Radiant Logistics, Inc. — Fiscal 2021 Second-Quarter 10-Q
Reporting period: Three and six months ended December 31, 2020. Unless otherwise noted, financial amounts below are in millions of U.S. dollars. Radiant is a third-party logistics provider operating primarily in the United States and Canada.
Financial performance and liquidity
| Metric | Three months | Six months |
|---|---|---|
| Revenue | $218.8, up 8.4% year over year | $394.7, down 1.9% |
| Operating income | $6.0, versus $4.2 | $10.8, versus $9.0 |
| Net income attributable to Radiant | $3.8, versus $2.6; diluted EPS $0.07, versus $0.05 | $6.9, versus $5.8; diluted EPS $0.14, versus $0.11 |
| Net revenue (non-GAAP) | $55.3, versus $56.0; margin 25.3%, versus 27.7% | $101.3, versus $111.5; margin 25.7%, versus 27.7% |
| Adjusted EBITDA (non-GAAP) | $12.5, up 33.7% year over year | $21.8, up 14.2% |
| Operating cash flow | Not separately reported | $1.9, versus $6.3 |
- Second-quarter GAAP gross margin was 23.9%, down from 26.2%; six-month gross margin was 24.2%, also down from 26.2%.
- Cash was $7.3 at December 31, compared with $34.8 at June 30. Six-month investing cash use was $4.8, mainly capital spending; financing cash use was $23.4, including $20.0 of revolver repayment. Operating cash flow was reduced primarily by working-capital changes, including higher receivables and contract assets.
- Total current assets were $146.8 and current liabilities $110.6. Notes payable were $31.0 net of issuance costs ($10.0 drawn on the revolving facility); the $150.0 facility matures in March 2025. The company reported covenant compliance. A $5.9 PPP loan remained recorded as debt while forgiveness was being sought.
Changes versus the prior comparable periods
- Quarterly revenue recovered above the prior-year quarter, which management attributed mainly to higher volume with certain customers. For the six months, revenue remained lower, reflecting first-quarter market softness and COVID-19 effects, partly offset by second-quarter volume recovery.
- Transportation revenue rose in the quarter, but transportation net revenue was nearly flat and its net margin fell to 23.9% from 26.3%, mainly due to a shift toward lower-margin business. Six-month transportation net revenue declined to $92.9 from $101.7.
- Value-added services revenue declined 19% in the quarter and 25% for the six months, reflecting slower contract logistics and customs brokerage activity. Margin improved, which the company attributed to lower warehousing and personnel costs as a percentage of revenue.
- Lower personnel, selling, general and administrative, and operating-partner commission expenses supported higher operating income and net income. These cost reductions included temporary workforce and compensation reductions in response to COVID-19.
Outlook, risks and unusual items
- Management described the second-quarter recovery as encouraging but said it is uncertain whether it will continue. It could not reasonably estimate the pandemic’s full-year effect on results, liquidity or financial position. The filing provides no specific financial guidance.
- COVID-19 risks include weaker demand, customer financial distress and bad-debt exposure, operating and employee-safety costs, remote-work and cybersecurity challenges, and possible effects on financing availability. Management said the pandemic’s adverse effects were expected to outweigh any benefit from handling essential goods.
- A $1.85 charge from an increase in the estimated fair value of acquisition earn-out obligations reduced reported income. Contingent consideration totaled $5.76 at quarter-end; actual payments depend on acquired businesses meeting operating objectives.
- The company reported no goodwill impairment trigger as of December 31, but noted that changing economic conditions and forecasts could require future impairment charges. A material weakness relating to goodwill and intangible-asset impairment controls, previously identified at June 30, was reported as remediated by December 31; disclosure controls were deemed effective.
- The PPP loan was subject to SBA review and forgiveness was not assured; the company said it could be required to repay the loan and potentially face penalties if found ineligible. Share repurchases and acquisition activity were temporarily paused. No potentially material legal proceedings were reported.
- Radiant consolidates a variable-interest entity in which an entity owned by its CEO holds a 60% interest and is entitled to a majority of distributable profits; the filing describes the arrangement and related distributions.
Key facts for investors to verify
- Whether the revenue and volume recovery continued after the quarter, and whether transportation margins recovered from the product-mix decline.
- Receivables, contract assets, operating cash flow and cash levels, given the significant working-capital cash use and lower cash balance.
- PPP loan forgiveness status and any repayment obligation; revolver availability, covenant compliance and debt repayment schedule.
- Earn-out estimates and payments, and whether COVID-19-related changes in forecasts create goodwill or intangible-asset impairment risk.
- Progress on cost reductions, paused acquisitions and buybacks, and the ongoing governance and financial implications of the CEO-related variable-interest entity.