Radiant Logistics, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended June 30, 2020. Although the request references 2019 Q4, this filing reports FY2020; management says COVID-19 adversely affected results in the fourth quarter, but the supplied filing text does not provide clear standalone Q4 financial values.
Business context
Radiant is a predominantly non-asset-based third-party logistics provider operating in the United States and Canada. It arranges freight forwarding, truckload, less-than-truckload and intermodal transportation, as well as customs brokerage and warehousing services. Its network includes over 100 independent strategic operating partner locations and approximately 20 company-owned offices.
Financial performance
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Revenue | $855.2 million | $890.5 million | Down 4.0% |
| Net revenue (non-GAAP) | $209.4 million | $230.1 million | Down 9.0% |
| GAAP gross profit | $197.3 million | $218.7 million | Down 9.8% |
| GAAP gross margin | 23.1% | 24.6% | Down 1.5 percentage points |
| Operating income | $17.5 million | $24.7 million | Down 29.2% |
| Net income | $12.4 million | $17.4 million | Down 28.8% |
| Net income attributable to Radiant | $10.5 million | $16.3 million | Down 35.5% |
| Diluted EPS | $0.21 | $0.27 | Down $0.06 |
| Adjusted EBITDA (non-GAAP) | $38.3 million | $40.8 million | Down 6.1% |
| Cash provided by operations | $29.9 million | $39.8 million | Down $9.9 million |
- Transportation revenue declined 3.9% to $824.5 million. Net transportation revenue was $190.4 million, with margin down to 23.1% from 24.9%; management attributed pressure partly to low-margin COVID-related PPE and disaster-relief shipments and product mix.
- Value-added services revenue declined 6.9% to $30.7 million, while net value-added revenue increased to $19.0 million from $16.6 million. Its reported margin rose to 61.9% from 50.4%, primarily reflecting lower personnel and warehousing costs as a share of revenue.
- FY2020 investing cash use was $14.1 million, including $9.2 million for acquisitions and $5.2 million for technology and equipment. Financing cash provided was $12.3 million, including $5.9 million of PPP proceeds.
Liquidity, debt and capital
- Cash and cash equivalents were $34.8 million at June 30, 2020, versus $5.4 million a year earlier. Current assets were $140.6 million and current liabilities $93.7 million.
- Notes payable totaled $51.9 million, including $30.0 million drawn on a new $150 million revolving facility, $16.3 million of Canadian secured term loans and $5.9 million of PPP borrowing, net of debt issuance costs. The revolver matures in March 2025; $50 million of additional accordion capacity is available subject to its terms.
- Operating and finance lease liabilities totaled $16.5 million. The company reported covenant compliance at year-end. Revolver covenants include maximum leverage of 3.00 and minimum fixed-charge coverage of 1.25.
- Management said cash and financing capacity had historically supported operating and capital needs, but warned that prolonged COVID-19 effects could constrain revolver availability and require other financing. Stock repurchases and the acquisition search were temporarily suspended or paused.
Material changes, outlook and risks
- COVID-19 reduced demand across many parts of the business beginning in April 2020, though some segments improved and PPE-related work provided an offset. Management expects pandemic effects to continue into FY2021 but says their impact on full-year results, liquidity and financial position cannot be reasonably estimated.
- Friedway and CIC2 were acquired in February 2020 for $9.2 million cash, 45,086 shares and contingent consideration. The acquisition added $6.8 million of goodwill; maximum contingent consideration was stated as $10 million. Acquired operations’ post-acquisition results were immaterial.
- The company received $5.9 million under the Paycheck Protection Program. Forgiveness is uncertain; the filing notes that the SBA may review loans over $2 million and that repayment or penalties could result if the company is found ineligible.
- Goodwill and intangible assets were significant balances: $72.2 million and $51.2 million, respectively. The company reported no goodwill impairment after its June 30, 2020 assessment, but disclosed a material weakness in controls over goodwill and intangible-asset impairment testing. Management said the weakness did not cause a financial-statement misstatement and described remediation efforts.
- The independent auditor gave an unqualified opinion on the FY2020 financial statements but an adverse opinion on internal control over financial reporting.
- One U.S. customer represented $126.9 million, or 14.8%, of FY2020 revenue. Approximately 40% of net revenues came from international transportation; currency, trade, regulatory and economic developments may affect results.
- Other key risks include customer credit losses, reliance on strategic operating partners and third-party carriers, acquisition integration and financing, variable-rate debt, covenant compliance, cybersecurity and technology migration, and seasonality. No quantified FY2021 earnings or revenue guidance is provided.
Important facts for investors to verify
- Whether COVID-19 demand and mix effects persisted into FY2021, including the durability and profitability of PPE-related work.
- Customer receivable quality, bad-debt trends, and the collectability of amounts owed by strategic operating partners.
- PPP loan eligibility, audit outcome and forgiveness or repayment status.
- Remediation and independent validation of the impairment-control material weakness; monitor future goodwill and intangible impairment assessments.
- Revolver availability, leverage and fixed-charge covenant headroom, total debt and lease obligations, and the effect of any future acquisitions or buybacks.
- Whether acquired operations meet earn-out expectations and whether the reported non-GAAP net revenue and adjusted EBITDA trends reconcile with GAAP results.