RXO Second-Quarter 2025 Financial Results [Financial and Operational Highlights](index=1&type=section&id=Financial%20and%20Operational%20Highlights) RXO achieved 1% brokerage volume growth, a 45% LTL volume surge, and 17% Last Mile stop growth in Q2 2025, improving cash sequentially - Brokerage business outperformed the market, with volume growing **1% year-over-year**[2](index=2&type=chunk) - Less-than-truckload (LTL) volume was a key driver, growing **45% year-over-year**[2](index=2&type=chunk)[6](index=6&type=chunk) - Last Mile segment achieved **17% year-over-year stop growth**, its fourth consecutive quarter of double-digit growth[2](index=2&type=chunk)[6](index=6&type=chunk) - The company is realizing early benefits from its newly combined carrier and coverage operations, achieving a Brokerage gross margin of **14.4%**[2](index=2&type=chunk)[6](index=6&type=chunk) - Cash performance was strong, with the cash balance increasing sequentially from Q1 2025[2](index=2&type=chunk)[6](index=6&type=chunk) [Companywide Financial Performance](index=1&type=section&id=Companywide%20Financial%20Performance) RXO's Q2 2025 revenue grew significantly, reporting a GAAP net loss, but achieving increased adjusted net income and adjusted EBITDA Q2 2025 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue ($) | $1.4 billion | $930 million | | Gross Margin | 17.8% | 19.0% | | GAAP Net Loss ($) | $(9) million | $(7) million | | Adjusted Net Income ($) | $7 million | $4 million | | Adjusted EBITDA ($) | $38 million | $28 million | | Adjusted EBITDA Margin | 2.7% | 3.0% | | GAAP Diluted Loss Per Share ($) | $(0.05) | $(0.06) | | Adjusted Diluted EPS ($) | $0.04 | $0.03 | - The Q2 2025 GAAP net loss included **$10 million** in transaction, integration, restructuring, and other costs[4](index=4&type=chunk) - Adjustments for transaction, integration, restructuring costs, and amortization of intangibles impacted GAAP earnings per share by **$0.09**, net of tax[5](index=5&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) RXO's Q2 2025 segment performance was mixed, with Brokerage volume up 1% due to LTL, and Complementary Services achieving 17% Last Mile stop growth [Brokerage](index=2&type=section&id=Brokerage) The Brokerage segment's volume grew year-over-year, fueled by LTL volume offsetting a full truckload decline, achieving a solid gross margin Brokerage Segment Performance (Q2 2025 vs Q2 2024) | Metric | Change | | :--- | :--- | | Overall Volume | +1% YoY | | Less-than-truckload Volume | +45% YoY | | Full Truckload Volume | -12% YoY | - Brokerage gross margin was **14.4%** in the second quarter[7](index=7&type=chunk) [Complementary Services](index=2&type=section&id=Complementary%20Services) Complementary Services saw Last Mile stops grow significantly, with Managed Transportation providing synergy loads to Brokerage, and achieving a strong gross margin - Last Mile stops grew by **17% year-over-year**[8](index=8&type=chunk) - Managed Transportation continued to increase synergy loads provided to the Brokerage segment[8](index=8&type=chunk) - Complementary services gross margin was **22.8%** for the quarter[8](index=8&type=chunk) [Third-Quarter Outlook](index=2&type=section&id=Third-Quarter%20Outlook) RXO anticipates Q3 2025 adjusted EBITDA between $33 million and $43 million, with flat brokerage volume growth and a projected gross margin - Q3 2025 adjusted EBITDA is expected to be between **$33 million** and **$43 million**[9](index=9&type=chunk) - In Brokerage, Q3 2025 overall volume growth is expected to be approximately **flat year-over-year**[9](index=9&type=chunk) - Brokerage gross margin for Q3 2025 is projected to be between **13.5%** and **15.0%**[9](index=9&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) The unaudited condensed consolidated financial statements detail RXO's Q2 2025 net loss, total assets, and net cash provided by operating activities for the first six months [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, RXO generated $1.419 billion in revenue, but increased costs led to a net loss of $9 million Q2 Statement of Operations Highlights (in millions) | Account | Q2 2025 ($) | Q2 2024 ($) | | :--- | :--- | :--- | | Revenue | $1,419 | $930 | | Cost of transportation and services | $1,118 | $700 | | Sales, general and administrative expense | $214 | $154 | | Operating income (loss) | $0 | $0 | | Net loss | $(9) | $(7) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, RXO's balance sheet shows decreased total assets, with significant accounts receivable and goodwill, alongside total liabilities and equity Balance Sheet Summary (in millions) | Account | June 30, 2025 ($) | Dec 31, 2024 ($) | | :--- | :--- | :--- | | Cash and cash equivalents | $18 | $35 | | Total current assets | $1,184 | $1,339 | | Total assets | $3,201 | $3,414 | | Total current liabilities | $880 | $1,065 | | Total liabilities | $1,613 | $1,802 | | Total equity | $1,588 | $1,612 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, net cash from operating activities improved, while investing activities used cash and financing activities provided a net cash inflow Six Months Ended June 30 Cash Flow Summary (in millions) | Activity | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $21 | $2 | | Net cash used in investing activities | $(43) | $(22) | | Net cash provided by financing activities | $4 | $22 | | Net (decrease) in cash | $(16) | $2 | [Supplemental Financial Information](index=8&type=section&id=Supplemental%20Financial%20Information) This section provides detailed breakdowns of revenue by service, GAAP to non-GAAP reconciliations, and gross margin analysis by segment, offering deeper operational insights [Revenue by Service Offering](index=8&type=section&id=Revenue%20by%20Service%20Offering) In Q2 2025, Truck Brokerage was the largest revenue contributor, with Last Mile revenue growing and Managed Transportation revenue seeing a slight decline Q2 Revenue by Service (in millions) | Service | Q2 2025 ($) | Q2 2024 ($) | | :--- | :--- | :--- | | Truck brokerage | $1,025 | $543 | | Last mile | $315 | $265 | | Managed transportation | $142 | $156 | | **Total (after eliminations)** | **$1,419** | **$930** | [Reconciliation of Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) The company reconciles its GAAP net loss to non-GAAP measures, adjusting Q2 2025's GAAP net loss to Adjusted EBITDA and Adjusted Net Income Q2 2025 Reconciliation of Net Loss to Adjusted EBITDA (in millions) | Line Item | Amount ($) | | :--- | :--- | | Net loss | $(9) | | Interest expense, net | $8 | | Income tax benefit | $(1) | | Depreciation and amortization expense | $30 | | Transaction and integration costs | $7 | | Restructuring and other costs | $3 | | **Adjusted EBITDA** | **$38** | Q2 2025 Reconciliation of Net Loss to Adjusted Net Income (in millions) | Line Item | Amount ($) | | :--- | :--- | | Net loss | $(9) | | Amortization of intangible assets | $11 | | Transaction and integration costs | $7 | | Restructuring and other costs | $3 | | Income tax associated with adjustments | $(5) | | **Adjusted net income** | **$7** | [Gross Margin Analysis](index=11&type=section&id=Gross%20Margin%20Analysis) RXO's overall gross margin decreased in Q2 2025, with Truck Brokerage at 14.4% and Complementary Services achieving a higher 22.8% gross margin Q2 Gross Margin as a Percentage of Revenue | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Truck brokerage | 14.4% | 14.7% | | Complementary services | 22.8% | 23.0% | | **Total Company** | **17.8%** | **19.0%** | [Important Disclosures](index=3&type=section&id=Important%20Disclosures) This section provides legal and financial disclosures, explaining non-GAAP measures and including a forward-looking statements disclaimer outlining risks [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) RXO explains its use of non-GAAP financial measures like Adjusted EBITDA and Adjusted EPS to analyze ongoing business operations by excluding non-core items - The company uses non-GAAP measures like adjusted EBITDA and adjusted EPS to facilitate analysis of ongoing business operations and assist with comparisons to prior periods[15](index=15&type=chunk) - Adjustments include transaction and integration costs, restructuring costs, and amortization of acquisition-related intangible assets[16](index=16&type=chunk)[17](index=17&type=chunk) - A reconciliation of the forward-looking Q3 2025 adjusted EBITDA to the corresponding GAAP measure is not available without unreasonable effort due to the variability of reconciling items[18](index=18&type=chunk) [Forward-looking Statements](index=3&type=section&id=Forward-looking%20Statements) This section serves as a legal safe harbor, cautioning that non-historical statements are forward-looking and subject to numerous risk factors - The release contains forward-looking statements regarding outlook, integration with Coyote Logistics, and cash synergies, which are based on current assumptions and are not guarantees of future performance[19](index=19&type=chunk) - Key risks that could affect future results include competition, pricing pressures, economic conditions, fuel price fluctuations, and the ability to successfully integrate the Coyote Logistics acquisition[20](index=20&type=chunk)

Core Viewpoint - RXO is anticipated to report a year-over-year decline in earnings despite an increase in revenues, which could significantly influence its stock price in the near term [1][2]. Earnings Expectations - The upcoming earnings report is expected to show quarterly earnings of $0.02 per share, reflecting a year-over-year decrease of 33.3% [3]. - Revenues are projected to reach $1.45 billion, representing a 56% increase from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has been revised down by 10.53% over the last 30 days, indicating a reassessment by analysts [4]. - The Most Accurate Estimate for RXO is higher than the Zacks Consensus Estimate, resulting in a positive Earnings ESP of +50.00% [12]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive reading indicates a likely earnings beat, particularly when combined with a strong Zacks Rank [10]. - RXO currently holds a Zacks Rank of 4, which complicates the prediction of an earnings beat despite the positive Earnings ESP [12]. Historical Performance - In the last reported quarter, RXO was expected to post a loss of $0.02 per share but actually reported a loss of $0.03, resulting in a surprise of -50.00% [13]. - Over the past four quarters, RXO has only beaten consensus EPS estimates once [14]. Conclusion - RXO does not appear to be a strong candidate for an earnings beat, and investors should consider additional factors when evaluating the stock ahead of the earnings release [17].

Core Viewpoint - The Portnoy Law Firm is investigating potential securities fraud involving RXO, Inc. and may file a class action on behalf of affected investors [1][3]. Group 1: Investigation Details - The investigation focuses on whether RXO and its executives may have violated federal securities laws by issuing materially false or misleading statements or failing to disclose material information in a timely manner [3]. - Investors who purchased RXO securities and suffered losses are encouraged to contact the firm to discuss their legal rights, with no cost or obligation to participate [4]. Group 2: Legal Support for Investors - The Portnoy Law Firm offers complimentary case evaluations and options for investors to pursue claims to recover their losses [2][4]. - The firm has a history of representing investors in claims against corporate wrongdoing, with the founding partner having recovered over $5.5 billion for aggrieved investors [5].

Core Viewpoint - Johnson Fistel, PLLP is investigating RXO, Inc. for potential violations of federal securities laws related to misrepresentation or failure to disclose material information to investors [1] Group 1: Investigation Details - The investigation focuses on whether RXO, Inc. or its officers and directors misrepresented or failed to disclose important information to investors [1] - Individuals who purchased RXO securities and experienced losses are encouraged to join the investigation [2] Group 2: Whistleblower Information - Individuals with nonpublic information about RXO are advised to consider assisting the investigation or utilizing the SEC Whistleblower program, which may offer rewards up to 30% of successful recoveries [3] Group 3: About Johnson Fistel, PLLP - Johnson Fistel, PLLP is a nationally recognized law firm specializing in shareholder rights, with offices across multiple states [4] - The firm has been ranked in the Top 10 Plaintiff Law Firms by ISS Securities Class Action Services in 2024, recovering approximately $90,725,000 for clients [5]

Core Insights - RXO and Triumph have expanded their partnership to provide new financial tools and services aimed at improving efficiency and profitability for carriers [1][3] - RXO Extra | Factoring, powered by Triumph, offers Factoring as a Service™ and LoadPay™, enabling carriers to access quick payments and seamless factoring services [2][3] Company Overview - RXO is a leading provider of asset-light transportation solutions, offering tech-enabled truck brokerage services and complementary solutions across North America [6] - Triumph is a financial and technology company focused on modernizing freight transactions through payments, factoring, and banking solutions [6][7] Service Details - RXO Extra | Factoring allows carriers to receive same-day payments on approved invoices, available 24/7, enhancing cash flow management [2][3] - LoadPay is a digital banking solution designed specifically for the freight industry, providing fast access to funds and tailored tools for transportation businesses [7] Loyalty Program - RXO Extra™ is a loyalty program that rewards carriers for hauling loads through RXO Connect, offering savings and bonuses as they progress through loyalty tiers [4]

Group 1 - RXO shares increased by 6.3% to close at $16.71, supported by higher trading volume compared to normal sessions, and this follows a 3.4% gain over the past four weeks [1] - RXO has been added to the Russell 2000 Value Index, which contributed to the recent stock price increase [1] - The company is expected to report quarterly earnings of $0.02 per share, reflecting a year-over-year decline of 33.3%, while revenues are projected to be $1.46 billion, an increase of 57.1% from the previous year [2] Group 2 - The consensus EPS estimate for RXO has been revised down by 4.8% over the last 30 days, indicating a negative trend in earnings estimate revisions, which typically does not lead to price appreciation [3] - RXO holds a Zacks Rank of 3 (Hold), indicating a neutral outlook [4] - RXO is part of the Zacks Transportation - Services industry, where another company, Hub Group, closed 4.9% higher at $35.06, with a 1% return over the past month [4]

Summary of RXO Conference Call Company Overview - **Company**: RXO - **Industry**: North American Transportation and Logistics Key Points and Arguments Market Environment - The load-to-truck ratio is currently around **5:1**, with tender rejections at approximately **6:1** [4][5] - The market is experiencing a shift from a capacity problem to a demand problem, with demand currently below **2019 levels** [6] - There is a slight recovery in demand expected as the market stabilizes post-April volatility [9][10] Demand and Capacity Dynamics - Different shippers are exhibiting varied behaviors in terms of ordering, leading to a lack of consensus in the market [11][12] - The technology sector has shown relative strength, while the automotive sector has seen a **26% decline** year-over-year in Q1, impacting gross margins significantly [13][14] Rate Environment - Truckload rates increased by **4%** in Q1, excluding fuel and length of haul, with contract rates up low to mid-single digits year-over-year [19][20] - Spot rates remain below contract rates, indicating a softer market environment [18] Regulatory and Capacity Considerations - Potential regulatory changes regarding cabotage could impact capacity by **low double digits** if implemented [22][23] - Regional dynamics are affecting capacity, particularly in the Southeast due to produce seasonality [27] Integration and Operational Updates - The integration of Coyote is progressing well, with a **4% voluntary turnover** among director-level staff [34] - Early signs of improved gross profit per load are expected as bids are implemented [40] - The company has already cut **$50 million** in costs, with a target of over **$70 million** in total cash synergies [41] Financial Performance and Projections - For Q2, RXO expects adjusted EBITDA between **$30 million to $40 million**, with variability based on volume and gross profit per load [67] - The company anticipates a decline in capital expenditures from **$70 million** in 2025 to about **$50 million** in 2026 [63][64] Last Mile and LTL Business - RXO is the largest player in big and bulky home delivery, with a **24% year-over-year increase** in stops [86] - The LTL segment is expected to provide stability, with a focus on large enterprise customers [95][96] Cash Flow and Capital Allocation - RXO plans to be opportunistic with cash flow, considering options such as debt repayment or share buybacks [100] Industry Outlook - The brokerage industry has seen **20%** of brokerages exit the market over the last two years, indicating a consolidation trend [77] - The company believes brokerage will continue to grow faster than the truckload market, potentially reaching over **30%** of the for-hire industry in the next few years [80] Additional Important Insights - The integration of technology systems is expected to enhance operational efficiency and cost savings [58][59] - The company is focused on maintaining strong relationships with carriers, which has resulted in increased freight opportunities [66] - RXO is exploring both organic growth and potential M&A opportunities in the last mile segment [88]

Investment Rating - The report does not explicitly state an investment rating for the transportation and logistics industry Core Insights - The report highlights a positive trend in U.S. imports, with a 6.1% week-over-week increase as of May 18, outperforming seasonal expectations by 980 basis points and showing a 2.8% year-over-year increase [2] - Spot rates for truckload transportation have surged, with dry van rates increasing by 6.1% week-over-week, outperforming historical averages [3] - There are concerns regarding potential freight demand impacts due to tariffs, with expectations of a flat outlook for dry van spot rates in 2026 [6] Summary by Sections Import & Congestion Monitor - Container bookings from China to the U.S. are at five-year lows, down 27% compared to 2023, indicating subdued future demand [2] - The report notes a recovery in container imports at the Port of LA/LB, which increased by 24% week-over-week [2] Truckload and Rail Data - Spot rates for dry van, reefers, and flatbed have all increased week-over-week, with dry van rates now 4% higher year-over-year [3] - The dry van load-to-truck ratio increased by 57% week-over-week, indicating a tightening market [6] - Rail management teams express skepticism about the feasibility of transcontinental mergers due to regulatory barriers [7] Airfreight & Surface Transportation - Airfreight rates have been monitored closely due to tariff implications, with significant declines observed in key freight lanes, particularly the China-U.S. lane, which fell by 6% week-over-week [10] - The overall airfreight market is experiencing broad-based weakness, with all major lanes underperforming seasonal expectations year-to-date [10] Rail Performance - The report card for railroads indicates varying performance levels, with some railroads rated as excellent while others are fair or poor [9] - Regulatory challenges are highlighted as a significant barrier to potential mergers in the rail industry, with environmental impact studies being particularly burdensome [7]

Summary of Key Points from the Conference Call Industry Overview - **Healthcare Sector**: Anticipation of an Executive Order on drug pricing expected next week, with a probability of over 70% for the implementation of Most Favored Nation (MFN) pricing to reduce the disparity between US and international drug prices [3][9] - **Transportation and Logistics**: Expected reduction in shipments due to tariffs, but supply chain disruptions may provide some offset. Favorable outlook for specific companies like XPO, NSC, and CP, while UPS and SAIA appear oversold [4] Company-Specific Insights - **Alphabet Inc. (GOOGL)**: Notable shift in search dynamics with the first-ever decline in Safari searches, raising concerns about AI search potentially replacing traditional search methods. However, long-term monetization of AI is expected to ramp up [2][27] - **Microsoft Corporation (MSFT)**: Azure reported a 35% year-over-year revenue growth, with a 34% increase in backlog, outperforming Amazon's AWS and Google's GCP. Combined cloud backlog growth of 33% indicates strong core demand despite AI capacity constraints [5][27] - **Tesla, Inc. (TSLA)**: Focus on Robotaxi and affordable model launches, but concerns over tariffs and execution risks contribute to share price volatility [6][27] - **Walmart Inc. (WMT)**: Anticipated Q1 sales are expected to be in line or slightly better, but caution is advised due to product mix and potential impacts on EBIT growth [5][27] - **Capital One Financial Corporation (COF)**: Continued performance exceeding expectations, with FY27 EPS estimates raised to approximately $25. Merger synergies of $2.7 billion expected to phase in from Q2 [7][27] - **MP Materials**: Potential factory closures in the US due to the absence of rare earth magnet flows from China, impacting industries such as aerospace and electric vehicles [7][27] - **GeneDx**: Management confidence in over 30% volume growth for NICU genetic diagnostics this year, with a compelling valuation at 4x projected 2026 revenues [8][27] Market Dynamics - **Quant Strategy**: Increasing EPS risk indicated by Q1 earnings beats and misses, with the Mag 7 model yielding a cumulative long-short return of 10.5% since its launch [2] - **Russell Rebalance**: Notable buy/sell pressure on specific stocks leading into the June 27 rebalance, with BAM, FLUT, and HWM among the top gainers, while SSB and HQY are under pressure [4] Additional Considerations - **Tariffs and Supply Chain**: The impact of tariffs on shipments and the potential for redirected flows to mitigate some negative effects [4] - **AI and Search Trends**: The evolving landscape of search engines and the implications of AI on traditional search methods [2] This summary encapsulates the critical insights and data points from the conference call, providing a comprehensive overview of the current state of the healthcare and technology sectors, along with specific company performances and market dynamics.

RXO Conference Call Summary Company Overview - RXO is a leading tech-enabled transportation brokerage platform, primarily focused on truck brokerage as its cornerstone asset [2][4] - The company operates in diverse sectors including retail, industrial manufacturing, automotive, and home building supplies [5] Core Business Lines - RXO has three main lines of business: 1. **Truck Brokerage**: Fastest growing segment, leveraging technology for operational efficiency [4] 2. **Managed Transportation**: Customers outsource their logistics needs, enhancing service and market rates [6] 3. **Last Mile Delivery**: Leader in home deliveries of large goods, with a network covering 90% of the U.S. population [7][8] Recent Developments - RXO completed a transformative acquisition of Coyote Logistics from UPS, increasing exposure to the food and beverage sector [5] - The acquisition has led to over 700 identified cross-selling opportunities within the legacy Coyote customer base [14] Financial Performance - RXO reported a 24% year-over-year growth in last mile stops [8] - The company has raised its synergy estimate from the Coyote acquisition to $70 million, with $60 million in operating expense synergies and $10 million in capital expenditure synergies [16] - RXO is currently in a soft rate environment, which has persisted for nearly three years, but is preparing for future growth [18][24] Strategic Focus - RXO aims to grow freight under management and managed transportation as key strategic pillars [20][23] - The company has seen a 25% year-over-year growth in LTL (Less Than Truckload) services, indicating strong demand from large companies [21][22] Technology Integration - RXO is integrating Coyote's technology into its existing systems, enhancing its digital capabilities and operational efficiency [36][39] - The migration of Coyote's carrier representatives to RXO's Freight Optimizer platform is a significant milestone [38] Market Outlook - RXO anticipates a rebound in the truck brokerage cycle, with potential for significant EBITDA growth as the market stabilizes [24][28] - The company expects low to mid-single-digit increases in contract rates for the remainder of the year, with a focus on managing demand fluctuations [68] Cross-Border Capabilities - RXO has expanded its cross-border capabilities, particularly in automotive and industrial manufacturing, which is expected to grow significantly [32][33] Last Mile and Managed Transportation Contributions - Last Mile logistics generates over $1 billion in revenue, focusing on large goods and providing a strong customer experience [41][42] - Managed transportation currently manages over $3 billion in freight under management, with a robust pipeline of new business opportunities [46][47] Return on Invested Capital - Historically, RXO's brokerage business has generated over 40% return on invested capital, demonstrating the scalability and efficiency of its business model [50][52] Conclusion - RXO is well-positioned for future growth through strategic acquisitions, technology integration, and a focus on expanding its service offerings across various sectors [19][30][54]