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RXO, Inc. (RXO)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 results were operationally solid but margin-compressed: revenue rose to $1.67B on Coyote consolidation, adjusted EBITDA was $42M (inline with prior guide), and adjusted EPS was $0.06; company gross margin fell to 15.5% amid tightening buy rates, while Brokerage GM was 13.2% .
  • Q1 2025 guide: adjusted EBITDA $20–30M and Brokerage GM 12–14% as seasonality, higher buy rates, and a larger-than-normal sequential decline in Last Mile weigh on near-term profitability; mgmt expects combined Brokerage volume to grow y/y for full-year 2025 .
  • Coyote integration remains ahead of schedule; annualized cost synergy target raised to at least $50M (from $40M), with ~$25M completed by year-end 2024 and $25M in 2025, driving $25–30M of realized 2025 OpEx savings (most tech-related savings in 2026) .
  • Strategic momentum: Last Mile stops +15% y/y; Managed Transportation sales pipeline nearly $2B FUM; contract mix in FTL at 76% supports stability into an inflationary rate environment; mgmt highlights improving 2025 contract pricing and early 1Q signs of easing buy rates after weather-led tightness .
  • Wall Street consensus from S&P Global was unavailable during this session; vs-estimates comparisons are not included and can be updated when accessible.

What Went Well and What Went Wrong

What Went Well

  • Integration and synergy cadence: “We’re again raising our estimate for annualized cost synergies… at least $50 million,” with ~$25M actions done in 2024 and $25M in 2025; realized OpEx savings of $25–30M expected in 2025; tech savings largely benefit 2026 .
  • Complementary services momentum: Managed Transportation pipeline nearly $2B FUM; Last Mile stops +15% y/y; complementary services GM 21.1% (+20 bps y/y) .
  • Scale and mix: Combined Brokerage volume +10% q/q with LTL +1% y/y; FTL contract mix at 76% (spot 24%) supports stability as rates transition off cycle lows; mgmt cites AI/ML-driven pricing and productivity gains .

What Went Wrong

  • Margin compression: Tightened market conditions increased buy rates through Q4 and into early January, pressuring gross profit per load; company GM fell to 15.5% (from 18.0% y/y) and Brokerage GM to 13.2% (vs 13.7% in Q3; 14.8% y/y) .
  • Soft freight backdrop: Muted peak season; combined Brokerage volume −6% y/y despite sequential growth; mgmt expects Q1 Brokerage volume to decline mid–high single-digits y/y .
  • Near-term headwinds in guidance: Q1 adjusted EBITDA guided to $20–30M, with Last Mile driving more than half of the sequential EBITDA decline and continued weakness in managed expedite automotive .

Financial Results

Consolidated P&L metrics

MetricQ2 2024Q3 2024Q4 2024
Revenue ($M)$930 $1,040 $1,667
Gross Margin %19.0% 17.3% 15.5%
Adjusted EBITDA ($M)$28 $33 $42
Adjusted EBITDA Margin %3.0% 3.2% 2.5%
Adjusted Diluted EPS ($)$0.03 $0.05 $0.06

YoY and QoQ for Q4 2024

MetricYoY change vs Q4’23QoQ change vs Q3’24
Revenue+70.5% (from $978M) +60.3% (from $1,040M)
Gross Margin %−250 bps (from 18.0%) −180 bps (from 17.3%)
Adjusted EBITDA+$11M (from $31M) +$9M (from $33M)
Adjusted Diluted EPSflat vs $0.06 +$0.01 (from $0.05)

GAAP EPS bridge (Q4 2024)

  • GAAP diluted EPS: −$0.12; amortization +$0.10; transaction/integration/restructuring +$0.20; tax/discrete −$0.12; Adjusted EPS: $0.06 .

Segment and mix

SegmentQ4 2023 Revenue ($M)Q4 2024 Revenue ($M)Q4 2023 GM %Q4 2024 GM %
Truck Brokerage$610 $1,267 14.8% 13.2%
Complementary Services (Last Mile + Managed Trans)$411 $431 20.9% 21.1%
Eliminations−$43 −$31 ——
Total$978 $1,667 18.0% 15.5%

Additional disaggregation (Q4 2024):

  • Last Mile revenue $290M; Managed Transportation revenue $141M; Eliminations −$31M .

KPIs and balance sheet

KPIQ4 2024
Brokerage volume q/q+10%
Brokerage volume y/y−6%
LTL volume y/y+1%
FTL volume y/y−8%
FTL mix76% contract / 24% spot
Complementary Services GM21.1%
Last Mile stops y/y+15%
Managed Trans pipelineNearly $2B FUM
Adjusted Free Cash Flow$6M; 14.3% conversion
Cash / Revolver$35M cash; $600M undrawn revolver
Net debt / Gross & Net leverageNet debt $353M; Gross 1.7x, Net 1.6x LTM bank-adjusted EBITDA

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAQ1 2025n/a$20–30M New
Brokerage GM %Q1 2025n/a12–14% New
Brokerage y/y volumeQ1 2025n/aDown mid–high single-digit % New
Annualized cost synergiesMulti-year≥$40M (Nov-2024) ≥$50M; $25M actions in 2024; +$25M in 2025; $25–30M 2025 realized OpEx savings; tech synergy realization 2026 Raised
Capital ExpendituresFY 2025n/a$75–85M (incl. ~$15M strategic real estate) New
DepreciationFY 2025n/a$70–80M New
Amortization of intangiblesFY 2025~ $50M (early view) $45–50M Maintained/Refined
Stock-based compensationFY 2025n/a$30–35M New
Restructuring/transaction/integration expensesFY 2025n/a$40–50M; cash outflow ~$50–60M (incl. prior actions) New
Net interest expenseFY 2025~ $32M (early view) $32–36M Maintained/Refined
Adjusted effective tax rateFY 202527–29% (early view) 27–29% Maintained
Diluted shares (avg)FY 2025~170M YE run-rate (context) ~170M Maintained

Earnings Call Themes & Trends

TopicQ2 2024 (Prior-2)Q3 2024 (Prior-1)Q4 2024 (Current)Trend
Freight cycle and buy ratesSoft market; seasonal tightening (produce/roadcheck); FT revenue/ld inflected positive in June; GM at high end of guide 14.7% Tightening in Oct (hurricanes, port strike); buy rates up; muted peak season; Brokerage GM guide 12–14% for Q4 Significant tightening through Q4 into Jan (weather); buy rates up then easing; Brokerage GM 13.2%; expects inflationary rate environment in 2025 Improving cycle, near-term tightness pressured GM
Coyote integration & synergiesDeal pending; synergy opportunity highlighted Closed mid-Sep; synergy target raised to ≥$40M; tech platform RXO Connect Ahead of schedule; synergy target ≥$50M; $25M actions 2024, $25M in 2025; $25–30M realized 2025; tech savings 2026 Positive, accelerated synergies
LTL & mixLTL volume +40% y/y; LTL 20% of Brokerage; contract mix 78% of FTL LTL +13% (legacy); LTL 20% of Brokerage; contract 77% FTL LTL +1% y/y; LTL 18% of Brokerage; FTL contract 76% Stable LTL outperformance; healthy contract mix
Managed TransportationFUM pipeline >$1.6B; $200M awards; synergy loads growing Massive pipeline; $300M FUM awards; $400M onboarding in Q4 Pipeline nearly $2B; near-term auto expedite soft; conversion seen 1H → 2H’25 Strengthening pipeline; gradual revenue impact
Last MileStops +7% y/y; profitability initiative >$20M annualized EBITDA targeted Stops +11% y/y; expected slower Q4 growth; seasonality Stops +15% y/y; larger-than-seasonal Q1 decline expected; strong GM 21.1% Strong growth; Q1 seasonal drag
Technology/AI & productivityAI pricing; productivity +18% LTM RXO Connect primary system; productivity +15% LTM (legacy) Migrated to cloud; unified tracking; AI/ML algorithms; productivity +16% LTM Ongoing tech leverage
Macro/tariffsMixed indicators; nearshoring tailwinds Muted peak; tightening; monitoring GDP/ISM Tariffs: short-term pull-forward, medium headwind, long-term nearshore tailwind Watch tariffs; long-term positive for nearshoring

Management Commentary

  • “We’re again raising our estimate for annualized cost synergies… at least $50 million” (excludes purchase transportation and cross-selling benefits) .
  • “For the first time in 2.5 years, contract rates are increasing year-over-year… we are transitioning… to an inflationary rate environment” .
  • “Complementary Services momentum continued… Managed Transportation… nearly $2 billion in freight under management… Last Mile… grew stops by 15% year-over-year” .
  • “Putting it all together, we expect incremental realized operating expense savings of $25–$30 million in 2025… tech-related synergies realized in 2026” .
  • “The team is executing well, the integration of Coyote is ahead of schedule, and we’re positioning RXO for the long term” .

Q&A Highlights

  • Gross profit per load trajectory: Mgmt expects Q1 gross profit/ld to improve through the quarter after January’s weather-driven tightness; path depends on buy rates easing and contract implementations; Q2 seasonality (produce/roadcheck) typically tighter .
  • Synergy cadence: ~$25M annualized actions completed by YE’24; additional ~$25M in 2025; realized 2025 OpEx savings $25–30M; technology synergy benefits largely show up in 2026 .
  • Contract vs spot: Higher contract mix in Q4 partly due to one large customer with seasonal Q4 weighting in the Coyote book; RXO expects to pivot to spot/projects as recovery strengthens .
  • Managed Transportation timing: Revenue growth expected to improve in late 1H into 2H 2025 as onboarded wins ramp; automotive expedite remains near-term headwind .
  • Tariffs: Short-term pull-forward, medium-term headwind, long-term nearshoring tailwind to RXO’s business .

Estimates Context

  • S&P Global consensus (EPS, revenue, margin) was unavailable during this request window due to provider limits; as a result, we have not included vs-consensus comparisons. We can update the vs-estimates analysis (EPS/Revenue/EBITDA and surprise magnitudes) once access is restored.

Key Takeaways for Investors

  • Integration-driven upside: Raising synergy target to ≥$50M (actions largely set) and clear tech roadmap support multi-year operating leverage as purchase transportation synergies and productivity scale, with bigger tech-related P&L impact in 2026 .
  • Near-term earnings dip, improving setup: Q1 guide reflects seasonal and weather-driven margin pressure (Last Mile seasonality and buy rates), but mgmt expects combined Brokerage volume growth in 2025 and a shift to inflationary rate environment, underpinning GP/ld recovery potential .
  • Mix provides resilience: FTL contract mix (76%) stabilizes through-cycle earnings; LTL growth and complementary services GM (~21%) diversify profit streams .
  • Volume catalysts: Managed Transportation pipeline (~$2B FUM) and cross-sell to legacy Coyote customers create embedded growth optionality; watch onboarding and conversion cadence across 1H–2H’25 .
  • Balance sheet optionality: Low leverage (1.7x gross/1.6x net), $600M undrawn revolver and improving free cash flow conversion in recovery create flexibility for organic investments and opportunistic M&A .
  • Trading implications: Near-term softness (Q1) may pressure sentiment; catalysts include easing buy rates, confirmation of 2025 contract increases, synergy realization milestones, and acceleration in Managed Trans conversion—each a potential narrative pivot toward normalized earnings power .

Appendix: Additional Q4 details and reconciliations

  • EPS Bridge (Q4 2024): GAAP −$0.12; amortization +$0.10; transaction/integration/restructuring +$0.20; tax adjustments −$0.12; adjusted $0.06 .
  • Cash flow: Q4 adjusted FCF $6M; 14% conversion; drivers: semiannual interest, lower profitability at cycle bottom, working capital timing .
  • Revenue disaggregation Q4 2024: Truck Brokerage $1,267M; Last Mile $290M; Managed Transportation $141M; Eliminations −$31M .
  • 2025 modeling assumptions highlight: Capex $75–85M (incl. ~$15M real estate); depreciation $70–80M; amortization $45–50M; SBC $30–35M; restructuring/transaction/integration $40–50M; net interest $32–36M; tax 27–29%; shares ~170M .