Rapid Expansion and Growth Being Driven by Logical Theories at RXO
RXO's LTL Business Drives Growth and Profitability
RXO Inc., a leading player in the logistics industry, is focusing on expanding its Less-Than-Truckload (LTL) business to account for over 50% of its total brokerage volume. This strategy, aimed at leveraging the stability and higher margins of LTL compared to full truckload (FTL), is proving successful [1][2].
The growth of the LTL business is being achieved through onboarding customers onto RXO's proprietary technology platform, RXO Connect. This platform enhances visibility, carrier matching, and capacity sourcing from regional players [1][2]. Acquisitions, such as Coyote Logistics, have also contributed to scale, with technology and carrier network integration driving operational efficiencies and cost synergies targeted at $70 million annually [2][3].
This strategy has positively impacted RXO's profitability. LTL has provided more stable and less volatile gross profit per load, supporting more consistent EBITDA compared to the fluctuating truckload segment [1]. Despite a slight decline in the overall brokerage gross margin from 14.7% to 14.4% due to a mix shift and market pressures, the adjusted EBITDA improved significantly, from $28 million to $38 million year-over-year in Q2 2025 [5].
RXO positions LTL as a long-term growth engine, contributing to earnings power and free cash flow across market cycles [1][5]. In the second quarter of 2025, LTL activities made up 32% of all brokerage volume, the highest level in RXO history [5].
The LTL business saw a 45% year-on-year growth in the second quarter, following a 26% growth in the first quarter [5]. The gross profit per load in LTL operations has less volatility compared to truckload, adding to margins [1].
Jared Weisfeld, RXO's chief strategy officer, mentioned that customers are moving some of their LTL business onto RXO's platform RXO Connect due to its familiarity and potential for better visibility [4]. Drew Wilkerson, CEO of RXO, stated that LTL will be part of the company's growth story for a long time [2].
In a related development, each driver involved in the Lytx Illinois biometrics case is expected to receive a payout between about $650 and $850 [6].
RXO's truckload brokerage volume declined 12% year-on-year, but the truckload gross margin was 14.4% in the quarter, above the company's projections, and gross profit per load in truckload was up 7% sequentially [7]. The merging of RXO and Coyote Logistics brokerage technologies has started to yield efficiencies, with the company's "buy rate" improving by about 30 to 50 basis points [7].
RXO has relationships with "nearly all the LTL providers in North America" [8]. A slowdown in automotive activity accounted for about 25% of the decline in truckload brokerage volume at RXO [9]. At C.H. Robinson, improved profitability, productivity, and a significant reduction in the workforce were noted [10].
In summary, RXO's LTL growth strategy—centered on volume scaling through technology adoption and acquisition—has bolstered its brokerage segment by adding a stable, higher-margin revenue stream. While margin compression from increased scale and integration costs exists, improved operational efficiency has contributed to stronger adjusted earnings, reinforcing LTL's role as a key driver of RXO’s overall profitability and resilience [1][2][3][5].
[1] RXO Inc. Q2 2025 Earnings Call Transcript. (2025, July 29). Seeking Alpha. Retrieved October 1, 2025, from https://seekingalpha.com/news/3752756-rxo-inc-q2-2025-earnings-call-transcript
[2] RXO Inc. Q2 2025 Earnings Release. (2025, July 29). Business Wire. Retrieved October 1, 2025, from https://www.businesswire.com/news/home/20250729005640/en/RXO-Reports-Second-Quarter-2025-Results
[3] RXO Inc. Q2 2025 Earnings Presentation. (2025, July 29). RXO Inc. Retrieved October 1, 2025, from https://ir.rxo.com/static-files/8f5276e7-c04d-4e7a-b148-789d2a1160be
[4] RXO Inc. Q2 2025 Earnings Call Transcript. (2025, July 29). Seeking Alpha. Retrieved October 1, 2025, from https://seekingalpha.com/news/3752756-rxo-inc-q2-2025-earnings-call-transcript
[5] RXO Inc. Q2 2025 Earnings Release. (2025, July 29). Business Wire. Retrieved October 1, 2025, from https://www.businesswire.com/news/home/20250729005640/en/RXO-Reports-Second-Quarter-2025-Results
[6] Lytx Illinois Biometrics Settlement. (2025, August 10). Lytx. Retrieved October 1, 2025, from https://www.lytx.com/news/lytx-illinois-biometrics-settlement
[7] RXO Inc. Q2 2025 Earnings Release. (2025, July 29). Business Wire. Retrieved October 1, 2025, from https://www.businesswire.com/news/home/20250729005640/en/RXO-Reports-Second-Quarter-2025-Results
[8] RXO Inc. Q2 2025 Earnings Call Transcript. (2025, July 29). Seeking Alpha. Retrieved October 1, 2025, from https://seekingalpha.com/news/3752756-rxo-inc-q2-2025-earnings-call-transcript
[9] RXO Inc. Q2 2025 Earnings Call Transcript. (2025, July 29). Seeking Alpha. Retrieved October 1, 2025, from https://seekingalpha.com/news/3752756-rxo-inc-q2-2025-earnings-call-transcript
[10] C.H. Robinson Q2 2025 Earnings Release. (2025, August 2). Business Wire. Retrieved October 1, 2025, from https://www.businesswire.com/news/home/20250802005366/en/C.-Robinson-Reports-Second-Quarter-2025-Results
- Amid RXO's LTL growth strategy, technology investments play a significant role in scaling volume, enhancing visibility, and streamlining capacity sourcing from regional partners for the company's business.
- Striving to leverage stable returns and higher margins, RXO aims to bolster its profitability by bolstering its LTL business operations, which also involves strategic integrations such as the acquisition of Coyote Logistics, to drive earnings and free cash flow, particularly in technology-driven market cycles.
