Radiant Logistics, Inc. — Form 10-Q Summary
Business context and reporting period
Unaudited fiscal first quarter ended September 30, 2019, compared with the three months ended September 30, 2018. Radiant is a third-party logistics provider serving primarily the United States and Canada through transportation brokerage and forwarding, plus value-added logistics services.
Financial results and liquidity
| Metric | Quarter ended Sep. 30, 2019 | Quarter ended Sep. 30, 2018 |
|---|---|---|
| Revenue | $200.5 million | $218.9 million |
| Net revenue (revenue less transportation and other service costs) | $55.5 million | $54.9 million |
| Operating income | $4.8 million | $4.8 million |
| Net income | $3.3 million | $3.3 million |
| Net income attributable to common stockholders | $3.2 million | $2.6 million |
| Basic / diluted earnings per share | $0.07 / $0.06 | $0.05 / $0.05 |
| Adjusted EBITDA (non-GAAP) | $9.7 million | $8.8 million |
| Cash provided by operating activities | $0.1 million | $5.8 million |
| Capital expenditures for technology and equipment | $1.7 million | $1.1 million |
- Gross revenue fell 8.4%, primarily because the prior-year quarter included a non-recurring special project. Net revenue increased 1.2%.
- Transportation revenue declined 9.1% to $191.8 million, while transportation net revenue declined to $50.7 million from $51.4 million. Transportation net margin improved to 26.4% from 24.4%, mainly from product mix.
- Value-added services revenue rose 14.3% to $8.8 million; net revenue increased to $4.9 million from $3.4 million. Net margin improved to 55.6% from 44.5%.
- Operating cash flow fell by $5.7 million year over year, largely reflecting changes in operating assets and liabilities, including accounts receivable and contract assets.
- Cash was $9.2 million at September 30, versus $5.4 million at June 30, 2019. Current assets were $137.8 million and current liabilities $107.2 million.
- Notes payable totaled $39.2 million, including $20.3 million drawn on the revolving credit facility. The $75 million facility had $43.4 million available after advances and letter-of-credit reserves; it matures June 14, 2022. The company reported compliance with its debt covenants.
- Operating lease liabilities were $15.7 million and finance lease liabilities $3.7 million at quarter-end. Adoption of ASC 842 on July 1, 2019 added operating lease right-of-use assets and liabilities to the balance sheet; the company reported no impact on income or cash flow statements from adoption.
Changes, outlook, commentary and risks
- Operating expenses increased modestly overall. Management cited higher personnel costs from a new company-owned location and higher SG&A, including technology spending and legal expense. Depreciation and amortization rose to $4.0 million from $3.6 million.
- Management expects to spend more than $3.5 million on technology in fiscal 2020, including implementation of a transportation management system. It also described continued focus on organic expansion, acquisitions, operating-partner growth, and productivity. No specific financial earnings or revenue guidance was provided.
- Management stated current working capital and anticipated operating cash flow should fund existing operations for the next 12 months. Acquisitions may require additional financing; available facility capacity, financing costs, and possible equity dilution are risks.
- Radiant’s acquisition strategy entails contingent earn-out obligations; estimated remaining fiscal 2020 payments were $614,000, comprising $516,000 cash and $98,000 equity. The quarter included a $15,000 expense from an increase in the estimated fair value of contingent consideration.
- A California wage-and-hour class action was dismissed and judgment entered for the company, but the plaintiff appealed. The company said the likely outcome could not be determined; an adverse result could be material to a particular quarter.
- Radiant consolidates Radiant Logistics Partners, LLC, which is 60% owned by an entity whose sole member is the CEO. The non-controlling owner’s distributable share of quarterly profit was $96,000.
- Other stated risks include economic, competitive and transportation-cost changes; dependence on strategic operating partners and key management; acquisition integration and financing; and seasonality. Management reported effective disclosure controls as of September 30, 2019.
Important facts for investors to verify
- Whether the operating cash flow decline and working-capital movements reverse in subsequent quarters.
- Whether stronger net revenue and adjusted EBITDA persist despite lower gross revenue, and how much reflects mix versus underlying shipment volumes.
- Technology investment needs, execution of the transportation management system, and expected effects on costs and productivity.
- Debt availability, covenant compliance, variable-rate borrowing costs, and financing capacity for planned acquisitions and earn-outs.
- Developments in the California appeal, contingent consideration estimates, and the related-party arrangements involving the CEO-owned entity.