Radiant Logistics, Inc. — Form 10-Q summary
Reporting period: Quarter and six months ended December 31, 2012. The filing is unaudited. Radiant is a non-asset-based freight-forwarding and logistics provider pursuing organic growth and acquisitions.
Financial performance
| Metric | Three months ended Dec. 31, 2012 | Prior-year quarter | Six months ended Dec. 31, 2012 | Prior-year six months |
|---|---|---|---|---|
| Revenue | $78.18 million | $72.61 million | $157.33 million | $144.45 million |
| Net transportation revenue | $21.53 million | $20.25 million | $43.76 million | $41.49 million |
| Net transportation margin | 27.5% | 27.9% | 27.8% | 28.7% |
| Operating income (loss) | $(265,000) | $1.11 million | $850,000 | $2.22 million |
| Net income attributable to Radiant | $20,780 | $417,497 | $423,933 | $1.07 million |
| Adjusted EBITDA (non-GAAP) | $2.03 million | $1.94 million | $4.54 million | $3.58 million |
- Quarterly revenue rose 7.7%, while net transportation revenue rose 6.3%; six-month revenue rose 8.9% and net transportation revenue rose 5.5%. Growth was principally attributed to ISLA and ALBS acquisition contributions.
- Net transportation margin narrowed in both comparisons. Management cited shipment/product mix and ISLA’s lower yields relative to the network.
- Quarterly operating results included $1.54 million of transition and lease-termination costs. For the six months, these costs were also $1.54 million, mainly from consolidating and relocating the Los Angeles operations. Acquired-intangible amortization was $1.80 million for the six months.
- Adjusted EBITDA increased 4.8% for the quarter and 26.8% for the six months. It is a non-GAAP measure with adjustments including lease-termination costs, contingent consideration, share-based compensation and acquisition-related costs.
Cash flow, liquidity and debt
- Six-month operating cash flow was $3.43 million, down from $5.78 million. Investing used $1.30 million and financing used $467,000; cash ended at $1.72 million, up from $66,888 at June 30, 2012.
- At December 31, current assets were $50.75 million and current liabilities $44.77 million. Total assets were $80.18 million and total liabilities $68.17 million.
- Recorded notes payable and other long-term debt totaled $16.77 million, including $10 million face value of Caltius subordinated notes, $6.77 million drawn on the credit facility and $1.53 million of DBA notes, offset by unamortized debt discounts and issuance costs. The Caltius notes bear 13.5% annual interest and mature December 2016.
- The $20 million Bank of America facility had $12.94 million available for borrowing at December 31, subject to eligible receivables, collateral and covenants. The company reported covenant compliance. On February 7, 2013, the facility maturity was extended to November 30, 2014; other terms were unchanged.
- Management said existing cash and available resources should meet working-capital, capital-purchase, commitment and other liquidity needs for the next 12 months.
Changes, outlook and material items
- Despite reported revenue growth, six-month pro forma results—which assume the acquisitions were in place from July 1, 2011—showed revenue down 6.7%, net transportation revenue down 8.1%, and adjusted EBITDA down 33.5%. Management cautioned that pro forma results are not necessarily indicative of actual or future results.
- Personnel costs and depreciation/amortization increased, reflecting acquired company-owned operations and acquisition-related intangibles. Higher interest expense also weighed on earnings. Management said near-term GAAP earnings would continue to be affected by non-cash amortization and other non-recurring costs; no specific earnings or revenue guidance was provided.
- Marvir and IFS were acquired in November and December 2012. Preliminary purchase-price allocation included $972,921 goodwill and $822,967 intangibles; acquisition earn-outs remain subject to operating targets. Contingent consideration was recorded at $6.58 million, including $650,000 associated with the fiscal 2013 acquisitions.
- An arbitrator awarded Radiant $698,623 in net damages from former DBA shareholders and found a former shareholder had breached noncompetition obligations. The award was offset against amounts owed. Related litigation remained pending, with trial scheduled for June 18, 2013; Radiant sought damages exceeding $500,000 and intended to defend its claims.
- The filing reports collection proceedings involving two customers owing approximately $1.1 million. Radiant had expensed its portion and did not expect material exposure, but noted potential loss if agent offices with deficit bad-debt reserve balances cannot replenish them.
- Other disclosed exposures include estimated future earn-out payments of $7.48 million undiscounted, operating lease commitments of $4.84 million, and reliance on independent agents, acquisitions, and covenant-compliant borrowing capacity. Management reported no goodwill or long-lived-asset impairment indicators and effective disclosure controls.
Important facts for investors to verify
- Whether acquired businesses can sustain growth and improve margins, particularly given lower pro forma revenue, net transportation revenue and adjusted EBITDA.
- How much of the earnings decline is recurring versus transition, lease, legal, amortization and other acquisition-related items; review the company’s non-GAAP reconciliations.
- Available borrowing capacity, covenant headroom, interest burden and the ability to refinance or repay upcoming debt maturities.
- Collection outcomes for the approximately $1.1 million customer balances and the collectability of agent reserve deficits.
- Final acquisition valuations and the timing and amount of earn-out obligations, alongside the pending litigation and Los Angeles lease costs.