RXO Swings to Adjusted Profit as Brokerage Volumes Recover
Second-quarter revenue rose 25% to $1.774 billion as truck-brokerage sales increased.
RXO (RXO), the transportation broker, swung to adjusted net income of $10 million, or $0.06 a share, from a first-quarter loss of $16 million, or $0.09 a share. A year earlier, adjusted net income was $7 million, or $0.04 a share.
The improvement followed a turn in brokerage demand. Brokerage volume rose 2% from a year earlier after falling 8% in the first quarter and 4% in the fourth quarter. Full-truckload volume also grew 2%, exceeding RXO's earlier expectation for approximately flat volume after two consecutive quarters of 12% declines.
Revenue increased from about $1.4 billion in the first quarter, while adjusted EBITDA rebounded to $40 million from $6 million. The adjusted EBITDA margin widened sequentially to 2.3% from 0.4%, though it remained below 2.7% a year earlier. RXO's GAAP net loss narrowed to $9 million, or $0.05 a share, from $36 million, or $0.21 a share, in the first quarter.
Truck-brokerage revenue rose 32% to $1.349 billion, accounting for most of the top-line growth. Last Mile revenue increased 9% to $344 million, while Managed Transportation revenue edged up 1% to $144 million. Last Mile stops returned to 3% growth after declining 8% in the first quarter.
Brokerage pricing and mix offered a more complicated margin picture. Truckload spot business climbed to 42% of the mix from 33% sequentially, and gross profit per load increased 11%, the strongest growth rate in four years. Brokerage gross margin narrowed to 10.7% from 11.4% in the first quarter, contributing to a companywide gross-margin decline to 13.9% from 14.2% sequentially and 17.8% a year earlier.
Operating income improved to $1 million from break-even a year earlier even as gross profit fell to $247 million from $252 million. Transportation and service costs rose 32% to $1.472 billion.
For the third quarter, RXO expects adjusted EBITDA of $35 million to $45 million, bracketing the second quarter's result. The company also forecasts low-to-mid-single-digit brokerage volume growth and another sequential increase in truckload gross profit per load. RXO did not repeat the full-year contract-rate forecast it raised in the first quarter to high-single-digit growth.