ 4 $ 92 $ 150 0.1 % 1.9 % 3.2 % Year Ended December 31, 2023 Compared with Year Ended December 31, 2022 Revenue for 2023 decreased by 18.1% to $3.9 billion, from $4.8 billion in 2022.
The Company believes the assumptions regarding allocations of XPO corporate expenses are reasonable. Nevertheless, the consolidated financial statements may not reflect the results of operations, financial position and cash flows had the Company been a standalone entity during the periods presented.
The Company believes the assumptions regarding allocations of XPO corporate expenses are reasonable. Nevertheless, the consolidated financial statements may not reflect the results of operations, cash flows and financial position had the Company been a standalone entity during the periods presented.
The primary use of cash from financing activities in 2022 was $621 million in net transfers to XPO in connection with the Separation. The source of cash from financing activities in 2022 was the issuance of long-term debt of $451 million, offset by payment of debt issuance costs of $9 million.
The primary use of cash from financing activities in 2022 was $621 million in net transfers to XPO in connection with the Separation. The primary source of cash from financing activities in 2022 was the issuance of long-term debt of $451 million, offset by payment of debt issuance costs of $9 million.
In addition, we offer technology-enabled managed expedite services that automate transportation procurement for time-critical freight moved by independent 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.
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.
For the periods ended after the Separation, the Company will file a consolidated U.S. federal income tax return as well as state and local income tax returns. The Company’s foreign income tax returns are filed on a full-year basis. The Company’s consolidated financial statements include the accounts of RXO, Inc. and its majority-owned subsidiaries.
For the periods ended after the Separation, the Company will file a consolidated U.S. federal income tax return as well as certain state and local income tax returns. The Company's foreign tax returns are filed on a full-year basis. The Company’s consolidated financial statements include the accounts of RXO, Inc. and its majority-owned subsidiaries.
The components of the net transfers to and from XPO include certain costs allocated from XPO Corporate functions, income tax expense, certain cash receipts and payments made on behalf of RXO and general financing activities.
The components of the net transfers to and from XPO include certain costs allocated from XPO's corporate functions, income tax expense, certain cash receipts and payments made on behalf of RXO and general financing activities.
The majority of these allocated costs are recorded within Sales, general and administrative expense; Depreciation and amortization expense; and Transaction and integration costs in the Consolidated Statements of Operations.
The majority of these allocated costs are recorded within Sales, general and administrative expense; Depreciation and amortization expense; Transaction and integration costs; and Restructuring costs in the Consolidated Statements of Operations.
RXO is permitted to redeem some or all of the Notes prior to their maturity at redemption prices described in the indenture governing the Notes. The Notes were issued at a price of 98.962% of par. Loan Covenants and Compliance As of December 31, 2022, we were in compliance with the covenants and other provisions of our debt agreements.
RXO is permitted to redeem some or all of the Notes prior to their maturity at redemption prices described in the indenture governing the Notes. The Notes were issued at a price of 98.962% of par. Loan Covenants and Compliance As of December 31, 2023, we were in compliance with the covenants and other provisions of our debt agreements.
For our 2022 goodwill assessment, we performed a quantitative analysis for our reporting units using a combination of income and market approaches. As of November 30, 2022 we completed our annual impairment tests for goodwill with all of our reporting units having fair values in excess of their carrying values, resulting in no impairment of goodwill.
For our 2023 goodwill assessment, we performed a quantitative analysis for our reporting units using a combination of income and market approaches. As of November 30, 2023 we completed our annual impairment tests for goodwill with all of our reporting units having fair values in excess of their carrying values, resulting in no impairment of goodwill.
The level and the timing of the Company’s capital expenditures within these categories can vary as a result of a variety of factors outside of our control, such as the timing of new contracts and availability of labor and materials.
The level and the timing of the Company’s capital expenditures within these categories can vary as a result of a variety of factors outside of our control, such as the timing of new contracts and availability of labor and equipment.
Sales, general and administrative expense (“SG&A”), including the allocated costs of XPO, 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.
Sales, general and administrative expense (“SG&A”), including the allocated costs of XPO prior to the Separation, 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.
Direct operating expense (exclusive of depreciation and amortization) is composed of 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.
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.
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 160 countries and territories. The Separation On November 1, 2022, we completed the separation from XPO, which we refer to as the Separation.
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. 30 Table of Contents The Separation On November 1, 2022, we completed the separation from XPO, which we refer to as the Separation.
This section of this Annual Report generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
This section of this Annual Report generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
See Note 9 — Debt to the consolidated financial statements for additional information. In addition, we have obligations for agreements to purchase goods or services entered into in the ordinary course of business that are enforceable and legally binding. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with GAAP.
In addition, we have obligations for agreements to purchase goods or services entered into in the ordinary course of business that are enforceable and legally binding. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with GAAP.
New Accounting Standards Information related to new accounting standards is included in Note 2 — Basis of Presentation and Significant Accounting Policies .
New Accounting Standards Information related to new accounting standards is included in Note 2 — Basis of Presentation and Significant Accounting Policies . 37 Table of Contents
The total net effect of the cash settlement of these transactions is reflected in the Consolidated Statements of Cash Flows as a financing activity and in the Consolidated Balance Sheets as XPO investment.
The total net effect of the cash settlement of these transactions is reflected in the Consolidated Statements of Cash Flows as a financing activity and in the Consolidated Statements of Changes in Equity as XPO investment.
Notable factors driving 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 industry tailwinds. As of December 31, 2022, we had approximately 123,000 carriers in our North American truck brokerage network, and access to more than 1.5 million trucks.
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 December 31, 2023, we had approximately 115,000 carriers in our North American truck brokerage network, and access to more than 1.4 million trucks.
Insurance We participate in a combination of self-insurance programs and purchased insurance that are managed to provide for the costs of medical, casualty, liability, vehicular, cargo, workers’ compensation, cyber risk and property claims.
Insurance We participate in a combination of self-insurance programs and purchased insurance that are managed to provide for the costs of medical, casualty, liability, vehicular, cargo, workers’ compensation, cyber risk and property claims. Insurance coverage levels are adjusted annually based on risk tolerance and premium expense.
The increase in interest expense in 2022 as compared to 2021 is primarily due to interest incurred on borrowings made in connection with the Separation in the fourth quarter. Our effective income tax rates were 22.6% and 21.4% in 2022 and 2021, respectively.
The increase in interest expense in 2023 as compared to 2022 is primarily due to a full year of interest incurred in 2023 on borrowings made in connection with the Separation in the fourth quarter of 2022. Our effective income tax rates were (13.0)% and 22.6% in 2023 and 2022, respectively.
Insurance coverage levels are adjusted annually based on risk tolerance and premium expense. 36 Table of Contents Liabilities for the risks we retain, including estimates of claims incurred but not reported, are not discounted and are estimated, in part, by considering retention levels, historical cost experience, demographic and severity factors, and judgments about current and expected levels of cost per claim.
Liabilities for the risks we retain, including estimates of claims incurred but not reported, are not discounted and are estimated, in part, by considering retention levels, historical cost experience, demographic and severity factors, and judgments about current and expected levels of cost per claim.
Net proceeds from the issuance of the Notes and the incurrence of the Term Loan, together with cash on RXO's balance sheet, were used to fund a net cash distribution of $604 million from RXO to XPO, in the fourth quarter of 2022.
Net proceeds from the issuance of the Notes and the incurrence of the Term Loan, together with cash on RXO's balance sheet, were used to fund a net cash distribution of $604 million from RXO to XPO, in the fourth quarter of 2022. Contractual Obligations We lease certain facilities and equipment under non-cancellable operating lease arrangements.
For the year ended December 31, 2021, our effective tax rate differs from the U.S. corporate income tax rate of 21% due to state income taxes within the United States, partially offset by a tax benefit of $5 million from changes in reserves for uncertain tax positions.
For the year ended December 31, 2023, our effective tax rate differs from the U.S. corporate income tax rate of 21% due to a tax benefit of $2 million from changes in reserves for uncertain tax positions.
Prior to the Separation, the historical results of operations included allocations of XPO costs and expenses including XPO’s corporate function which incurred a variety of expenses including, but not limited to, information technology, human resources, accounting, sales and sales operations, procurement, executive services, legal, corporate finance and communications.
In connection with the Separation, the Company’s assets and liabilities were transferred to the Company on a carry-over basis. 31 Table of Contents Prior to the Separation, the historical results of operations included allocations of XPO costs and expenses including XPO’s corporate function which incurred a variety of expenses including, but not limited to, information technology, human resources, accounting, sales and sales operations, procurement, executive services, legal, corporate finance and communications.
The increase in our effective income tax rate for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily driven by reduced tax benefit resulting from changes in reserves for uncertain tax positions.
The change in our effective income tax rate for the year ended December 31, 2023 compared to the year ended December 31, 2022 was driven primarily by a tax benefit of $2 million realized in 2023 from changes in reserves for uncertain tax positions.
Impact of Inflation Inflation can have a negative impact on our operating costs. A prolonged period of inflation could cause interest rates, fuel, wages and other costs to increase, which would adversely affect our results of operations unless our pricing to our customers correspondingly increases.
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.
The combined financial statements for all periods presented prior to the Separation are now also referred to as “consolidated financial statements,” and have been prepared under the U.S. generally accepted accounting principles (“GAAP”).
The combined financial statements for all periods presented prior to the Separation are now also referred to as “consolidated financial statements,” and have been prepared under the U.S. generally accepted accounting principles (“GAAP”). Cost of transportation and services (exclusive of depreciation and amortization) primarily includes the cost of providing or procuring freight transportation for RXO customers.
We believe that our existing liquidity and sources of capital are sufficient to support our operations over the next 12 months. Capital Expenditures Our 2022 capital expenditures include capital associated with investments in technology and equipment.
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 2023 capital expenditures include capital associated with strategic investments in technology, equipment and real estate.
Prior to the Separation, the Company’s historical assets and liabilities presented were wholly owned by XPO and were reflected on a historical cost basis. 30 Table of Contents In connection with the Separation, the Company’s assets and liabilities were transferred to the Company on a carry-over basis.
Prior to the Separation, the Company’s historical assets and liabilities presented were wholly owned by XPO and were reflected on a historical cost basis.
We are the largest provider of outsourced last mile transportation for heavy goods in the United States, 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. 29 Table of Contents 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 the largest provider of outsourced last mile transportation for heavy goods in the United States, 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.
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.
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.
Cash Flow Activity for the Years Ended December 31, 2022 and 2021 Our cash flows from operating, investing and financing activities are summarized as follows: Years Ended December 31, (In millions) 2022 2021 $ Change % Change Net cash provided by operating activities $ 310 $ 155 $ 155 100.0 % Net cash used in investing activities (56) (38) (18) (47.4) % Net cash used in financing activities (183) (158) (25) (15.8) % Effect of exchange rates on cash, cash equivalents and restricted cash (2) — (2) — % Net increase (decrease) in cash and cash equivalents $ 69 $ (41) $ 110 268.3 % 34 Table of Contents Operating Activities Cash flows provided by operating activities for 2022 increased by $155 million compared with 2021.
Cash Flow Activity Our cash flows from operating, investing and financing activities are summarized as follows: Years Ended December 31, (In millions) 2023 2022 $ Change % Change Net cash provided by operating activities $ 89 $ 310 $ (221) (71.3) % Net cash used in investing activities (66) (56) (10) (17.9) % Net cash used in financing activities (117) (183) 66 36.1 % Effect of exchange rates on cash, cash equivalents and restricted cash 1 (2) 3 150.0 % Net increase (decrease) in cash and cash equivalents $ (93) $ 69 $ (162) 234.8 % 35 Table of Contents Net cash provided by operating activities for 2023 decreased by $221 million compared with 2022.
We measure goodwill impairment, if any, at the amount a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill. Our reporting units are our operating segments or one level below our operating segments for which discrete financial information is prepared and regularly reviewed by segment management. We have six reporting units.
Our reporting units are our operating segments or one level below our operating segments for which discrete financial information is prepared and regularly reviewed by segment management. We have six reporting units.
Our ability to fund our operations and anticipated capital needs are reliant upon the generation of cash from operations, supplemented as necessary by periodic utilization of our revolving credit facility. Our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures, repayment of borrowings and strategic business development transactions.
Liquidity and Capital Resources Overview Our ability to fund our operations and anticipated capital needs are reliant upon the generation of cash from operations, supplemented as necessary by utilization of our revolving credit facility.
Of the total restructuring costs incurred in 2022, $10 million was related to severance costs, $2 million was related to facilities costs, and $1 million was related to contract termination costs. All restructuring costs incurred in 2021 were related to severance costs. Interest expense primarily consists of interest related to indebtedness for money borrowed and finance lease obligations.
Restructuring costs in 2023 and 2022 were $16 million and $13 million, respectively, and primarily comprised severance costs. Interest expense primarily consists of interest related to indebtedness for money borrowed and finance lease obligations.
See Note 7 — Leases to the consolidated financial statements for additional information. As of December 31, 2022, we had $355 million of the Notes outstanding with interest payable semiannually in cash in arrears on May 15 and November 15 of each year, beginning May 15, 2023.
As of December 31, 2023, we had $355 million of the Notes outstanding with interest payable semiannually in cash in arrears on May 15 and November 15 of each year, beginning May 15, 2023. The Notes mature on November 15, 2027, unless earlier repurchased or redeemed, if applicable.
We allocate goodwill to our reporting units for the purpose of impairment testing. We evaluate goodwill for impairment annually, or more frequently if an event or circumstance indicates an impairment loss may have been incurred.
We evaluate goodwill for impairment annually, or more frequently if an event or circumstance indicates an impairment loss may have been incurred. We measure goodwill impairment, if any, at the amount a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill.
Overview RXO, Inc. is a high-performing brokered transportation platform defined by cutting-edge technology and a nimble, asset-light business model, with the largest component being our core truck brokerage business.
Overview RXO, Inc. 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.
Financial Condition The following table summarizes our asset and liability balances as of December 31, 2022 and 2021: December 31, (In millions) 2022 2021 $ Change % Change Total current assets $ 1,029 $ 1,083 $ (54) (5.0) % Total long-term assets 1,002 985 17 1.7 % Total current liabilities 823 816 7 0.9 % Total long-term liabilities 621 182 439 241.2 % The decrease in current assets from December 31, 2021 to December 31, 2022 primarily reflects the impact of decreased accounts receivable, driven by increased collections and a decrease in revenue in the fourth quarter of 2022 as compared to 2021, offset by an increase in cash and cash equivalents.
Financial Condition The following table summarizes our asset and liability balances as of December 31, 2023 and 2022: December 31, (In millions) 2023 2022 $ Change % Change Total current assets $ 796 $ 1,029 $ (233) (22.6) % Total long-term assets 1,029 1,002 27 2.7 % Total current liabilities 682 823 (141) (17.1) % Total long-term liabilities 549 621 (72) (11.6) % Total assets decreased by $206 million from December 31, 2022 to December 31, 2023, driven primarily by a $157 million decrease in accounts receivable as a result of a decrease in revenue due to decreased rates and a $93 million decrease in cash and cash equivalents as a result of the payoff of the Term Loan, partially offset by a $36 million increase in operating lease assets.
Loans under the Revolver bear interest at a fluctuating rate plus an applicable margin calculated based on the Company's credit ratings. There were no amounts outstanding under the Revolver as of December 31, 2022. 33 Table of Contents Term Loan Facilities On October 18, 2022, we entered into a five-year $100 million unsecured term loan facility (the “Term Loan”).
Loans under the Revolver bear interest at a fluctuating rate plus an applicable margin calculated based on the Company's credit ratings. There was $5 million outstanding under the Revolver as of December 31, 2023.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Annual Report and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Exhibit 99.1 to our Registration Statement on Form 10, as amended, declared effective on October 17, 2022.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this Annual Report and can be found in Part II, Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operation s ” in our Annual Report on Form 10-K for the year ended December 31, 2022.
XPO stockholders received one share of RXO common stock for every share of XPO common stock held at the close of business on the record date. RXO is now a standalone publicly traded company.
XPO stockholders received one share of RXO common stock for every share of XPO common stock held at the close of business on the record date. On November 1, 2022, RXO became a standalone publicly-traded company. Notable External Conditions As a leading provider of freight transportation services, our business can be impacted to varying degrees by factors beyond our control.
Direct operating expense (exclusive of depreciation and amortization) in 2022 was $226 million, or 4.7% of revenue, compared with $192 million, or 4.1% of revenue, in 2021.
Direct operating expense (exclusive of depreciation and amortization) of $235 million in 2023 increased $9 million, or 4.0%, from $226 million in 2022. As a percentage of revenue, direct operating expense (exclusive of depreciation and amortization) increased to 6.0% in 2023 compared to 4.7% in 2022 due to deleverage on lower revenue.
Notes On October 25, 2022, we completed an offering of $355 million in unsecured notes (the “Notes” or the "7.50% Notes due 2027").
On November 2, 2023, the Company repaid all of the outstanding obligations in respect of the $100 million principal amount, interest and fees under the Term Loan and terminated the Term Loan. 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 year-over-year increase was driven by a $180 million increase in truck brokerage revenue, due to increased load volume facilitated by our digital platform. Cost of transportation and services (exclusive of depreciation and amortization) in 2022 was $3.6 billion, or 75.6% of revenue, compared with $3.7 billion, or 78.5% of revenue in 2021.
Additionally, revenue generated from our freight forwarding business decreased by $171 million, driven primarily by a decrease in ocean rates and volume. Cost of transportation and services (exclusive of depreciation and amortization) in 2023 was $3.0 billion, or 75.6% of revenue, compared with $3.6 billion, or 75.6% of revenue in 2022.
SG&A was $640 million in 2022, or 13.3% of revenue, compared with $539 million, or 11.5% of revenue, in 2021. The year-over-year increase in SG&A as a percentage of revenue primarily resulted from higher compensation-related costs of 1.5 percentage points in 2022 as compared to 2021.
SG&A of $591 million in 2023 decreased $49 million, or 7.7%, from $640 million in 2022. As a percentage of revenue, SG&A increased to 15.0% in 2023 compared to 13.3% in 2022 due to higher compensation-related costs of 1.5 percentage points reflecting deleverage on lower revenue and incremental corporate costs of operating RXO as a standalone public company.
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.
Our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures, repayment of borrowings, share repurchases and strategic business development transactions. The timing and magnitude of our growth and working capital needs can vary and may positively or negatively impact our cash flows.
Additionally, disruptions in supply chains for industrial materials and supplies, such as semiconductor chips, have impacted some of the end-market activities that create demand for our services. We cannot predict how long these dynamics will last, or whether future challenges, if any, will adversely affect our results of operations.
The COVID-19 pandemic may continue to impact overall economic activity, customer sectors served by our industry, supply chains and labor markets. We cannot predict how long these dynamics will last, or whether any future resurgences will adversely affect our results of operations.
Removed
Based on 2021 revenues, we are the fourth largest broker of full truckload freight transportation in the United States, and have approximately 4% share of the entire $88 billion brokered truckload industry. Our truck brokerage business has a variable cost structure with robust free cash flow conversion and a long track record of generating a high return on invested capital.
Added
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.
Removed
On November 1, 2022, regular-way trading of RXO’s common stock commenced on the New York Stock Exchange under the ticker symbol “RXO.” The Separation was completed under a Separation and Distribution Agreement and various other agreements that govern aspects of our relationship with XPO, including, but not limited to the TMA, EMA, TSA and IPLA.
Added
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.
Removed
See Note 3 — The Separation to our consolidated financial statements for additional information. Impacts of COVID-19 and Other Notable External Conditions As a leading provider of freight transportation services, our business can be impacted to varying degrees by factors beyond our control.
Added
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.
Removed
The COVID-19 pandemic that emerged in 2020 affected, and may continue to affect, economic activity broadly and customer sectors served by our industry. Labor shortages, particularly a shortage of truck drivers, and equipment shortages continue to present challenges to many transportation-related industries.
Added
The year-over-year decrease was driven primarily by a $571 million decrease in revenue generated from our truck brokerage business, as a result of a 28% reduction in revenue per load, which was impacted by a combination of transportation market rates, fuel prices, length of haul and freight mix. The decline was partially offset by a 12% increase in load volume.
Removed
To date, the totality of the actions we have taken during the pandemic, and continue to take, have mitigated the impact on our profitability relative to the impact on our revenue and volumes, while our strong liquidity and disciplined capital management enable us to continue to invest in growth initiatives.
Added
In 2023, we experienced (i) lower transportation costs as a percentage of revenue in last mile and (ii) an improvement in mix in our freight forwarding business.
Removed
Regarding the war between Russia and Ukraine, we have no direct exposure to those geographies. We cannot predict how global supply chain activities or the economy at large may be impacted by a prolonged war in Ukraine or sanctions imposed in response to the war, or whether future conflicts, if any, may adversely affect our results of operations.
Added
This was offset by a 3.0 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 year.
Removed
During 2022, the transportation industry’s truck driver shortage, together with rising fuel prices, resulted in higher transportation procurement costs to meet growing demand, which costs were largely offset by mechanisms in our customer contracts, including fuel surcharge clauses and general rate increases. An economic recession could depress activity levels and adversely affect our results of operations.
Added
This was partially offset by cost savings from restructuring actions executed in 2023, which primarily comprised employee severance. We anticipate the restructuring actions will result in cumulative annualized net cost savings of approximately $32 million. Depreciation and amortization expense in 2023 was $67 million, compared with $86 million in 2022.
Removed
Third-party transportation costs as a percentage of revenue decreased year-over-year by 2.8 percentage points, primarily due to our ability to purchase transportation services at lower cost as the transportation market softened, while the majority of our revenue reflected fixed terms on customer contracts established in stronger rate environments prior to 2022.
Added
The year-over-year reduction was driven by (i) a decrease in intangible asset amortization expense as a result of a customer relationship intangible asset being fully amortized in December 2022 and (ii) a decrease in depreciation for our allocated share of XPO’s corporate overhead. 33 Table of Contents Transaction and integration costs in 2023 and 2022 were $12 million and $84 million, respectively, and primarily comprised spin-off related costs.
Removed
The year-over-year increase as a percentage of revenue was primarily the result of higher compensation-related costs and higher facilities and maintenance costs, which increased as a percentage of revenue by approximately 0.3 and 0.2 percentage points, respectively.
Added
On November 2, 2023, the Company exercised a feature to increase the total commitments under its Revolver from $500 million to $600 million. 34 Table of Contents Term Loan Facilities On October 18, 2022, we entered into a five-year $100 million unsecured term loan facility (the “Term Loan”).
Removed
Depreciation and amortization expense in 2022 was $86 million, compared with $81 million in 2021. Transaction and integration costs in 2022 were $84 million, compared with $2 million in 2021.
Added
Total liabilities decreased by $213 million from December 31, 2022 to December 31, 2023, driven primarily by a decrease in third party transportation costs due to decreased rates and a $95 million decrease in long-term debt as a result of the payoff of the Term Loan.
Removed
Transaction and integration costs for 2022 and 2021 are primarily comprised of spin-off related costs. 32 Table of Contents Restructuring costs in 2022 were $13 million, compared with $2 million in 2021, and are primarily composed of spin-off related costs.
Added
The decrease in cash provided by operating activities reflects the impact of an $88 million decrease in net income between periods and changes in working capital. The change in working capital was driven primarily by the balance sheet impact of decreased revenues and cost of third party transportation between periods.
Removed
Liquidity and Capital Resources Overview Prior to the Separation on November 1, 2022, the Company participated in XPO’s centralized treasury model, which included cash pooling and other intercompany financing arrangements. Prior to the Separation, we generated positive cash flows from operations. We have generated and expect to continue generating positive cash flows from operations after the Separation.
Added
Investing activities used $66 million of cash in 2023 compared with $56 million of cash used in 2022. The primary use of cash in both periods was to purchase property and equipment. Financing activities used $117 million of cash in 2023 compared with using $183 million of cash in 2022.
Removed
The Term Loan bears interest at a fluctuating rate plus an applicable margin calculated based on the Company's credit ratings, payable quarterly.
Added
The primary uses of cash from financing activities in 2023 were (i) $104 million for debt and finance lease repayments, driven primarily by the payoff of the Term Loan and (ii) $14 million for payments of tax withholdings related to vesting of stock compensation awards.
Removed
Beginning with the fiscal quarter ending March 31, 2025, the Term Loan will amortize on a quarterly basis in an amount equal to (i) 5% per annum for the first eight fiscal quarters ending on or after such date and (ii) 10% per annum for each fiscal quarter ending thereafter. The Term Loan matures on November 1, 2027.
Added
As of December 31, 2023, our outstanding discounted obligations under operating and finance leases were $199 million and $6 million, respectively. See Note 6 — Leases to the consolidated financial statements for additional information.
Removed
Total long-term assets reflect an increase in operating lease assets associated with new lease contracts entered into during 2022. The increase in current liabilities is primarily driven by an increase in accrued salaries and wages. The increase in long-term liabilities reflects the issuance of the Term Loan and Notes in 2022.
Added
As of December 31, 2023, we had $5 million outstanding under the Revolver, with interest payable monthly or quarterly, depending on RXO’s upfront election. Borrowings under the Revolver are payable, at our option, at any time prior to or at maturity on October 18, 2027. See Note 8 — Debt to the consolidated financial statements for additional information.
Removed
The increase is primarily the result of changes in working capital, which generated $114 million in cash in 2022 compared to using $90 million in cash in 2021, primarily due to revenue growth rate deceleration in 2022 driven by a reduction in freight pricing in the second half of the year.
Added
Although actual results may differ from estimated results, we believe the estimates are reasonable and appropriate. 36 Table of Contents Evaluation of Goodwill We measure goodwill as the excess of consideration transferred over the fair value of net assets acquired in business combinations. We allocate goodwill to our reporting units for the purpose of impairment testing.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−1 removed2 unchanged
Biggest changeBased on principal balances outstanding at December 31, 2022, a 1% increase or decrease in interest rates on variable-rate debt would increase or decrease our annual interest expense by approximately $1 million.
Biggest changeA 1% increase or decrease in interest rates on variable-rate debt outstanding as of December 31, 2023 would not have a material impact on our annual interest expense.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk related to changes in commodity prices and in the price of diesel fuel purchased for use by third-party carriers who perform the physical freight movements we arrange.
ITEM 7A. 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 for use by third-party carriers who perform the physical freight movements we arrange.
Additionally, a portion of our net assets and income are in non-U.S. dollar currencies and, as such, we are exposed to currency risk from potential changes in the functional currency values of our foreign currency denominated assets, liabilities and cash flows.
Additionally, a portion of our net assets and income are in non-U.S. dollar currencies and, as such, we are exposed to currency risk from potential changes in the functional currency values of our foreign currency denominated assets, liabilities and cash flows. We believe that this foreign currency exchange rate risk will not have a material impact on our financial results.
Removed
We believe that this foreign currency exchange rate risk will not have a material impact on our financial results. 37 Table of Contents

Other RXO 10-K year-over-year comparisons