Financial metrics and earnings at 3PL RXO, which soared above the rest of the industry in the first quarter, held steady on several fronts sequentially, with a slight improvement in net income.

While the normal comparisons between the second quarter of 2022 and 2023 all show sharp declines over the 12 months, the sequential numbers at RXO (NYSE: RXO) tell a story of a freight market that showed essentially no signs of improvement between the first three months of the year and months four to six.

Investors did not like what they heard and read. At approximately 1:45 p.m ET, RXO stock was down about 13.8%, to about $18.90, a decline of a little more than $3.

RXO stock began trading in November after its spinoff from XPO (NYSE: XPO). RXO’s all-time-high close since then was $23.74 on June 30.

RXO’s adjusted earnings before interest, taxes, depreciation and amortization margin in the second quarter was 3.9%; it was 3.7% in the first. The actual dollars reported were adjusted EBITDA of $38 million in the second quarter and $37 million in the first.

The contrast with the second quarter of 2022 is stark: EBITDA in that period was $101 million, with an EBITDA margin of 8.2%. CEO Drew Wilkerson, on the RXO earnings call with Wall Street analysts, said last year’s Q2 EBITDA was at the peak of the cycle and was a record for RXO, “so it’s a tough comparison.”

Truck brokerage revenue at RXO was $557 million in the second quarter and $600 million in the first. On the balance sheet, cash at the end of the second quarter was $124 million, up from $121 million at the end of March.

Total company revenue was $963 million in the second quarter and just over $1 billion in the first.

Net income eked out a slight gain sequentially to $3 million from flat in the first quarter despite the fact that the cost of transportation rose to $759 million from $723 million in Q1.

In the prepared statement released in conjunction with the earnings, Wilkerson cited several other statistics pointing to the company’s argument that the performance was relatively strong.

Wilkerson said total volume, quarterly loads per day and monthly loads per day were all records. The volume growth was 10% year on year. (A spokesman said data on those metrics is not disclosed externally.)

He also cited companywide gross margin as a percentage of revenue as a strong point. It was 18.6%, less than the 21.6% from a year ago but down only slightly from the 18.8% recorded in the first quarter.

Truck brokerage gross margin was 15.4% in the second quarter, compared to 20.8% a year ago and 16.3% in the first quarter.

On the call, Chief Strategy Officer Jared Weisfeld said the freight market was beginning to strengthen. He said RXO ended the second quarter “with incredible brokerage volume momentum,” and the company’s sales pipeline is the highest since before COVID. “This gives us confidence that we will again grow brokerage volume on a year-over-year basis in the third quarter,” he added.

But despite that momentum, July financial trends were just similar to June, Weisfeld noted. Gross profit per load has not improved, though it was stable between June and July. Truckload revenue per load, a key metric, was flat in July compared to June, but that actually was an improvement, Weisfeld said, describing it as “the first time truckload revenue per load has stabilized month over month since the first quarter of 2022.”

The 15.4% gross margin last quarter, Wilkerson said, “given where we are at this point in the freight cycle, we’re really proud of.”

Wilkerson said that both internal and external data “suggest we are approaching the bottom of the freight cycle.” He cited tender rejections, load-to-truck ratios and carrier exits from the market. Wilkerson also said that during the second quarter, there was a tightening of capacity in some unidentified states, and it was “particularly acute in states impacted by produce season.”

On the call with analysts, Wilkerson and Weisfeld highlighted some of the more positive numbers in the report:

Weisfeld said RXO had “substantial market share gains enabled by our people and technology.” In an email, a spokesman for RXO said the company uses “various third party data points primarily from factors and payment processors” to determine the size of the market and can then calculate its market share from there. The figure is not disclosed.

Weisfeld indicated RXO had not yet seen significant impact from the closure of Yellow. “A majority of the growth that we talked about in the quarter is coming from our core full truckload business,” he said. “LTL mix in the quarter was relatively unchanged relative to the prior quarter.”

EBITDA in the last-mile segment at RXO, which was not disclosed, was higher year over year from the second quarter, one of the few areas where a comparison to 2022 was better. RXO said in its earnings release that it expects full-year EBITDA for the last-mile segments to be higher than in 2022.

Metrics provided by the company on the size of the RXO network said carrier retention in the quarter was 78% compared to 73% in the corresponding quarter of 2022. Carriers are exiting the market at a “slow rate,” according to Wilkerson. Active carriers in the RXO network were up 2% sequentially and 3% year on year. The number of loads covered digitally soared to 96% from 80% a year earlier. Volume that was part of a contractual arrangement was 79% of RXO’s business, up 200 basis points sequentially and 600 bps from a year earlier.

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