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RXO, Inc. (RXO)·Q1 2025 Earnings Summary

Executive Summary

  • RXO delivered Q1 2025 revenue of $1.43B and adjusted EBITDA of $22M, with gross margin at 16.0%; adjusted diluted EPS was $(0.03) while GAAP diluted EPS was $(0.18) as integration and restructuring costs weighed on GAAP results .
  • Versus S&P Global consensus, revenue missed by ~$60M and adjusted EPS missed by ~$0.01, while adjusted EBITDA was essentially in line; Q2 guidance calls for adjusted EBITDA of $30–$40M and Brokerage gross margin of 13–15% . Values retrieved from S&P Global.
  • Management raised the Coyote synergy target again to “> $70M” cash synergies, excluding sizable cost-of-purchased-transportation (COPT) opportunities; carrier and coverage operations migrated to a single RXO Connect platform enabling future buy-side savings .
  • Key operating positives: 26% LTL brokerage volume growth and 24% Last Mile stop growth; key headwind: automotive, which was a ~$10M gross profit drag year-over-year in Q1 .
  • Near-term stock reaction catalysts: raised synergy target and tech integration milestone (buy-side opportunity), alongside conservative Q2 outlook framed by shipper uncertainty and tariff impacts .

What Went Well and What Went Wrong

What Went Well

  • “Carrier and coverage operations are now happening in one system,” unlocking future COPT synergies; synergy target raised to >$70M cash synergies . CEO: “We now expect cash synergies to be more than $70 million... This estimate does not include cost-of-purchased-transportation opportunities, which we expect will be significant.”
  • Strong growth in complementary services: Last Mile stops +24% YoY; complementary services gross margin 21.0% (+40 bps YoY) .
  • LTL brokerage volume +26% YoY; RXO emphasized AI/ML-driven productivity gains (+17% loads per person per day over the last 12 months) .

What Went Wrong

  • Automotive weakness: CFO quantified a ~$10M company-wide gross profit headwind year-over-year; managed expedite automotive volumes pressured Managed Transportation .
  • Company gross margin compressed to 16.0% (from 17.4% YoY) and Brokerage gross margin to 13.3%, reflecting buy-rate dynamics and mix, including net revenue accounting for some legacy Coyote fee-based business (reduced reported revenue by ~$35M with no GP/EBITDA impact) .
  • Free cash flow conversion was negative on an unadjusted basis (FCF $(17)M) given lower profitability at cycle trough; adjusted FCF $6M (27% conversion), below long-term target 40–60% .

Financial Results

Sequential trend (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Billions)$1.04 $1.70 $1.43
Gross Margin %17.3% 15.5% 16.0%
Adjusted EBITDA ($USD Millions)$33 $42 $22
Brokerage Gross Margin %13.7% 13.2% 13.3%
Adjusted Diluted EPS ($USD)$0.05 $0.06 $(0.03)

Year-over-year and estimates (Q1 focus)

MetricQ1 2024Q1 2025 ActualQ1 2025 Consensus*Est. Count
Revenue ($USD Billions)$0.913 $1.433 $1.493*14*
Adjusted EBITDA ($USD Millions)$15 $22 $22.7*—
Adjusted Diluted EPS ($USD)$(0.03) $(0.03) $(0.0174)*18*
GAAP Diluted EPS ($USD)$(0.13) $(0.18) ——

*Values retrieved from S&P Global.

Segment breakdown (Q1 2025 vs Q1 2024)

Segment Revenue ($USD Millions)Q1 2024Q1 2025
Truck Brokerage$564 $1,067
Last Mile$232 $278
Managed Transportation$152 $137
Eliminations$(35) $(49)
Total$913 $1,433
Gross Margin ($USD Millions)Q1 2024Q1 2025
Truck Brokerage$80 $142
Complementary Services (Last Mile + Managed Trans.)$79 $87
Total Gross Margin$159 $229
Gross Margin %17.4% 16.0%
Brokerage Gross Margin %14.2% 13.3%
Complementary Services Gross Margin %20.6% 21.0%

KPIs

KPIQ1 2025
Brokerage volume YoY(1%) (combined; LTL +26%, TL −8%)
LTL brokerage volume YoY+26%
Full Truckload volume YoY−8%
Brokerage Gross Margin %13.3%
Complementary Services Gross Margin %21.0%
Last Mile stops YoY+24%
Productivity (loads/person/day)+17% LTM
Cash & LiquidityCash $16M; Revolver availability $565M; Liquidity $581M
Net Leverage (LTM bank-adjusted EBITDA)1.9x

Non-GAAP impacts: “Transaction, integration, restructuring and other costs, and amortization of intangibles” impacted GAAP EPS by $0.15 (net of tax) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAQ2 2025—$30–$40M New
Brokerage Gross MarginQ2 2025—13–15% New
Capital ExpendituresFY 2025$75–$85M $65–$75M Lowered
DepreciationFY 2025$70–$80M $65–$75M Lowered
Amortization of IntangiblesFY 2025$45–$50M $45–$50M Maintained
Stock-based CompensationFY 2025$30–$35M $30–$35M Maintained
Restructuring + Transaction & Integration ExpensesFY 2025$40–$50M $40–$50M Maintained
Net Interest ExpenseFY 2025$32–$36M $32–$36M Maintained
Adjusted Effective Tax RateFY 202527–29% 30–33% Raised
Fully Diluted SharesFY 2025~170M ~170M Maintained
Annualized Cash Synergies (Coyote)Multi-year≥$50M (Feb) >$70M Raised

Earnings Call Themes & Trends

TopicQ3 2024 (Q-2)Q4 2024 (Q-1)Q1 2025 (Current)Trend
AI/Technology integrationIdentified best-of-breed across RXO/Coyote; roadmap to integrate RXO Connect Tight market; tech cited for productivity Carrier/coverage migration complete; unified pricing dataset; AI/ML models on larger combined data Accelerating integration benefits
Purchase Transportation (buy-side)Anticipated benefits post tech integration Buy rates rose in Oct; squeeze noted Early signs of COPT savings post-migration; focus on buy-side in Q2 Improving sequentially
Tariffs/MacroSoft freight; capacity exits; muted peak anticipated Tightening late Q4; shipper uncertainty Customers staging inventory vs pausing; imports down from Asia; shipper uncertainty in Q2 Macro uncertainty persists
Automotive end-marketPlants restarted but demand soft Automotive headwinds in Brokerage & Managed Trans ~$10M GP headwind YoY; managed expedite impacted Still a headwind
LTL performanceLTL volume up; doubled with Coyote LTL outperformed; stable GP/load LTL volume +26% YoY; revenue per load flat ex-fuel/LoH; share gains Strong positive
Last MileStops +11% Stops +15%; expected seasonal decline Q1 Stops +24%; continued share gains Strong momentum
Capital structure/liquidityStrong revolver; leverage reduced Revolver undrawn; liquidity strong Cash $16M, liquidity $581M; net leverage 1.9x Stable
Legal/regulatory——Misclassification claims noted in 10-Q; no accrual, unable to estimate losses Ongoing cases disclosed

Management Commentary

  • CEO: “Carrier and coverage operations are now happening in one system… which will enable us to leverage our scale and realize future cost-of-purchased-transportation synergies… we now expect cash synergies to be more than $70 million.”
  • CFO: “The slowdown in automotive volume represented a company-wide gross profit headwind of approximately $10 million year-over-year.”
  • CSO: “We anticipate gross profit per load to improve in the second quarter… brokerage gross margin of between 13% and 15%.”
  • CEO (on LTL share gains): “Revenue per load, excluding fuel and length of haul was flat… lowering price to get business, not in our playbook.”
  • CFO (on COPT opportunity): “Combined brokerage transportation spend of about $4 billion in 2024. A 1% improvement in buy rates would represent a $40 million opportunity.”

Q&A Highlights

  • Earnings power and mid-cycle progression: Management emphasized higher cross-cycle earnings power via buy-side synergies, scale, and productivity runway; a 1% COPT improvement equates to ~$40M .
  • Q2 framework and assumptions: Guidance brackets reflect no sequential improvement from April at the high-end and worse volume/GP at the low-end; excludes material buy-side benefits from the May 1 migration .
  • Tariff impacts and imports: Mixed customer responses (pull-forward vs pause), with sharp import declines from Asia potentially dampening truckload demand near-term .
  • LTL share gains: Driven by ease-of-use tech and enterprise relationships; pricing discipline maintained (revenue per load flat ex fuel/LoH) .
  • Cross-selling and synergy loads: Managed Transportation onboarding drives Brokerage synergy loads; additional OpEx and CapEx synergies outlined with high ROI (~$50M spend to generate $70M savings) .

Estimates Context

  • Q1 2025 comparison to consensus: Revenue $1.433B vs $1.493B consensus (miss); adjusted diluted EPS $(0.03) vs $(0.017) consensus (miss); adjusted EBITDA $22M vs ~$22.7M consensus (in line). Values retrieved from S&P Global.
  • Outlook: Q2 2025 guidance ($30–$40M EBITDA; Brokerage GM 13–15%) appears consistent with consensus EBITDA trending to low/mid-$30Ms; continued conservative framing given macro uncertainty and automotive headwinds . Values retrieved from S&P Global.

Key Takeaways for Investors

  • Integration milestone is material: Single-platform carrier/coverage migration should unlock meaningful buy-side (COPT) savings starting in Q2 and scaling into H2 2025 .
  • Synergies raised: Cash synergy target now >$70M (OpEx + CapEx), with additional COPT opportunity potentially as large or larger over time; high ROI with ~$50M cash outlay .
  • Mix balancing the cycle: LTL strength (+26% volume) and Last Mile momentum (+24% stops) provide margin stability as TL remains soft; automotive weakness remains the key headwind .
  • Estimates likely to adjust: Given Q1 revenue/EPS misses and cautious Q2 framing (shipper uncertainty, tariffs), expect near-term revisions focused on Brokerage GM and auto-exposed Managed Trans .
  • Liquidity and leverage manageable: Cash $16M with $565M revolver capacity; net leverage 1.9x LTM bank-adjusted EBITDA provides flexibility for integration, working capital, and selective growth .
  • Trading setup: Near-term catalysts include visible buy-side savings and cross-selling wins; downside risks centered on macro/tariff-induced demand softness and auto end-market .
  • Medium-term thesis: As buy-side synergies materialize, contract rate increases phase in, and cycle normalizes, RXO’s earnings power should inflect higher given scale, technology, and cross-cycle FCF conversion .

Notes:

  • No additional Q1 2025 press releases beyond the 8-K with Exhibit 99.1 were found .
  • 10-Q provides cross-validation of Q1 financials and added disclosures on revenue by sector and legal contingencies .