Radiant Logistics, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended December 31, 2011 (fiscal Q2 and first half of fiscal 2012). The unaudited filing covers a non-asset-based freight forwarding and logistics company. Comparisons are with the corresponding 2010 periods unless stated otherwise.
Financial performance
| Metric | Quarter ended Dec. 31 | Six months ended Dec. 31 |
|---|---|---|
| Revenue | $72.6 million, up 63.2% | $144.4 million, up 59.0% |
| Net revenue | $20.2 million, up 42.8% | $41.5 million, up 46.6% |
| Net transportation margin | 27.9%, versus 31.9% | 28.7%, versus 31.1% |
| Operating income | $1.1 million, down 15.2% | $2.2 million, down 15.9% |
| Net income attributable to Radiant | $0.42 million, versus $0.72 million | $1.07 million, versus $1.50 million |
| Diluted EPS | $0.01, versus $0.02 | $0.03, versus $0.05 |
| Adjusted EBITDA (non-GAAP) | $1.94 million, up 16.1% | $3.58 million, up 5.9% |
Revenue growth was principally attributed to the April 2011 DBA acquisition; Isla was acquired on December 1, 2011. Transportation costs grew faster than revenue, and management attributed lower margins to shipment mix and more lower-margin charter shipments. Higher personnel, SG&A, transition, amortization and interest costs also weighed on operating results. SG&A included non-recurring legal and transaction-related expenses; DBA integration transition costs were $0.28 million for the quarter and $0.56 million for the six months.
On an unaudited pro forma basis assuming DBA and Isla were owned from July 1, 2010, six-month revenue increased 2.6% to $157.4 million, while net revenue fell 6.1% to $45.0 million, adjusted EBITDA fell 5.4% to $5.44 million, and net income fell 27.2% to $2.21 million. These figures are not directly comparable to reported results and are not indicative of results that would necessarily have occurred.
Cash flow, liquidity and debt
- Six-month operating cash flow was $3.95 million, versus $1.79 million in the prior year; investing cash use was $8.50 million, primarily the $7.66 million Isla purchase payment; financing provided $6.23 million. Cash increased by $1.69 million to $2.12 million.
- At December 31, current assets were $49.6 million and current liabilities $42.8 million, a current ratio of approximately 1.16. The filing reports $16.51 million available under the senior facility after outstanding advances and letters of credit.
- The $20 million Bank of America revolving facility had $3.0 million in advances and $0.49 million in letters of credit outstanding. The company also reported $4.32 million of unprocessed payments reclassified from cash and expected to be funded through the facility.
- Debt included $10 million of Caltius senior subordinated notes, recorded net of discount and issuance costs, DBA seller notes, and revolving-facility borrowings. Caltius notes accrue interest at 13.5%, with 11.75% payable currently in cash and the balance added to principal unless paid in cash; principal is due December 1, 2016. The notes are subject to restrictive covenants and early-prepayment limits. The balance sheet also included $4.08 million of contingent consideration, principally related to Isla.
- Total assets were $73.4 million, including $9.96 million of acquired intangibles and $11.75 million of goodwill; total liabilities were $64.7 million and stockholders’ equity $8.78 million. Management reported no goodwill or long-lived-asset impairment indicators at December 31.
Material changes, outlook and risks
- Radiant acquired Isla for a recorded initial purchase price of approximately $13.1 million, including cash, future share consideration and estimated earn-outs. Isla provides cross-border U.S.–Mexico operations. Since acquisition, it generated approximately $1.5 million in revenue and a net loss below $0.1 million, including purchase-accounting charges.
- The company completed its NYSE Amex uplisting on January 11, 2012, trading as RLGT. It issued 500,000 shares to Caltius in connection with the financing and reported 32.31 million shares outstanding as of February 10, 2012.
- No numerical revenue or earnings guidance was provided. Management described continued growth through agency expansion, customer development and acquisitions, while noting dependence on acquisition financing, integration, agency relationships, competition and maintaining margins.
- Radiant asserted indemnification claims against former DBA shareholders in January 2012 concerning undisclosed transportation costs and related-party transactions, and alleged breaches of non-compete and non-solicitation provisions. The company intended to pursue arbitration and related legal remedies. Management did not expect a meaningful long-term adverse effect but warned that near-term legal expense could reduce earnings.
- Debt agreements impose leverage and fixed-charge covenants, acquisition limits and other restrictions; noncompliance could constrain borrowing and acquisitions or impair liquidity. The company stated it was covenant-compliant at December 31, 2011. Management also cited risks from dilution and potential sales of shares issued in acquisitions or financing.
- Management concluded disclosure controls were effective at period-end and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- How much reported growth reflects acquired businesses versus underlying organic performance, and whether pro forma margin and earnings declines persist.
- Whether Radiant can realize anticipated DBA and Isla integration benefits while controlling operating costs and protecting transportation margins.
- Cash interest and principal implications of the high-cost Caltius notes, covenant headroom, and availability under the asset-based revolver.
- The outcome, timing, recoverability and potential earnings impact of the DBA claims and related proceedings.
- The final Isla purchase-price allocation, contingent earn-out payments, and dilution from acquisition-related shares, Caltius shares and outstanding options.