RXO, Inc. (NYSE:RXO) is a leading provider of asset-light transportation solutions, offering tech-enabled truck brokerage services along with complementary offerings in managed transportation, freight forwarding, and last mile delivery. The company has demonstrated its ability to navigate the current soft freight environment, delivering solid financial results and positioning itself for future growth.

Financials

In the latest quarter, RXO reported revenue of $913 million, down 9.6% year-over-year, but still outperforming the broader market. The company's annual revenue for 2023 stood at $3.927 billion. Despite the challenging conditions, RXO managed to maintain a healthy gross margin of 17.4% in the first quarter of 2024, showcasing the resilience of its business model.

Business Performance

One of the key highlights was RXO's continued growth in its brokerage business, which saw a 11% increase in volume year-over-year, marking the fourth consecutive quarter of double-digit volume growth. The company's full-truckload volumes grew by 8%, while its less-than-truckload (LTL) business experienced a remarkable 29% year-over-year increase. This strong performance underscores RXO's ability to gain market share and capitalize on the growing demand for its services.

The company's complementary service offerings, including managed transportation, freight forwarding, and last mile delivery, also contributed to its overall performance. In the first quarter, the managed transportation business was awarded or onboarded more than $350 million in freight under management, demonstrating the strong demand for RXO's comprehensive transportation solutions.

Innovation and Technology

RXO's focus on innovation and technology has been a key differentiator, enabling the company to enhance its operational efficiency and provide superior customer service. The integration of Shiplify's data with RXO's proprietary RXO Connect™ platform, for example, has improved invoice transparency and accessibility for the company's LTL customers, further strengthening its value proposition.

Liquidity

The company's financial position remains robust, with annual operating cash flow of $89 million and free cash flow of $25 million in 2023. As of the latest quarter, RXO had $7 million in cash on its balance sheet and over $600 million in committed liquidity, providing ample flexibility to navigate the current market conditions and invest in future growth initiatives.

Outlook

Looking ahead, RXO expects to deliver a significant sequential increase in adjusted EBITDA in the second quarter of 2024, with guidance of $24 million to $30 million. This improvement is driven by the company's momentum in brokerage gross profit per load, as well as the seasonal strength in its complementary services, particularly the last mile business.

Conclusion

While the broader freight market remains soft, RXO has demonstrated its ability to adapt and thrive. The company's focus on service, solutions, innovation, and customer relationships has enabled it to gain market share and build a robust sales pipeline, which is currently the largest it has been in the past four years.

RXO's diversified business model, strong financial position, and strategic initiatives position the company well to navigate the current freight downturn and capitalize on the eventual market recovery. With its proven track record of operational excellence and its commitment to innovation, RXO is poised to continue delivering value for its shareholders.