Radiant Logistics, Inc. — FY2016 Form 10-K
Reporting period: Fiscal year ended June 30, 2016, compared with fiscal 2015. The filing is an annual report, not a standalone 2015 fourth-quarter report; separate Q4 results are not clearly provided in the supplied text.
Business context
Radiant is a non-asset-based third-party logistics provider offering freight forwarding, truck brokerage, intermodal, and related services, primarily in the United States and Canada. It reported approximately 140 operating locations, 18 company-owned offices, about 10,000 transportation providers, and more than 12,000 customer accounts. Growth during the period reflected acquisitions, notably Wheels, Service By Air (SBA), and Highways, as well as organic network expansion.
Financial performance
| Metric | FY2016 | FY2015 |
|---|---|---|
| Revenue | $782.5 million | $502.7 million |
| Net revenue (revenue less transportation costs) | $186.7 million | $123.7 million |
| Net transportation margin | 23.1% | 24.4% |
| Operating income (loss) | $(0.3) million | $10.6 million |
| Net income (loss) | $(3.5) million | $6.0 million |
| Net income (loss) attributable to common stockholders | $(5.6) million | $3.8 million |
| Net cash provided by operating activities | $21.4 million | $2.1 million |
- Revenue increased 55.7%; net revenue increased 50.9%. Transportation revenue was $774.4 million, including $540.1 million of forwarding and $234.2 million of brokerage revenue. The filing attributes growth primarily to Wheels and SBA, a full year of DCA revenue, and added operating-partner locations.
- Brokerage revenue grew substantially with Wheels, but its lower-margin mix contributed to the decline in the overall net transportation margin.
- Adjusted EBITDA was $24.4 million versus $17.3 million; normalized adjusted EBITDA was $26.8 million versus $17.4 million. These are non-GAAP measures. GAAP operating results were burdened by higher amortization, acquisition-related costs, and interest.
- Interest expense was $4.9 million, versus $1.9 million. The company recorded $5.9 million of transition and lease-termination costs, a $3.7 million acquired-intangible impairment, and a $1.0 million loss from changes in contingent consideration. It also recorded a $1.2 million write-off of loan fees.
Liquidity, cash flow, and debt
- At June 30, 2016, cash was $4.8 million, current assets were $113.4 million, and current liabilities were $96.5 million, implying working capital of approximately $16.9 million. Total assets were $263.5 million and total liabilities were $144.3 million.
- Operating cash flow was $21.4 million; investing cash outflow was $4.4 million; financing cash outflow was $19.6 million. The operating cash flow increase included a $25.7 million cash benefit from lower accounts receivable, partly offset by lower accounts payable and accrued transportation costs. The filing does not establish how sustainable this working-capital contribution is.
- Notes and other long-term debt totaled $31.3 million, including $9.8 million outstanding under the revolving credit facility and $22.1 million under the senior secured loan. The $25.0 million subordinated loan was repaid in April 2016. The company reported $31.2 million of borrowing availability under its $65 million revolver, excluding availability attributable to SBA receivables, and compliance with debt covenants at year-end.
- Debt is secured by company assets and subject to financial covenants. Management said working capital and expected operating cash flow should support existing operations for the next 12 months, but further acquisitions would require additional financing.
Material changes, outlook, and risks
- The Wheels acquisition expanded Canadian operations and brokerage and intermodal services; SBA added company and operating-partner locations. Acquisition-driven growth also increased personnel, selling and administrative, depreciation, amortization, and interest costs.
- Management plans to pursue organic growth and further acquisitions, improve productivity, and continue investing in technology. It expected FY2017 technology spending to exceed FY2016 spending of approximately $3.0 million. The filing provides no numerical revenue or earnings guidance.
- International transportation represented 48% of net revenue in FY2016, up from 36% in FY2015. The company reported foreign-currency exposure and no historical hedging activity.
- Principal risks include retaining strategic operating partners, integrating acquired businesses and disparate systems, carrier capacity and pricing, competition, seasonality, economic and trade conditions, foreign exchange, and reliance on key personnel. A number of operating partners had bad-debt reserve deficits totaling approximately $1.0 million.
- Two disclosed matters remained unresolved: a California wage-and-hour putative class action and a shipment-related claim seeking more than $1.0 million. Management could not determine the likely outcomes; it stated the shipment claim was subject to insurance and disputed liability.
- FY2016 included a $3.7 million impairment of On Time customer-related intangibles following customer losses. Goodwill testing found no impairment indication, according to management.
- The company has 9.75% cumulative preferred shares with $21.0 million liquidation preference and paid $2.0 million in preferred dividends during the year. No common dividends were anticipated in the foreseeable future.
Important facts for investors to verify
- Whether acquired businesses, especially Wheels and SBA, sustain revenue and margins and deliver expected integration benefits.
- How much of the operating cash flow increase reflects repeatable operations versus working-capital movements.
- Current revolver availability, debt covenant headroom, interest costs, and financing capacity for acquisitions and earn-outs.
- The status and potential financial exposure of the California employment action and shipment-related litigation.
- Whether continued lower-margin brokerage growth, foreign-exchange movements, and partner reserve deficits affect profitability or liquidity.