• Total Revenue: $1.7 billion in the fourth quarter.
• Gross Margin: 15.5% in the quarter.
• Adjusted EBITDA: $42 million, with a margin of 2.5%.
• Adjusted Earnings Per Share (EPS): $0.06.
• Brokerage Revenue: $1.3 billion, representing 75% of total revenue.
• Brokerage Gross Margin: 13.2%.
• Complementary Services Revenue: $431 million, 25% of total revenue.
• Complementary Services Gross Margin: 21.1%.
• Last Mile Revenue: $290 million, with stops growing by 15% year-over-year.
• Managed Transportation Revenue: $141 million, down 8% year-over-year.
• Adjusted Free Cash Flow: $6 million, representing a 14% conversion from adjusted EBITDA.
• Cash on Balance Sheet: $35 million at the end of the quarter.
• Annualized Cost Synergies: Expected to be at least $50 million.

• Warning! GuruFocus has detected 4 Warning Sign with RXO.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• RXO Inc (NYSE:RXO) is ahead of schedule with the integration of Coyote Logistics, expecting at least $50 million in annualized cost synergies.
• The company's Managed Transportation sales pipeline has grown to nearly $2 billion, indicating strong future potential.
• RXO Inc (NYSE:RXO) achieved a 10% sequential increase in brokerage volume from the third quarter, showcasing effective execution.
• Last Mile stops grew by 15% year-over-year, reflecting strong demand and operational efficiency.
• The company has made significant structural improvements, enhancing its long-term earnings power and free cash flow potential.

Negative Points

• RXO Inc (NYSE:RXO) is operating in a soft freight market, impacting gross profit per load and overall financial performance.
• The first quarter is expected to see a mid to high single-digit decline in combined brokerage volume year-over-year.
• Coyote's historical gross margin and EBITDA margin are lower than RXO Inc (NYSE:RXO), affecting overall profitability comparisons.
• Managed Transportation revenue declined by 8% year-over-year, primarily due to lower automotive volume.
• The company anticipates a larger-than-normal seasonal decline in Last Mile performance into the first quarter.

Q & A Highlights

Q: Can you define the core RXO EBITDA shifts over the past year and discuss the Coyote contribution? Also, have there been any recent changes in the market outlook? A: Jared Weisfeld, Chief Strategy Officer, explained that RXO typically sees a seasonal uplift from Q1 to Q2 across all lines of business. The company is moving into an inflationary rate environment with contract rates expected to rise. Recent improvements in buy rates have been a tailwind for gross profit per load, which is expected to increase throughout the first quarter.

Q: What is your confidence level in volume growth for 2025, and how might tariffs affect your business? A: Drew Wilkerson, CEO, expressed confidence in volume growth based on early bid season results and customer feedback. Regarding tariffs, short-term implementation could boost business by pulling inventory forward, while long-term tariffs could create a tailwind by encouraging nearshoring to the U.S.

Q: Can you provide more details on the incremental synergies and integration progress with Coyote? A: James Harris, CFO, noted that synergy targets have doubled to $50 million due to opportunities in technology, real estate consolidation, and procurement activities. Drew Wilkerson highlighted the importance of building trust and relationships with employees to retain key talent during the integration.

Q: How has Coyote's operating performance been since the acquisition, and what are the transaction and integration costs? A: Drew Wilkerson stated that Coyote has performed well relative to market conditions, and the acquisition has increased RXO's volume by 125%. James Harris mentioned that transaction and integration costs are primarily related to technology, real estate consolidation, and restructuring, with a total expected cost of $40 million to $50 million for the year.

Q: What are the key factors affecting the Q1 guidance range of $20 million to $30 million in adjusted EBITDA? A: Jared Weisfeld indicated that gross profit per load and cost of purchase transportation are the main variables. The company expects gross profit per load to improve as the quarter progresses, with cost management being crucial to achieving the higher end of the guidance range.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.