Radiant Logistics, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended December 31, 2013. The company is a non-asset-based freight forwarder and logistics provider. Results are unaudited and compare with the periods ended December 31, 2012.
Financial performance
| Metric | Three months ended Dec. 31, 2013 | Six months ended Dec. 31, 2013 |
|---|---|---|
| Revenue | $84.1 million, up 7.6% | $160.8 million, up 2.2% |
| Net transportation revenue | $24.4 million, up 13.2% | $47.6 million, up 8.7% |
| Net transportation margin | 29.0%, versus 27.5% | 29.6%, versus 27.8% |
| Operating income | $2.2 million, versus a $0.3 million loss | $4.3 million, versus $0.9 million |
| Net income attributable to Radiant | $0.3 million, versus $0.02 million | $1.4 million, versus $0.4 million |
| Adjusted EBITDA (non-GAAP) | $3.6 million, versus $2.0 million | $6.7 million, versus $4.5 million |
Quarterly diluted and basic earnings per share were both reported as $0.01; six-month EPS was $0.04. The company reported six-month operating cash flow of $8.9 million, investing cash outflow of $7.0 million (principally the On Time acquisition), and financing cash inflow of $8.9 million. Cash increased to $11.8 million from $1.0 million at June 30, 2013.
At December 31, 2013, current assets were $65.7 million and current liabilities $51.4 million. Total assets were $110.2 million and total liabilities $72.8 million. Reported notes payable and other long-term debt totaled $11.5 million, including $8.7 million drawn on the credit facility and $2.8 million current notes payable. Approximately $16.2 million was available under the $30 million revolving facility; the company reported compliance with its covenants. Contingent consideration was $10.5 million, separate from reported debt.
Material changes and notable items
- On Time Express was acquired on October 1, 2013. Its results contributed approximately $7.0 million of revenue and $0.3 million of operating income after acquisition. The preliminary purchase consideration had a fair value of $17.8 million, including $7.0 million of contingent consideration; purchase accounting remained subject to refinement.
- Domestic revenue rose, principally with On Time, while international revenue declined amid slower Mexico cross-border shipping, lower charter services, and less project work. On a pro forma basis including acquisitions, six-month revenue declined 2.0% year over year, while net transportation revenue rose 4.2%.
- Operating income improved partly because the prior-year period included $1.5 million of transition and lease-termination costs. However, current-period other expense included a $1.2 million non-cash write-off of debt discount when the company repaid its $10 million Caltius notes. Prior-year other income included a litigation-settlement gain.
- In December, the company raised $19.3 million net from issuing 839,200 Series A preferred shares with a 9.75% cumulative dividend and $25 per-share liquidation preference. Proceeds were used to repay Caltius and reduce credit-facility borrowings. Preferred dividends are subject to board declaration and other restrictions.
- Personnel costs increased with acquired company-owned operations and higher headcount. Management attributed margin improvement to multiple factors, including shipment mix and operating-platform leverage.
Outlook, risks, and contingencies
Management said existing cash was expected to meet working-capital, capital-purchase, commitment, and other liquidity needs for the next 12 months. No quantified revenue or earnings guidance for the coming period is provided. Strategy emphasizes organic growth, acquisitions, stronger operating systems, and developing truck-brokerage and On Time line-haul capacity to improve service and margins.
- Management cautioned that results are seasonal and interim performance may not indicate full-year results. Risks include economic and freight-volume changes, competition, carrier capacity and costs, agent retention, customer credit, regulation, and dependence on key personnel and systems.
- On Time integration and performance are uncertain; the filing notes its historical reliance on a small number of customers and lack of long-term contracts with them. Earn-out liabilities use Level 3 estimates; potential earn-outs could total up to $21.5 million, and actual amounts may vary materially with operating results and assumptions.
- Several agency bad-debt reserve accounts were in deficit by approximately $674,000, including about $229,000 attributable to one office. Recovery depends on future operations and collections.
- A dispute related to the DBA acquisition remained pending, with trial scheduled for April 2014. The company sought damages exceeding $500,000; management said the matter could affect near-term earnings through customer losses or legal expenses, but did not expect ordinary-course claims to materially harm financial position, results, or liquidity.
- The CEO-affiliated Radiant Logistics Partners, LLC is consolidated as a variable interest entity; the CEO’s affiliate receives a majority share of its distributable profits and cash.
Investor verification points
- Track whether On Time retains major customers, integrates successfully, and delivers the expected line-haul and margin benefits.
- Reconcile reported GAAP earnings with adjusted EBITDA, including the debt-discount write-off, acquisition-related amortization, and other adjustments.
- Monitor cash conversion, borrowing availability, covenant headroom, and repayment of acquisition-related notes; the On Time $2.0 million note was repaid in January 2014.
- Review the assumptions and potential cash or share settlement of contingent consideration, as well as the cumulative preferred-dividend obligations and payment restrictions.
- Follow recovery of agent reserve deficits and developments in the DBA-related litigation, including related legal costs and customer retention.