Jared Weisfeld spoke at the UBS Global Industrial and Transportation Conference. RXO is maintaining its earlier prediction to grow its brokerage volumes in the second quarter year over year.
Volumes increased by 6% year-over-year in the first quarter. This time was one of the worst for the freight industry in recent memory. RXO predicts increased volumes but without a numerical estimate.’
Weisfeld, the sole representative of the company at the gathering, stated that the prediction of increase in second-quarter brokerage volumes “is not something we do lightly.”
They were very confident after examining all the evidence and business momentum from the second half of April and the first half of May.
RXO reported earnings in early May. The company had completed its April transactions and started planning for May.
Weisfeld stated in an interview with Tom Wadewitz, the senior equity research analyst at UBS who leads the transportation group, that their share gains are accelerating.
RXO, which was spun off as an asset-light brokerage last year from XPO, is gaining market share, according to Weisfeld. The market share gains are profitable, and this is significant. Gross margins in brokerage are north of 16% year on year, as he said.
RXO’s financial objective is to achieve $500 million in annual EBITDA by mid-2027. The firm’s adjusted EBITDA was $37 million in the first quarter.
Weisfeld acknowledged that RXO’s current logistics shippers are mostly Fortune 500-sized organizations. However, expanding to SMBs is necessary to reach the goal of $500 million in EBITDA.
Wesfield mentioned C.H. Robinson as a competitor for RXO. C.H. Robinson was the only publicly traded brokerage company between 2021 and 2018. RXO became a stand-alone 3PL in 2018.
Weissfeld did not provide fresh data. He discussed successful tactics and those that are yet to come.
RXO emphasizes superior customer service and innovation to avoid pricing competition. RXO brokered 96% of loads digitally in the first quarter, showing the merging of technology and human service. Shippers are using brokerages for their freight. 3PLs are benefiting from this. RXO’s core value proposition is “service and technology”. They have decided not to compete on pricing. In the first quarter, contract revenue made up 77% of total revenue, a higher percentage than in previous quarters.
RXO is setting up the firm to increase market share. The goal is to do so when the cycle eventually turns. Participants at the UBS conference speculated about the improvement of the sluggish freight market. Conference presenters noted that the first quarter decline in carriers’ “active network capacity” at RXO was an indicator that a bottom may be near, compared to the fourth quarter decline. RXO has been informed by customers that they are finishing or almost finishing destocking their stocks. Weisfeld said the good times lasted a long time. Companies had plenty of cash due to the booming market in 2021 and the first half of 2022, as well as cheaper gasoline.
He pointed out that company closures and insolvencies are increasing, which suggests that these measures have limitations in maintaining trucks on the road. Almost half of the capacity acquired by the 3PL comes from one-truck fleets. RXO needs to have a strong view of what’s happening with independent owner-operators.
Final Wording
TPLs are gaining market share, which is good news for the logistics sector. All contribute to 3PL market expansion. The third-party logistics services market is expected to grow at a CAGR of over 8% in the projected period. Online stores and emerging technologies are fueling the third-party logistics industry. The third-party logistics industry is estimated to reach $1.7 trillion by 2028, up from $961.8 billion in 2020. E-commerce activity is increasing. Government encouragement is driving growth.
The ultimate guide to book dry van dispatch services!
