RXO management in its third quarter earnings call, several weeks after the fourth quarter already had begun, said things were not going the way the brokerage would have desired. Several key numbers in RXO’s fourth quarter earnings released Friday morning backed that up.
Various numbers showed just how tough the quarter was for RXO, the latest data in line with challenging results reported by standalone brokers and the brokerages within trucking companies. Those various results show what happens when the freight market suddenly gets stronger, as it did in the last four to five weeks of the quarter, and 3PLs face the reality of filling earlier booked capacity with higher-priced truckload rates.
Adjusted EBITDA for RXO (NYSE: RXO) in the quarter was $17 million. That was down from $32 million in the third quarter but also was down from $42 million in the fourth quarter of 2024. The adjusted EBITDA margin in the third quarter was 2.3%; in the fourth quarter, it dropped to 1.2%. A year ago, the EBITDA margin was 2.5%.
The outlook isn’t much better. RXO said it expects its first quarter adjusted EBITDA will be between $5 million and $12 million, which would be a downturn from the fourth quarter. It would also be far less than the $22 million in the first quarter of 2025.
1Q Brokerage volume to drop
RXO said its Brokerage volume in the first quarter would be down 5% to 10% from a year earlier.
“In the fourth quarter, tightening in the freight market accelerated, driven by continued reductions in truckload capacity,” CEO Drew Wilkerson said in a prepared statement released by RXO with its earnings. “This impacted our buy rates and squeezed our Brokerage gross margin.”
The squeeze was clear in looking at sequential data on revenue versus the cost of transportation. In the third quarter, RXO had revenue of $1.42 billion and transportation costs of $1.14 billion. In the fourth quarter revenue rose to $1.47 billion, up 3.5% but RXO also saw a 5.2% gain in the cost of transportation to $1.2 billion.
The bottom line GAAP net loss was $46 million in the fourth quarter. That was more than a $25 million GAAP net loss in the fourth quarter of 2024, and $14 million in the third quarter.
It wasn’t just a squeeze in margins that affected RXO. It also reported a decline of 4% year-on-year in brokerage volume. The positive side in that number is that LTL volume was up 31% from a year ago, but truckload brokerage declined 12%.
The brokerage margin at RXO also showed weakness in the fourth quarter, coming in at 11.9%. Sequentially, that was down from 13.5% in the third quarter and 13.2% a year ago.
Weaker gross margin in 1Q
RXO sees a downturn in its gross margin, predicting a first quarter gross margin of between 11% and 13%. The gross margin in the fourth quarter was 14.8%, compared to 15.5% in the fourth quarter of 2024.
With that sort of financial performance, it was no surprise that RXO, in announcing its earnings, tried to play up various positive data. The company said its Managed Transportation unit in the quarter was awarded more than $200 million of freight under management, which allowed an “increase (in) the synergy loads provided to Brokerage.”
But even with that optimistic outlook , Managed Transportation revenue declined to $133 million from $141 million a year ago. That was down sequentially from $137 million.
RXO also used the opportunity to disclose it had replaced a $600 million unsecured revolving credit facility with a $450 million asset-based revolving credit facility. The transaction was completed at some point in the first quarter.
More articles by John Kingston
Werner settlement ready to go in drivers’ lawsuit that dates to 2014
Amazon’s LTL offering reaching out to shippers as possible customers: report
NFI’s Brown, others win another round in dismissed New Jersey indictment
The post First look: Tough market for brokers evident in RXO 4Q earnings appeared first on FreightWaves.
