RXO (NYSE:RXO) executives said fourth-quarter results were pressured by a late-quarter squeeze in brokerage margins as purchased transportation costs rose sharply amid capacity exits, while demand remained soft. On the company’s earnings call, management emphasized actions to mitigate near-term pressure, pointing to a growing late-stage sales pipeline, continued momentum in managed transportation and less-than-truckload (LTL), and a newly finalized asset-based lending facility intended to improve flexibility through freight cycles.
Fourth-quarter results and margin pressure
RXO reported fourth-quarter total revenue of $1.5 billion, gross margin of 14.8%, adjusted EBITDA of $17 million, and an adjusted EBITDA margin of 1.2%, according to CFO Jamie Harris. Adjusted loss per share was $0.07, and interest expense was $9 million.
Harris said brokerage gross margin was 11.9%, slightly below the low end of the company’s outlook, declining 160 basis points sequentially and 130 basis points year-over-year. He characterized the dynamic as a squeeze on a largely contractual, enterprise-focused book of business because costs moved faster than revenue per load.
Business line performance: brokerage, LTL growth, and last-mile softness
In brokerage, Wilkerson said overall volume declined 4% year-over-year, with 31% growth in LTL volume more than offset by a 12% decline in truckload volume. Chief Strategy Officer Jared Weisfeld added that the volume decline still outpaced the Cass Freight Index’s 8% year-over-year decline, and noted that LTL represented 26% of brokerage volume in the quarter while truckload represented 74%.
Weisfeld said truckload revenue per load trends remained muted, with revenue per load (excluding fuel and length-of-haul changes) up 1% year-over-year, while purchased transportation costs increased at a faster rate. He also said truckload gross profit per load decreased 10% from November to December, and that December gross profit per load was about 30% below the company’s five-year average excluding COVID-era highs.
Within truckload verticals, Weisfeld said industrial and manufacturing volume declined 1% year-over-year, benefiting from special projects. He also said the automotive headwind eased, with automotive volume down a mid-teens percentage year-over-year in the quarter compared with declines of nearly 30% earlier in the year, while company-wide automotive gross margin dollars declined by a low to mid-single-digit percentage.
In complementary services, the company reported revenue of $431 million, flat year-over-year, and gross margin of 20.2%, down 110 basis points sequentially and 90 basis points year-over-year. Harris said the decline was primarily due to weakening demand in last-mile and the effect of fixed costs within RXO’s last-mile hubs. Managed transportation revenue was $133 million, down 6% year-over-year, while last-mile revenue was $298 million, up 3% year-over-year, with last-mile stops also up 3%. Management reiterated that “big and bulky” demand weakened late in the third quarter and continued to soften through the fourth quarter.
Pipeline, commercial strategy, and technology initiatives
Wilkerson said RXO’s late-stage brokerage sales pipeline for new business grew more than 50% year-over-year, driven mostly by full truckload. He described the pipeline as a mix of long-tenured enterprise customers and new “high-quality” names, and said early bid-season wins have already emerged. Management said bids are typically implemented throughout the second quarter, which underpins the company’s expectation that it can return to year-over-year truckload volume outperformance versus the market as early as mid-year.
In response to an analyst question on pricing, Wilkerson said contractual pricing was likely “low to mid-single digits,” while he expected spot pricing to be “significantly more than that.” He also reiterated a framework for earnings power, stating that every $1 of gross profit per load improvement translates to “well north of $1 million” of annualized EBITDA.
Executives also highlighted technology integration and AI initiatives. Wilkerson said the company is now operating on an integrated platform that includes its CRM, pricing tools, and proprietary systems RXO Connect and Freight Optimizer, leveraging data from both legacy RXO and legacy Coyote following the integration work completed over the past year.
Weisfeld detailed “transformational AI” efforts across four pillars—volume, margin, productivity, and service—and cited several implementations and outcomes, including:
- A new proprietary AI spot quote agent intended to unlock incremental margin opportunity.
- Expanded automation in pricing tools and a “contract pricing model view” for decision-making.
- Agentic AI capacity sourcing to attract qualified carriers.
- Automation of thousands of tracking updates and a generative AI assistant for sales and operations.
- A 24% increase in digital bids per carrier using AI-based load recommendations in RXO Connect.
On productivity, management said brokerage headcount declined by a mid-teens percentage year-over-year and that productivity rose 19% over the last 12 months. Wilkerson said the company has removed more than $155 million in costs since becoming standalone through initiatives that included AI investment, real estate optimization, and productivity improvements.
Balance sheet actions and cash flow
RXO ended the quarter with $17 million of cash. Harris said adjusted free cash flow for 2025 was $47 million, equating to 43% conversion from adjusted EBITDA, driven by disciplined capital deployment and favorable working capital. Net capital expenditures for the year were $57 million, below the company’s outlook range of $65 million to $75 million. Quarter-end net leverage was three times trailing twelve-month bank-adjusted EBITDA.
Management also announced a new $450 million asset-based lending facility replacing a prior $600 million revolver. Harris said the facility is “right-sized,” reduces unused commitment fees by about $400,000 annually, includes a $200 million accordion feature, and offers an interest rate about 35 basis points more favorable at current utilization. The company also replaced leverage and interest coverage covenants with a fixed charge covenant that Harris said has minimal impact on borrowing ability.
Outlook: Q1 headwinds, cost items, and market dynamics
For the first quarter, Harris guided to adjusted EBITDA of $5 million to $12 million, reflecting continued weak demand and elevated purchased transportation costs. Weisfeld said the company expects total brokerage volume to decline 5% to 10% year-over-year in Q1, with LTL growth expected in the mid-single digits. RXO expects brokerage gross margin between 11% and 13% in Q1, with tight market conditions expected to persist through the quarter. In last-mile, management expects stops to be down a mid-single-digit percentage year-over-year, noting that Q1 is typically the weakest seasonal quarter and that demand softness in big and bulky is expected to continue.
Management said winter storms affected results early in the quarter. Harris quantified an estimated negative EBITDA impact of about $2 million through January, and Wilkerson added that weather affects both brokerage operations and last-mile deliveries when conditions prevent access to delivery locations.
For 2026 modeling assumptions, management provided the following ranges: capex of $50 million to $55 million; depreciation expense of $65 million to $75 million; amortization expense of $40 million to $45 million; stock-based compensation of $25 million to $35 million; net interest expense of $32 million to $36 million; and cash tax outflows of about $6 million to $8 million. RXO expects restructuring, transaction, and integration expenses of $25 million to $30 million, with associated cash outflows of about $30 million to $35 million, about half tied to prior-period actions. The company expects a fully diluted share count of roughly 170 million.
Executives repeatedly framed the near-term margin squeeze as supply-driven. Weisfeld said tighter market conditions have been driven by enforcement actions related to non-domiciled CDLs and English language proficiency, noting increases in out-of-service enforcement rates. Management also said tighter supply dynamics could set the stage for a sharper market inflection when demand recovers, while also improving safety and helping combat theft and fraud.
About RXO (NYSE:RXO)
RXO Inc (NYSE: RXO) is a leading asset-light provider of digital freight brokerage and managed transportation solutions. The company leverages a proprietary technology platform to connect shippers with a network of third-party carriers, enabling optimized route planning, real-time shipment tracking, and dynamic pricing. RXO’s end-to-end service model spans full truckload, less-than-truckload (LTL), intermodal and cross-border freight movements, designed to improve efficiency and reduce transportation costs for its customers.
Operating primarily across North America, RXO serves a diverse base of shippers in industries ranging from retail and consumer goods to manufacturing and automotive.
