Business context and reporting period
Radiant Logistics, Inc. is a third-party logistics provider operating primarily in the United States and Canada. It arranges multimodal freight transportation and offers value-added services through a network of more than 100 locations. The filing covers the quarter and nine months ended March 31, 2022—fiscal 2022 Q3, notwithstanding the request metadata indicating “2021 Q3.” Financial statements are unaudited; amounts below are in U.S. dollars.
Financial performance and position
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| Revenue | $460.9 million, up 94.9% from $236.5 million | $1,079.8 million, up 71.1% from $631.2 million |
| Operating income | $18.5 million, versus $5.4 million | $38.9 million, versus $16.3 million |
| Net income attributable to Radiant | $14.3 million, versus $5.0 million; diluted EPS $0.28 versus $0.10 | $28.4 million, versus $11.9 million; diluted EPS $0.56 versus $0.23 |
| Net revenues and net margin | $84.9 million; 18.4%, versus $56.8 million; 24.0% | $221.3 million; 20.5%, versus $158.1 million; 25.0% |
| Adjusted EBITDA (non-GAAP) | $23.6 million, up 83.1%; 27.8% of net revenues versus 22.7% | $55.4 million, up 59.9%; 25.0% of net revenues versus 21.9% |
GAAP gross margin declined to 17.7% from 22.7% in the quarter and to 19.6% from 23.6% for the nine-month period. The company attributed lower transportation margins mainly to tight capacity and related surcharges, fuel costs, lower-margin charter business, and Navegate’s lower-margin profile. Canadian value-added services also faced startup costs at a new warehouse.
Operating cash flow was negative $6.9 million for the nine months, compared with positive $3.7 million a year earlier. Investing cash outflow was $44.4 million, including $38.4 million paid for Navegate net of acquired cash; financing provided $77.2 million. Cash and cash equivalents were $40.0 million at March 31, 2022, versus $13.7 million at June 30, 2021. Working-capital balances expanded, including accounts receivable of $206.1 million and contract assets of $59.9 million.
Total notes payable were $113.7 million, compared with $28.4 million at June 30, 2021, principally reflecting revolver borrowing to finance the Navegate acquisition. Revolver borrowings were $103.5 million under a $150 million facility, with a $50 million accordion feature; the company reported covenant compliance. The facility matures in March 2025. Operating and finance lease liabilities totaled $46.0 million.
Material changes versus prior comparable periods
- Revenue rose sharply, reflecting higher transportation prices and surcharges, increased shipment volumes, charter business, and the Navegate acquisition. The company said growth was driven in part by markups associated with higher carrier costs, so revenue growth did not translate proportionately into net margin.
- Navegate, acquired effective November 30, 2021, had a final purchase price of $38.9 million, funded with cash and the credit facility. It contributed $38.8 million of revenue and $2.3 million of operating income in the quarter.
- Net income growth also included a $2.0 million quarterly gain from changes in the fair value of interest-rate swaps, compared with a $0.5 million loss in the prior-year quarter. The nine-month prior-year comparison included a $1.4 million gain on PPP loan forgiveness.
- The company repurchased 870,733 shares for $6.3 million in the nine months; no shares were repurchased in the comparable prior-year period.
Outlook, risks, contingencies, and unusual items
- No numerical revenue, earnings, or cash-flow guidance is provided. Management describes continued focus on organic growth, acquisitions, expanding operating-partner locations, and using infrastructure and technology to improve productivity.
- Management cautions that COVID-19 effects remain uncertain. Results are also exposed to seasonality, transportation capacity and costs, fuel surcharges, customer demand, acquisition integration and financing, and dependence on strategic operating partners.
- A December 2021 ransomware incident disrupted systems and caused revenue loss and incremental costs. Systems and operations were reported substantially recovered/fully functional; incident-related costs were $1.0 million for the nine months. The investigation confirmed some customer and employee data extraction. Insurance is expected to offset part of the costs, but the amount is not stated; privacy-related claims or investigations remain possible.
- Disclosure controls were deemed ineffective at March 31, 2022 because of material weaknesses in IT general controls following the cyber incident and previously identified weaknesses in revenue processing and operating-partner commission calculations. Remediation is underway; management nevertheless stated the financial statements fairly present the periods shown.
- No potentially material legal proceedings were reported as of March 31, 2022. Contingent consideration liabilities were $5.4 million, with estimates subject to operating results and assumptions. Goodwill was $88.8 million; management reported no impairment indicators.
- Subsequent to quarter-end, the SEC declared effective a shelf registration allowing offerings of up to $150 million of securities. The filing does not specify whether or when securities will be issued.
Most important facts for investors to verify
- How much of the exceptional reported revenue growth reflects higher freight rates and surcharges versus underlying shipment volume, and whether transportation and value-added margins recover.
- Whether operating cash flow improves as receivables and contract assets grow, and the company’s cash-conversion and working-capital trends.
- Revolver utilization, covenant headroom, borrowing costs, and the company’s capacity to fund earn-outs, acquisitions, or repurchases while debt is elevated.
- Navegate’s ongoing contribution, integration progress, and the realization of expected strategic benefits.
- Remediation of the reported material weaknesses, any further cyber-related costs or claims, and the extent of insurance recovery.
- How much earnings depend on non-operating fair-value movements, acquisition-related amortization, and other adjusted-EBITDA exclusions.