RXO NYSE: RXO reported second-quarter results that exceeded its prior outlook, as brokerage volume growth, a larger mix of spot freight and stronger-than-expected last-mile stops supported profitability. The company said it expects brokerage momentum to continue into the third quarter, though it also anticipates weaker conditions in its last-mile business.
RXO generated $1.8 billion of revenue in the second quarter, with a 13.9% gross margin, $40 million of adjusted EBITDA and adjusted earnings per share of $0.06, Chief Financial Officer Jamie Harris said. Adjusted EBITDA exceeded the high end of the company’s guidance range, which management attributed to better-than-expected brokerage performance and last-mile stop growth.
Brokerage Gains Driven by Spot Freight
Brokerage revenue rose 32% year over year to $1.3 billion, representing 73% of RXO’s revenue. The increase was primarily driven by higher freight rates and fuel prices, Harris said. Overall brokerage volume increased 2%, including 2% growth in full truckload volume and 3% growth in less-than-truckload volume.
Chairman and CEO Drew Wilkerson said the company gained profitable market share in brokerage, with truckload volumes outperforming the broader market. Chief Strategy Officer Jared Weisfeld said truckload volume outperformed the Cass Freight Shipments Index by 500 basis points during the quarter.
A key contributor was RXO’s rising spot-freight mix. Spot freight represented 42% of truckload volume in the second quarter, up 900 basis points sequentially and 1,500 basis points from a year earlier. Management said spot loads generally produce higher revenue and gross profit per load than contract freight.
Truckload gross profit per load increased 11% sequentially, which Wilkerson described as the company’s largest sequential improvement in four years. Brokerage gross margin, however, declined 70 basis points sequentially to 10.7%, as higher fuel prices created an estimated 90-basis-point headwind. Harris noted that fuel costs are generally passed through over time and can increase revenue without a meaningful corresponding increase in gross profit dollars.
Management said brokerage conditions remained favorable in July. Spot freight reached 50% of truckload volume during the month, while truckload revenue per load rose more than 25% year over year excluding fuel and length-of-haul effects. Weisfeld said July truckload gross profit per load was about 40% above its January level and approximately 20% above the prior-year period.
Complementary Services and Last-Mile Trends
Revenue from complementary services increased 7% year over year to $488 million, with a gross margin of 21.1%. Managed Transportation generated $144 million of revenue, up 1%, while Last Mile generated $344 million, up 9%.
RXO was awarded about $100 million of freight under management in its Managed Transportation business during the second quarter and another $100 million in July, Wilkerson said. The company said these awards can create additional freight opportunities for other RXO business lines. Managed Expedite volume, supported by the automotive business, rose nearly 30% year over year in the quarter.
Last-mile stops increased 3%, surpassing management’s expectation for roughly flat stops despite continued softness in the housing market. Wilkerson said the company gained share among big-and-bulky delivery customers.
For the third quarter, however, RXO expects Last Mile to decline by more than typical seasonal patterns. Weisfeld said the outlook includes an additional $3 million to $5 million sequential headwind from weaker customer demand and higher carrier costs.
Third-Quarter Outlook and Cash Flow
RXO forecast third-quarter adjusted EBITDA of $35 million to $45 million. Management expects truckload and LTL brokerage volumes to grow at low- to mid-single-digit year-over-year rates, with higher spot mix and contract repricing contributing to another sequential improvement in truckload gross profit per load.
Weisfeld said the midpoint of the outlook assumes gross profit per load declines by about 10% from July through the end of September, despite the company’s strong July results. He said a more typical historical cadence could support results at the high end of the range.
The company reported negative adjusted free cash flow of $42 million in the second quarter, primarily due to working-capital usage. Harris said roughly two-thirds of the working-capital impact came from revenue growth, while the remainder reflected greater use of carrier quick-pay programs, particularly in Managed Transportation. RXO expects strong adjusted free-cash-flow conversion in the third quarter as it collects cash associated with second-quarter working capital.
At quarter-end, RXO had $15 million of cash, $350 million of available liquidity and net leverage of 4.1 times last-12-month bank-adjusted EBITDA. Harris said the company expects its leverage ratio to decline significantly by year-end as operating results improve.
Carrier Vetting and Insurance Focus
Management also addressed carrier vetting and insurance, describing both as competitive differentiators amid heightened industry scrutiny. Harris said RXO does not permit conditional carriers on its network, requires active operating authority for at least 90 days, and requires carriers to speak with a member of its carrier team before booking an initial load.
The company said its annual casualty-insurance spending is approximately $15 million to $20 million and that its insurance program includes a $5 million deductible per occurrence. Its current insurance rates are set through the end of 2026, with renewal occurring in late December.
RXO said it expects its insurance renewal outcome to compare favorably with the broader industry because of its carrier-vetting procedures, claims history and coverage levels. Management added that it believes a more selective insurance market could create market-share opportunities as shippers place greater emphasis on carrier oversight, safety and financial stability.
Wilkerson said RXO is continuing to deploy agentic artificial-intelligence tools across its operations. The company processed five times more email spot quotes through its spot-quote agent during the second quarter, while improved freight-matching tools and carrier user experience contributed to a 25% sequential increase in digital carrier offers.
About RXO (NYSE:RXO)
RXO Inc NYSE: RXO is a leading asset-light provider of digital freight brokerage and managed transportation solutions. The company leverages a proprietary technology platform to connect shippers with a network of third-party carriers, enabling optimized route planning, real-time shipment tracking, and dynamic pricing. RXO’s end-to-end service model spans full truckload, less-than-truckload (LTL), intermodal and cross-border freight movements, designed to improve efficiency and reduce transportation costs for its customers.
Operating primarily across North America, RXO serves a diverse base of shippers in industries ranging from retail and consumer goods to manufacturing and automotive.
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