Radiant Logistics, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended June 30, 2021, compared with fiscal 2020. The filing is an annual report, not a report for calendar 2020 Q4. Radiant is a non-asset-based third-party logistics provider operating primarily in the United States and Canada.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $889.1 million | $855.2 million | Up 4.0% |
| Net revenues (non-GAAP) | $220.8 million | $209.4 million | Up 5.5% |
| GAAP gross profit | $208.8 million | $197.3 million | Up 5.8% |
| GAAP gross margin | 23.5% | 23.1% | Up 0.4 percentage points |
| Income from operations | $26.0 million | $17.5 million | Up 48.4% |
| Net income attributable to Radiant | $22.9 million | $10.5 million | Up 117.8% |
| Diluted EPS | $0.45 | $0.21 | Up $0.24 |
| Adjusted EBITDA (non-GAAP) | $48.8 million | $38.3 million | Up 27.5% |
| Cash provided by operating activities | $14.1 million | $29.9 million | Down $15.8 million |
Transportation revenue rose 4.2%; net transportation revenue margin increased to 23.4% from 23.1%. Value-added services revenue declined 1.3%, while net value-added services margin improved to 65.9% from 61.9%.
At June 30, 2021, cash was $13.7 million, current assets $176.3 million, and current liabilities $126.4 million, implying working capital of approximately $50.0 million. Notes payable totaled $28.4 million, including $15.0 million drawn on the $150 million revolving facility and $13.7 million of Canadian term loans. Operating and finance lease liabilities totaled $44.4 million. The company reported compliance with debt covenants.
Investing activities used $11.1 million, primarily for $11.4 million of property, technology, and equipment purchases. Financing activities used $23.7 million. Operating cash flow fell mainly because of higher receivables, partly offset by increased payables.
Material changes and notable items
- Profitability improved, supported by higher net revenues and lower personnel and SG&A costs. SG&A declined 17.3%, including lower bad-debt expense, claims, professional services, and travel.
- FY2021 earnings included a $6.0 million gain from forgiveness of $5.9 million of PPP loans and accrued interest. The company says the loans were forgiven during the year.
- Operating expenses included a $4.4 million loss from the change in fair value of contingent acquisition consideration, compared with a $1.8 million loss in FY2020.
- Operating cash flow was substantially lower year over year as accounts receivable and contract assets increased. Cash declined from $34.8 million to $13.7 million.
- Strategic operating partners generated approximately 52% of consolidated net revenues, down from 55% in FY2020. No customer exceeded 10% of FY2021 revenue; one customer represented 14.8% in FY2020.
- The company repurchased 268,969 shares for $1.9 million in FY2021, resuming repurchases in the fourth quarter after pausing earlier in the pandemic.
Outlook, risks, and contingencies
- Management described FY2021 as showing an “encouraging recovery,” but said the continuing effects of COVID-19, economic uncertainty, and new variants make future impacts difficult to predict. No financial guidance was provided.
- Management expects to continue organic growth and acquisitions, while integrating technology and back-office systems. It plans to spend more than $3.5 million on technology enhancements in FY2022.
- Key exposures include dependence on strategic operating partners and third-party carriers, freight-capacity and pricing changes, economic and seasonal fluctuations, acquisition integration and financing, foreign-exchange movements, and cybersecurity and technology risks.
- Management and the independent auditor identified material weaknesses in controls over revenue recording and operating-partner commission calculations. Management concluded disclosure controls and internal control over financial reporting were ineffective as of June 30, 2021; the auditor issued an adverse opinion on internal control. The auditor nevertheless gave an unqualified opinion on the financial statements. Management said remediation was being evaluated.
- Estimated acquisition earn-out liabilities were $7.3 million, with disclosed payments expected through FY2024. The filing reported no potentially material legal proceedings as of June 30, 2021.
- The auditor identified goodwill valuation as a critical audit matter. Goodwill was $72.6 million, and the company reported no impairment in its latest test; future impairment depends on forecasts and valuation assumptions.
Most important facts for investors to verify
- How quickly and effectively the company remediates the revenue and commission-control material weaknesses, and whether later filings report any misstatements or control improvements.
- Whether operating cash flow recovers as receivables and contract assets normalize, given the decline to $14.1 million.
- How much FY2021 earnings growth depended on the one-time PPP forgiveness gain and whether underlying operating performance is sustained.
- Future freight margins, carrier capacity and costs, and the retention and economics of the strategic operating-partner network.
- Debt availability and covenant headroom, planned technology spending, and the timing and amount of acquisition earn-out payments.