RXO Reports Solid First-Quarter Performance

• Brokerage volume increased 6% year-over-year
• Brokerage gross margin of 16.3 percent
• Operating cash flow of $42 million and adjusted free cash flow of $37 million
• Company announces $125 million share repurchase program

RXO (NYSE: RXO) today announced its financial results for the first quarter of 2023.

Drew Wilkerson, chief executive officer of RXO, said, “RXO continued to deliver solid results in the first quarter, despite the current challenges in the freight market and the economy. Our brokerage business gained market share and recorded a 6 percent increase in volume year-over-year. We also maintained best-in-class brokerage gross margin of 16.3 percent.”

Wilkerson continued, “RXO ended the first quarter with $121 million in cash, up $23 million from last quarter. I’m pleased to announce that our Board of Directors has authorized a $125 million share repurchase program. The authorization reflects the strength of RXO’s balance sheet and supports RXO’s commitment to a balanced capital allocation philosophy.

“RXO’s performance was underpinned by continued adoption of our cutting-edge technology,” Wilkerson said. “Ninety-six percent of RXO’s brokerage loads were created or covered digitally in the quarter, 79 percent of carriers using our technology returned to our platform within seven days, and we surpassed more than 1 million downloads of our driver app, RXO Drive™.

“This is an important part of the freight cycle. Our share gains position us for significant growth when the market inflects. We remain focused on execution and providing best-in-class service to our customers,” Wilkerson concluded.

Companywide Results

The company’s revenue was $1.01 billion for the first quarter, compared to $1.31 billion in the first quarter of 2022. Profitability remained strong, with 18.8 percent adjusted gross margin, up 80 basis points year-over-year.

Due to $14 million in spin-related transaction, integration and restructuring costs, the company reported first-quarter 2023 GAAP net income of $0, compared to net income of $39 million in the first quarter of 2022. Adjusted net income in the quarter was $13 million, compared to $45 million in the first quarter of 2022.

Adjusted EBITDA was $37 million, compared to $75 million in the first quarter of 2022. Adjusted EBITDA margin was 3.7 percent, compared to 5.7 percent in the first quarter of 2022.

Spin-related transaction, integration and restructuring costs, and amortization of intangibles, impacted GAAP earnings per share by $0.11, net of tax. For the first quarter, RXO reported GAAP diluted earnings per share of $0.00. Adjusted diluted earnings per share were $0.11.

Brokerage

RXO’s brokerage business grew volume 6 percent year-over-year in the first quarter. Brokerage gross margin was 16.3 percent in the first quarter, flat year-over-year.

Brokerage contract volume increased by 19 percent year-over-year in the first quarter, the result of the company’s increased bid activity in the fourth quarter of 2022. Annual bid opportunities, measured in revenue, continued to increase in the first quarter and were up 11 percent sequentially.

The company expects brokerage volumes to continue to grow on a year-over-year basis in the second quarter of 2023.

Complementary Services

RXO’s complementary services increased adjusted gross margin by 160 basis points year-over-year in the quarter. Loads provided by RXO’s managed transportation business to its brokerage business increased significantly in the quarter.

Also in the quarter, RXO announced that it has invested in a new cross-border facility in Laredo, Texas. The warehousing and distribution services site sits at the center of the nearshoring movement – at the border between the United States and Mexico. This premium location and the comprehensive solutions offered through the facility will help streamline supply chains for RXO’s blue-chip customer base.

Technology Update

In the first quarter of 2023, 96 percent of RXO’s brokerage loads were created or covered digitally using RXO’s best-in-class technology platform, up from 87 percent in the fourth quarter and up from 74 percent in the first quarter of 2022.

The average weekly users of the platform increased 25 percent year-over-year in the first quarter, and the seven-day carrier retention rate was 79 percent vs. 74 percent in the fourth quarter of 2022.

Downloads of RXO Drive™, the company’s driver app, increased by 45 percent year-over-year in the first quarter to more than 1 million.

Conference Call

The company will hold a conference call and webcast on Wednesday, May 3 at 8 a.m. Eastern Daylight Time. Participants can call in toll-free (from U.S./Canada) at 1-888-886-7786; international callers dial +1-416-764-8658. The conference ID is 83931505.

A live webcast of the conference call will be available on the investor relations area of the company’s website, https://investors.rxo.com. A replay of the conference call will be available through May 24, 2023, by calling toll-free (from U.S./Canada) 1-877-674-7070; international callers dial +1-416-764-8692. Use the passcode 931505#. Additionally, the call will be archived on https://investors.rxo.com.

For the full earnings release, click here