Radiant Logistics, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended March 31, 2014; comparative periods ended March 31, 2013. The filing covers 2014, despite the request metadata indicating “2013 Q3.” Financial statements are unaudited.
Business context
Radiant is a non-asset-based transportation and logistics provider using company-owned and independent-agent offices and third-party carriers. It reported one operating segment. Growth strategy combines organic expansion and acquisitions; the company also launched a truck-brokerage initiative intended to internalize some purchased transportation and improve margins.
Financial performance
| Metric | Three months ended March 31, 2014 | Three months ended March 31, 2013 | Nine months ended March 31, 2014 | Nine months ended March 31, 2013 |
|---|---|---|---|---|
| Revenue | $86.0 million | $72.8 million | $246.9 million | $230.1 million |
| Net revenue (revenue less transportation cost) | $24.0 million | $21.6 million | $71.6 million | $65.4 million |
| Net transportation margin | 27.9% | 29.7% | 29.0% | 28.4% |
| Operating income | $2.8 million | $2.5 million | $7.2 million | $3.4 million |
| Net income | $1.7 million | $0.9 million | $3.1 million | $1.4 million |
| Net income attributable to common stockholders | $1.1 million | $0.9 million | $2.4 million | $1.3 million |
| Basic and diluted EPS | $0.03 | $0.03 | $0.07 | $0.04 |
Adjusted EBITDA, a non-GAAP measure, was $3.5 million for the quarter and $10.3 million for the nine-month period, compared with $3.0 million and $7.7 million, respectively. Adjusted EBITDA margin on net transportation revenue was 14.6% and 14.3%, versus 13.8% and 11.7%.
Cash flow, debt and liquidity
- Nine-month operating cash flow was $8.5 million, versus $3.6 million in the prior-year period. Investing used $8.9 million, primarily for acquisitions and payments to former acquired-business shareholders. Financing provided $3.4 million; cash ended at $4.0 million, up from $1.0 million at June 30, 2013.
- At March 31, 2014, total assets were $107.4 million, total liabilities $68.0 million, and stockholders’ equity $39.3 million. Current assets were $60.7 million and current liabilities $48.5 million.
- Notes payable and other long-term debt totaled $6.0 million, including $5.2 million under the credit facility and $0.8 million of current notes payable. The $30 million Bank of America facility matures August 2018; approximately $24.5 million was available, based on collateral and outstanding advances and letters of credit. The company reported compliance with covenants.
- Contingent consideration was $12.25 million at fair value ($1.61 million current and $10.64 million long-term). Estimated undiscounted earn-out payments totaled $13.7 million through fiscal 2018. Operating lease commitments totaled $5.2 million.
- The company issued $19.3 million of 9.75% preferred stock in December 2013 and used proceeds to repay $10 million of 13.5% senior subordinated notes and reduce credit-facility borrowings. Preferred dividends attributable to the period were $0.58 million for nine months.
Material changes and management commentary
- Quarterly revenue rose 18.2%, but net transportation revenue grew 11.0%; transportation costs grew faster than revenue, and quarterly net transportation margin fell from 29.7% to 27.9%. Management cited shipment mix and On Time’s historically lower-margin profile.
- Nine-month revenue increased 7.3% and net transportation revenue 9.5%. Management attributed growth principally to On Time and higher domestic business; international revenue declined amid weaker Mexico cross-border shipments, lower charter activity and less project work.
- On Time was acquired October 1, 2013, with approximately $13.7 million of revenue and $0.3 million of operating income since acquisition. Its preliminary purchase-price allocation included $10.9 million of goodwill. In March 2014, Radiant acquired select customer relationships of Phoenix Cartage and Air Freight and opened a Philadelphia location.
- Nine-month operating income improved partly because the prior-year period included $1.5 million of transition and lease-termination costs. Current-period other expense included a $1.24 million write-off of debt discount upon early repayment of the subordinated notes; the prior-year period included a litigation-settlement gain.
- Management said cash and cash equivalents should meet working-capital, capital-purchase, commitment and other liquidity needs for the next 12 months. No quantitative earnings or revenue guidance was provided. Results may be seasonal and interim results are not necessarily indicative of full-year results.
Risks, contingencies and unusual items
- Contingent consideration is based on Level 3 estimates and future acquired-business performance; changes in assumptions could materially affect recorded liabilities and earnings.
- A California wage-and-hour class action and a lawsuit by Service By Air seeking unspecified damages were at early stages; outcomes were uncertain. A $1.5 million jury verdict in Radiant’s favor in a separate dispute remained subject to post-trial motions and possible appeal; the company had not recognized the award.
- Management reported no goodwill or long-lived-asset impairment indicators. It also noted exposure to agent relationships, acquisition execution and financing, competition, economic and political conditions, transportation costs, key-person dependence, and regulation.
- Disclosure controls were reported effective as of March 31, 2014; no material change in internal control over financial reporting was reported during the quarter.
Important facts for investors to verify
- Whether On Time and the newer acquisitions deliver expected growth and margin benefits, and how much reported growth reflects acquisitions versus organic performance.
- Whether the lower quarterly transportation margin persists and whether the truck-brokerage initiative improves economics.
- Cash conversion, receivables quality and the company’s ability to service credit-facility debt, preferred dividends, lease obligations and acquisition earn-outs.
- The assumptions and potential range of contingent-consideration payments, including the effect on future earnings and liquidity.
- Developments in the pending litigation and the final outcome and collectability of the unrecognized $1.5 million jury award.